Archive for the ‘roles’ Category

“Founders’ Dilemmas” Course: “Building the (Founding) Team” Case Studies

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 […]

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A Second Look at “Idea People” as CEOs: Should vs. Do

In response to last week’s post showing raw data about the propensity of “idea people” to take the CEO position within their founding teams, Tadej commented: I don’t think having the idea should generally affect your position in the company (that should be determined by your abilities and motivations) – some people say that having an idea is worth 20 bucks, the rest is implementation. Tadej makes an excellent point about what teams “should” do. In practice, what do teams actually do? To give us some deeper data regarding this, I ran a quick regression analysis to assess the strongest factors affecting which founder takes the CEO position. The factors I included in the regression were as follows: Serial entrepreneur — Has this founder already founded a prior company? Industry experience — Has this founder worked in the same industry before? Years of experience — This founder’s # of years of prior work experience at time of founding Was idea person — Did this founder come up with the idea on which the venture was based? The first 3 are meant to capture the “abilities” factor mentioned by Tadej, with the fourth being the variable I described in the “Idea People” post. The dependent variable in the regression was whether the founder was the founder-CEO or not. Quick technical notes: The pseudo-R-squared of this basic logit model was .07, the Prob>chi2 was .0000, and I clustered the standard errors by venture. Regarding the 3 abilities metrics, 26% of the founders had prior founding experience, 31% had worked in the same industry before, and the average prior work experience was 15.9 years. Side note: Interestingly, the Idea Person variable was not significantly correlated with Serial Entrepreneur and with Years of Experience, but was significantly negatively correlated (r=-.22, p<.01) with Industry Experience. […]

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Idea People and Their Initial Roles Within Founding Teams

Does being your venture’s “idea person” affect your initial role within the venture and the size of your equity stake? Initial analyses of data from our 2007 Compensation Survey (the 2008 Survey is currently under way — see here to participate!) suggest that being the idea person can affect your role and the size of your equity stake. In this post, I delve into the impact on roles, and in the next post, I’ll delve into the equity-stake implications (IY”H). Note: The analyses I present below are only descriptive and preliminary, and will be followed by more detailed/definitive regression analyses (which will control for differences in years of prior work experience, prior founding experiences, and other factors). Please post your thoughts on any data or statements below — I look forward to incorporating those insights into the regression analyses. In the survey, we asked whether each founder had come up with the idea on which the venture was based. Within the IT survey, we received data on 324 founding teams encompassing 880 individual founders (for an average founding-team size of 2.7 people). Of those 880 founders, 412 were identified as being the “idea people” within the team, an average of 1.3 idea people per venture. As shown in the pie chart below, 81% of the ventures had a single idea person and 15% had 2 idea people. Of the 412 idea people, 232 (56%) of them took the CEO position at the time of founding, 50 took the CTO position, another 50 took a lower-level VP position, and 30 became Chairman. Sliced another way, what percentage of people in each initial position were identified as the idea people for their ventures? Almost 85% of founding CEOs had been the idea person, 65% of the founding Chairmen had been, and 42% […]

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Neverland, or Dictatorship?

As a start-up grows, can the founding team continue to make decisions collectively, or does someone have to rise above the others and become the final decision maker? A couple of years ago at a panel discussion at HBS’s annual Entrepreneurship Conference, the 4 founders on the panel disagreed about almost every topic raised by the moderator. The one thing on which all 4 agreed was that “a start-up has to be a dictatorship.” Each of the founders had started a company with at least one co-founder, and had tried to make all decisions by “consensus.” However, in all 4 cases, this structure had caused major problems for the start-up. Therefore, summed up one of the founders, “Either I have to be making the final decisions, or I have to be working under my co-founder who is. ‘Co-CEOs’ just doesn’t work.” At the time, I had just finished writing my Ockham case, where this issue caused disruptive tension between the founders. On the other hand, back when I first started focusing on founders half a decade ago, one of the first companies I studied was iWon, which was run pretty successfully for a while by two co-founders and co-CEOs, Bill Daugherty and Jonas Steinman. In our Entrepreneurship MBA class, we refer to this as the “Neverland” approach (the Peter Pan one), after the place where there are no parents, only children. Here’s an excerpt from an old story about Bill and Jonas. It’s Bill response to the question, “Explain how you manage to both share the CEO title. Doesn’t one person have to make the final decisions?” Daugherty: Jonas and I met at Harvard, so we’ve been friends a long time. Even though we hadn’t worked together, we had a real good knowledge of each other’s strengths and weaknesses. We […]

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