I'm not sure I get this. Maybe I'll be fortunate enough one day to experience it first hand, but I'm perfectly happy to be the Paul Allen or Steve Wozniak. I remember reading iWoz and constantly got the impression that Woz was complaining about how he wasn't recognized for things that - in the big picture - are really not that important. Surely there are more important things in life to enjoy than worrying about the "unfairness" of stuff like this, particularly when you've become financially set for life? All I want to do is make enough money to comfortably explore the things I'm passionate about without being side-tracked by working on non-interesting things for survival, and get proper medical treatment in case I'm hit by a bus, and for taking care of my needs during my old age.
I'm friends with a guy who was 'bought out' of his startup for north of $8M and he said something I found interesting.
"Chuck its not about the money, until there is a lot of money and you're not getting it. I mean when its all hypothetical you can be generous, but when its not hypothetical, and the piece being offered is not what you had informally agreed upon, you tend to stop seeing what you're getting and instead focus on what you are not getting. That can be toxic."
True, I don't doubt it is. I suppose all I'm saying is that I hope that if it ever happens to me I'll get over it quickly and move on happily with my $8M ;) I've learned a lot from Burns' "Feeling Good" and the nature of anger and pointlessness of worrying about unfairness in the world, and this just seems like another instance of something you can't control, probably can't influence (because you only recognize what's going on when it's too late), and consequently something you just need to accept. (I'm not saying don't anticipate it and try your best not to get screwed over, but if it happens, relax.)
A little bit of a link bait if you ask me; just chronicles some of the more famous founder/company fall outs with a focus on Foursquare. This is something every founder has nightmares about, especially once the company makes it. Not something you can really plan for...
I agree. The third-from-last paragraph starts with " But surely there must be some way to guard against defoundering, we imagined. " ... One would imagine that if this article had addressed the subject, this question would have been answered by then.
Respectfully, I disagree to some extent on this point. It's always a good idea never to attack others. And ideally, you hope you'll never come under attack yourself. But if you do, you don't want it to take you by surprise.
Consider this quote from the article:
"'I think it’s easy for people to jump to the side of the founder against the big bad investor,' Mr. Blumberg said. 'But we’re all grownups and you sign the papers you sign.'"
This may come across as cold-blooded, but let's be honest, there's a grain of truth to it. Startups are every bit as political as BigCo, and in some cases, even moreso. Whenever we see these stories -- and maybe it's just the popular mythological portrayal of them -- we see them as heartbreaking tales of betrayal and shattered friendships. But perhaps they're better described as tales of political savvy vs. naivete -- of ruthlessness vs. innocence. The business world often rewards the former, and rarely graces the latter. Nice guys usually finish last.
It may be sad. It may not be right. It may not be the way we want things to be. And maybe there is a "better way" to be discovered. But, no matter the case, people can't afford to place unconditional trust in each other. When big money and influential outsiders enter into an equation, people's incentives change dramatically. Eyes should be kept open to that fact. Even if we don't assume people will, by necessity, turn on us at some point, we shouldn't rule it out. It's not that people are assholes; it's that the upper echelons of business are cutthroat, and people usually respond according to their economic incentives. As the co-founder of a small, early-stage company, you don't need to concern yourself with these things. But the second you've got a VP stripe, or especially the letter "C-" in your acronym, you've got a target on your back. You need to be mindful of it.
This doesn't excuse the nature of the game, but it does offer fair warning to any who'd play it. Keep stock of everyone else's hand. Know what cards they've got. Know how they may, or may not, be able to play them. Know what they stand to gain or lose by doing so, and the magnitude of that gain or loss.
There's no great excuse for being a dick, but there's equally litttle excuse for being a Polyanna. I would never advocate that we all actively seek to screw each other over. Rather, I'd suggest we keep our guard up -- especially around times of big organizational shift (new funding rounds, board changes, big new hires, etc.).
I am always a fan of the idea that in business, work with people you completely trust, and set things up as if you don't trust them at all. Part of it is that this way you avoid letting all sorts of things from honest data entry errors to actual dirty tricks. Anything that is important should be cross-checked.
Really like that first line. I think it's very true. You should try to pick people you can trust, but design systems to reduce the incentive for breach of trust. You won't always eliminate the risk of the latter, but assuming the risk will never materialize -- and thus, doesn't need to be accounted for -- is a dicey proposition.
The challenge really is setting these things up from an early stage. I don't think as a founder at a company that has not yet been funded you have the luxury (time, brain power, etc.) of thinking about these things, you're so busy trying to get the company off the ground that everything else is secondary. Even more so once you get funded, because all of a sudden it's not just you pushing yourself, it's a group of investors that are all of a sudden breathing down your neck (not to say all are like that or that it's a bad thing...) Especially if it's the first company you've founded and you're stumbling along, the learning curve is exponential...
"I don't think as a founder at a company that has not yet been funded you have the luxury (time, brain power, etc.) of thinking about these things"
Agreed, albeit to an extent. It's one of those things that must be taken into consideration, because the magnitude of the downside is so potentially massive. But to a large extent, 100% agree with you, it's not something you have the luxury to ruminate on for any appreciable length of time.
Ergo, I'd suggest that the time to do the rumination is whenever a big org shift or financial event is on the horizon (major funding round, new board appointments, major new hires -- especially if there's any overlap with your own responsibilities -- etc.). Each major shift of this nature deals some new cards, and it changes everyone's hand in the game. It's helpful, if nothing else, to take stock of how things will change for everyone before the change takes place.
[Of course, I'm not suggesting that founders become preoccupied with this sort of thinking. That's a recipe for paranoia and a poisonous political climate, and it may end up creating a self-fulfilling prophecy. Rather, all I'm suggesting is that some nontrivial degree of thought be taken.]
Come to think of it, there was a great article on HN about 6 months ago about how to structure a founders' agreement. It seems especially relevant to this conversation. Wish I could remember the title or author.
That may be true in most cases. However I think that founders who have significant financial accounting knowledge and experience will do this because concepts like separation of duties enforce this sort of thinking.
As a note, financial accounting as a discipline has solutions for this that can be applied elsewhere in the business process. I am perhaps lucky because I build financial accounting software :-P
The title on HN may not be right, but I really appreciate the tech and startup space getting some researched and more long-form style of writing rather than just more of the same two-paragraph bullshit blog posts.
There are three things in life that make people act funny: drugs, women (or men, you get the point), and money. They don't act rationally or human, and you should be prepared.
"... A source close to Selvadurai tells us the Foursquare cofounder has seemed ‘frustrated’ and ‘lost,’” reported the blog Business Insider; Mr. Selvadurai was “forced out,” according to a followup story. 'Dennis and he don’t hate each other—things just changed, ..."
Elon Musk had to deal with and survived a hostile power play to get him removed from Tesla after he founded and funded the company. Martin Eberhard filed suit against Tesla and Musk for slander, libel and breach of contract. Eberhard failed in his power play to be named one of the remaining two founders of Tesla.
To succeed after you have succeeded in business you have to be a Jedi master of strategic, tactical, and operational civil legal warfare. Extremely intelligent and opportunistic people will help you achieve your goals, then stick a daggar in your back, take all of your money, leave you with nothing, laugh at you, then rewrite history with you as the villan.
"Take all of your money" is really rare... the one constant in every example in the article is that the founder who is being forced out is almost always paid off.
In the one case I've been a witness too, it was the same. It's usually quite expensive to force a founder out, but that dosen't make it any less tragic.
"Extremely intelligent and opportunistic people will help you achieve your goals, then stick a daggar in your back, take all of your money, leave you with nothing, laugh at you, then rewrite history with you as the villan."
I've learned this over the past couple of years. As soon as you see the slightest bit of success, someone will try to take it from you. If you aren't defensively strategic, they will succeed.
The problem is that any hint of money brings the predators.
