“Founders’ Dilemmas” Course: Franchising, The Full Life Cycle of a Venture, and Exit Decisions

Prior posts about my “Founders’ Dilemmas” MBA course included the following items:

• an overview of the course,
• details about the Introductory case and the cases in the “When to Found” module,
• details about four cases in the “Building the Team” module,
• descriptions of the core new-venture hiring cases, and
• details about the founder-CEO succession cases.

This post describes a case that examines franchising as a growth option and as an entry point into entrepreneurship, from the perspectives of both the founder of the potential franchisor and the founder of the potential first franchisee (“Rubbish Boys“); three cases that trace the full series of founding decisions from idea through exit (“Evan Williams: From Blogger to Odeo,” “The Tale of the Lynx,” and “Lather, Rinse, Repeat: FeedBurner’s Serial Founding Team“); and a case that focuses on exit decisions (“Nantucket Nectars: The Exit“).

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.

FRANCHISING

• Case #1: “Rubbish Boys” (HBSP link)

Case description: “It looked like founder-CEO Brian Scudamore might not be able to pursue franchising as a growth option for his junk-removal business after all. Over the years, he had overcome many hurdles, including buying out his ‘too-fiery’ co-founder, firing all of his employees so he could start all over again when he became disillusioned with the company’s developing culture, and failing at experimenting with student franchising to increase the rate of growth. Now looking to expand within North America, he had turned to a professional franchising model and had developed a new brand to help grow the business. Paul Guy, his first franchisee who was beginning his operations in Toronto, had just called. ‘Brian, my wife’s relative just told me that I’m crazy to open here because the city picks up things for free. It’s crazy to charge $300 to pick something up when they can get the same service for free! We had never heard of that in Vancouver, but that’s a big problem here!’ Was Guy over-reacting, or had Scudamore made a major mistake in his growth strategy?”

Core issues: The growth challenges faced by entrepreneurs, including whether to take on a co-founder, how to reverse a bad co-founder decision, the growth challenges involved in growing a people-intensive business, franchising as a potential growth option, and the negotiations over franchising terms.

FOUNDER DECISIONS THROUGHOUT THE VENTURE LIFE CYCLE

• Case #2: “Evan Williams: From Blogger to Odeo” (HBSP link)

Case description: “For several months, founder-CEO Evan Williams has felt trapped, unable to control Odeo and its strategic direction. He longs for the ‘simple’ days of Blogger, the previous venture he had co-founded. Although his Blogger experiences had included a major blow-up with his co-founder that had resulted in legal proceedings, a brush with near-bankruptcy, and the laying off of his entire team, Williams has become even more disillusioned with his current venture, Odeo. Odeo, a podcasting pioneer, had debuted almost two years before and had gotten off to a very strong start, with a high-profile debut at a prominent industry conference, coverage on the front page of the New York Times’ Business section, and the raising of a large round of financing from a top-tier venture capital firm. His attempts to find an acquirer have failed, layoffs have begun, and he is now facing a meeting with an increasingly hostile board of directors. At that meeting, he is very tempted to resign so he can move on to his next project and regain the thrill of being an entrepreneur.”

Core issues: To examine alternate approaches to founding and building new ventures, by examining the decisions and actions of a serial entrepreneur regarding co-founders, hiring, investors, and exits. [Note: Evan is now better known as the founder-CEO of Twitter.]

 

• Case #3: “The Tale of the Lynx” (HBSP link)Case description: “The founders of Lynx Solutions have survived tensions within the founding team, the firing of Lynx’s founder-CEO, and a crisis sparked by media allegations that it had been spying on its users. Now the founders are considering a proposal from one of their directors to make a dramatic shift in the venture’s strategy and have to decide how to react.”

  Core issues: Managing the board of directors, Bridge CEOs, Founding teams, Hiring challenges, Venture growth, Raising venture capital.

• Case #4: “Lather, Rinse, Repeat: FeedBurner’s Serial Founding Team” (HBSP link)Case description: “‘Is this the right time or is it still too early?’ Dick Costolo wondered as he reflected on the latest acquisition offer. He had been building FeedBurner with his three co-founders for almost four years and was staring at the details of an acquisition offer from Google. He and his co-founders had founded three prior ventures together, each of which had had increasingly attractive outcomes, but none of which had reached their full potential. The number on the table from Google was a big one. Should the deal be completed, it would be the biggest win the founding team had ever had. However, was this the right time to exit? If Costolo didn’t think so, would he be able to convince his co-founders who all had different personal risk profiles? This was going to be the biggest decision in the life of FeedBurner and its co-founders.”

  Core issues: To examine the lessons learned by serial entrepreneurs during their early ventures, regarding building strong founding teams, hiring and incenting employees, dealing with investors, and making exit decisions.

 

EXIT DECISIONS

• Case #5: “Nantucket Nectars: The Exit” (HBSP link)

Case description: “The founders of Nantucket Nectars are trying to decide whether and how to sell their company.”

Core issues: Exit decisions, strategic sale, M&A, power of auctions.