Month: December 2009

This evening I came across Richard Luck’s post on “5 Things I Wish Someone Had Told Me (about starting a company)” and it triggered thoughts about stuff I wish folks had told me about. Two things that popped up immediately in my head were, about the unstated emotions that surround the phrase founder and the matter of laying people off. In this post, I will confine myself to talk about founders and issues surrounding them and save the cheery matter of having to handle layoffs in your start-up for a future post.

My first thoughts were captured in an earlier post “Do I want to be a founder?”

Who’d have thought a simple word, such as founder, could be such a loaded word? Having founded two companies, been part of at least two other early-stage tech firms, and now as an advisor to several startups, I see this is an important matter to address head-on. Prior to my arriving in India, my rather simple view of the founder was a person who was there on day 1 or before day n. In an Indian context, this word has been imbued with so much more context, that it took me a while to recognize that they are there and to deconvolute them. I suspect, even at the end of this piece, there may be a few loose threads which I hope we can wrap up in discussions and comments.

Out of all of the stumbling, fumbling and plain screwing up that I have done, I have come to put down these four points to discuss with folks who join me in business or I see going into business. Rather than achieving alignment, I find that just raising these itself, is sufficient for people to get that “Oh!” expression and think about it some more.

These include their role as a

• founder – a very influential role in vision and culture, with a huge emotional component, but little legal significance beyond what the other roles provide
• shareholder as someone who holds a reasonable stake in the company. While usually, founders hold significant shares, others too may be large shareholders
• board member legally recognized role as a member of the board of directors;  may include executive officers and usually not all founders are members of the board, 
  
• operational or day-to-day functional roles as engineering or marketing heads or lead technology person or CEO – the job you are expected to play as a key team member of the startup. These may include founders and will usually be shareholders (or option)

Founder – anyone who joins the company prior to its formation or on its 1st day. This definition is the cleanest that I have found. However all too often, startups—certainly any that I have been involved in—tend to take a while to figure out what they are about. In this phase, which usually is some finite and arbitrary time frame, maybe three or six months, you end up bringing on board others who fill out the founding team. Hence these folks become (co-)founders. If that is all there was to it, I’d have wasted your time reading this far.

Being a founder, brings largely psychic benefits for the foreseeable future, a lot of real expectations (from other founders) and a whole lot of sacrifices when things don’t go well. Sure as a founder, if you own a significant stake in the business you stand to gain a whole lot when the business succeeds but that always seems so far away, that it is better to expect and settle for the psychic benefits. The media in India always like it if you are the founder and happen to be a C-level executive or the tech genius. If, like in many US startups, you are a principal engineer, despite being a founder, not a lot of media people want to talk to you.

Share-holder Prior to being in a startup I had never given this any thought. The Chairman of my previous startup used to often say “We leave our shareholding at home when we come into work,” and I think we all actually believed it. But then again this is easier said than done. I have seen founders and even those amongst the first 10 employees, who owned non-trivial amounts of company stock and were largely in senior individual contributor roles handle this very differently. The extremes, even in my limited experience ranged from the role of a deeply committed statesman to less-than-subtle mini-Carl Icahn in the making.

Board Member or Director – When there are multiple founders, who get to be on the board, what are people’s titles and functional roles become points of heartburn if not stated, discussed and handled up front. Of course, neither the government nor statutory bodies recognize anything called founder, they want to know and care about board members or (founder-) directors (as they are called in the UK or India).

Unlike a founder, a company director, is a recognized statutory role (with its legal repercussions) and often one or all of the founders may start as directors in the company (board). This will change as angels or others invest in the company and take board seats on. Contracts and other legal obligations of the company will be taken on by directors.

To compound matters, the Valley nomenclature has percolated into Indian tech firms so one can be a Director of Engineering or Marketing, and this has nothing to do with being a director in the company. The media seem to prefer talking to the latter and rarely to the former. Which brings us to the matter of functional roles.

Functional roles Startups, particularly ones that survive and thrive grow faster than the founders will necessarily grow. This means a founder who started as Director of Engineering, may end up being program manager or business development manager, whilst someone who has actually managed a 200 person engineering team may come on board as the VP or Director of Engineering. Only one or two of the founders may remain on the management team of the growing company, whilst other will have individual roles or functional manager roles. This whilst easily stated may not be palatable to all founders, who may only then realize they had different dreams or desires.

If all founders were aware of these four distinct roles that they can play, it would help matters a whole lot. If their identities and egos are excessively tied to their titles and functional roles, the decisions they make may not always serve the company, and therefore their own self-interest well.

Business is a whole lot more fun when done with others, especially with a good, strong founding team. The funny thing is that in the heady days when you start, all this seems so academic, distant and meaningless. And it matters little when you are cash-strapped, busting your rear to get the product out the door, finding customers and trying to keep your head above the water. But if you don’t think and more importantly talk and align with these roles and our own expectations, in those early days, this can at the very least cause some major heartache and at the worst cause things to implode, when you actually have a real business, money in the bank and prospective investors or buyers looming.

Share with me your own experiences as a founder or as a witness or participant in founder feuds!