In prior posts about my “Founders’ Dilemmas” MBA course, I provided an overview of the course and details about its first three case studies (which include the Introductory case and the cases in the “When to Found” module).
This post covers the four founding-team cases in the “Building the Team” module. (Another case in the module covers non-founder hiring issues, and will be described in my next post.) Collectively, these cases cover wide variations in prior relationships, in role allocations, and in approaches to equity splits. For each case, this post provides the official case description, a list of the case’s core issues, and a link to its full HBS Publishing entry.
As mentioned before, case studies are often valuable for helping founders, employees, and investors understand the difficult issues they are facing or will be facing in the future (or even help them gain insights into their past experiences!), so if you want to see any of the full cases, you can get them from the HBS Publishing site via the HBSP links below.
MODULE #2: “BUILDING THE TEAM” – Should I be a solo founder, or should I try to attract co-founders? If I attract co-founders, who should they be (e.g., my good friends?); how should we split the roles; and, how should we split the equity?
- Case #1: “Smartix: Swinging for the Fences” (HBSP link)Case description: “Vivek Khuller has built Smartix by attracting classmates to co-found it with him, learning how to pitch it to top VC firms and potential strategic partners, and honing the concept and business model by testing it in smaller venues. Now, he is facing the implications of the choices he has made in each of these areas and has to decide how to manage those implications.”
Core issues: Founding with classmates, Attracting co-founders, Process of splitting equity within the team, How outside job options can constrain strategic and financing decisions.
- Case #2: “Savage Beast” (HBSP link)Case description: “For several months, things had been spiraling downwards at Savage Beast, the music-recommendation company started three years before by Tim Westergren. The company’s founder-CEO had recently left due to pressures both at home and within the venture. Dozens of investors had turned thumbs-down on the venture; salaries had been cut; and, tensions had risen within the founding team. Now Westergren, the founder who has taken over as CEO, is facing even deeper pressures as he finds out about a lawsuit filed by former employees, and he is wondering if it is time to give up on ever achieving his vision.”
Core issues: Founding with strangers/acquaintances, Adopting a strong division of labor within the team, Splitting equity equally, Salary deferrals, Founder persistence, The entrepreneurial “roller coaster.”
- Case #3: “Negotiating Equity Splits at UpDown” (HBSP link)Case description: “Michael Reich is having severe doubts about how he split the equity with his co-founders two months ago, when they completed a one-page ‘November Agreement.’ Since then, Michael has found an angel investor and has worked non-stop on the business, while one co-founder was off enjoying the winter break with his family and the other worked on lucrative consulting contracts for other companies. Michael has just sent his co-founders a proposal that would re-allocate the equity within their founding team, and all three founders are getting ready to reopen a negotiation they thought had been finalized.”
Core issues: Adding co-founders, Negotiating equity splits within the founding team, Allocating equity to a drop-out co-founder, Re-opening equity negotiations.
- Case #4: “Ockham Technologies: Living on the Razor’s Edge” (HBSP link)Case description: “Describes the issues facing a founder-CEO regarding building a board of directors, assembling an executive team, managing tension between co-founders, and outsourcing system development work.”
Core issues: Founding with prior co-workers, Adjusting roles as the venture scales, Dynamic equity splits, Outsourcing system development, Investor decisions (Angel vs. VCs), Building a board.
Up next: New-Venture Hiring Cases