Staying Successful In A Startup

Thursday, March 6, 2008 by Mistlee

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Staying Successful In A Startup

By Brajeshwar Oinam

What motivates entrepreneurs? Money? Control? In truth, some entrepreneurs are expecting to get rich. Others want to grow and control a new venture. But most would probably answer - both - and in the process of mixing the two, ended up with neither.

Few days back, I read about Harvard Business School's (Working Knowledge) articles that address a number of nagging founder-issues - ownership and change of control, resource management and getting to profitability, common legal sand traps - via FoundRead's article on Sharpening Your Startup Skills.

I understand that the art of successfully staying alive in a startup, moving ahead with achievement of one's goal have varied ways, methodologies and beliefs depending on how and what one is involved with, nonetheless, the handy kit should be a good framework for anybody to learn from. The articles answer few very common questions that one might need to ask to "sharpen business skills".

Should I keep control of my company?

As a an entrepreneur, how would you decide between the two options - become rich or be the boss - it is very difficult to have both. Professor Noam Wasserman discusses his research into the motivations of entrepreneurs and the people who invest in them.

Key concepts include:

• Entrepreneurs are often motivated by the potential of money and control, but very few ever achieve both.
• A fundamental tension between "rich and regal" starts to develop as entrepreneurs look to attract resources to grow their ventures.
• Investors need to understand the motivations of the entrepreneurs they back to make sure their goals are aligned.

Most of the founders started off wanting to become both Rich and King - "Rich and Regal." This desire is reinforced when they see such prominent Rich and Regal entrepreneurs as Larry Ellison of Oracle Corporation, Marc Benioff of, and Phil Knight of Nike. What's ignored is that these people are so well known precisely because they are the exceptions, the rare founders who are able to achieve both. Many others who tried to achieve both have ended up making some decisions consistent with Rich motivations and others consistent with King motivations, and in the process of mixing the two, ended up with neither.

Professor Noam Wasserman further states that, "A more successful approach seems to be that the entrepreneur step back to really understand what his or her true motivation is, Rich or King, and then to recurringly make decisions consistent with that motivation. This may reduce the chances of becoming Rich and Regal, but it may dramatically increase the chances of achieving what really motivated you to become an entrepreneur to begin with."

From a VC or any investor's perspective, there is a straight line to look at - VCs invest in a company in order to maximize their financial returns from the company - i.e., to become Rich themselves. They are driven by the profit motive. If an entrepreneur wants to become Rich, then VCs see that entrepreneur's interests as being aligned with theirs, for they both want to maximize financial returns.

However, if an entrepreneur wants to become King, that entrepreneur is more driven by the control motive and is willing to sacrifice financial gains in order to keep control. The interests of such an entrepreneur are not aligned with those of the VCs, and in fact may be in direct conflict with them. Thus, from the beginning, many investors want to find out whether an entrepreneur is motivated by Rich or by King, and then only want to invest in the "I want to be Rich" subset.

At the same time, savvy entrepreneurs know that this is what VCs are looking for, and are able to "talk the Rich talk" convincingly. For many VCs, seeing through to a founder's real motivations is critical, but can be very tough.

How do I turn potential into profit?

Professor Joseph Lassiter research explores entrepreneurial marketing in high-potential ventures. He describes entrepreneurial marketing as a mindset and a process, one that involves gathering specific evidence that convinces a specific group of individuals to act and react, exploiting breakthroughs, and overcoming setbacks.

Continue reading this article...

About the Author:
Brajeshwar is an ace digerati and an ardent believer of KISS (Keep It Simple Stupid), he envisions pushing the technical envelope time and again for the betterment of commercial and practical applications.

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