The Founder’s Dilemma by Noam Wasserman

Reflection Paper #1, Justin Wylie

The Founder’s Dilemma by Noam Wasserman highlights the struggles encountered by entrepreneur founders who inevitably walk the gauntlet in an effort to make a decision about their own future within a venture they founded. Do I want to get rich (wealth) or run the company (power)? The answer to this seemingly either/ or question has far reaching implications about their role in the venture they created.

The “get rich” option (wealth) favors increasing the value of a smaller piece of the pie. Why smaller? The founder leverages equity slices of the pie to attract qualified co-founders, critical executives and valuable investors. The outside resources have critical skills required to make the venture a success but are not inherent to the founder. As such the founder is left with a smaller stake in the venture they founded, al-be-it a potentially more lucrative slice.

The “run the company” option (power) suggests a founder does not offer equity to entice outside support but rather bootstrap’s their company with their own funds thus keeping their slice of the pie large. In this scenario a founder might be limited to ventures that don’t require large amounts of capital and/or limits the scope of the business to area’s where the founder has vast experience themselves.

The article described a seemly binary scenario where the founder inevitably has to make an absolute either/or decision; however, the motivations of the founder are noticeably void. I assume for a founder who is completely motivated by money, there is no dilemma. Sell the equity, pocket the cash and go live on an island. The same would be true for the founder consumed with the need for power, there simply is no dilemma. Don’t sell the equity and manage the venture exactly the way they desire. To their personal benefit or detriment. The “dilemma” only exists when the founder wants both – the wealth and the power.

Set aside the binary option, a 3rd option would be required. A middle ground where half-wealth and half-power might co-exist to the benefit of the venture and the risk of the founder. This scenario would require hyper communication via the founder concerning his/ her motivations, strengths, weaknesses and vision for the venture.

This scenario is also not without its challenges. Any outside investment needed to further the venture would introduce “strings”, i.e. he who has the gold makes the rules. The founder would once again be required to be hyper vigilant in communicating their vision of the venture, their value (need to maintain the wealth and power) while seeking outside an investment. Depending on the abilities of the founder, this could dramatically reduce the pool of available investment capital. This option would also require the founder to exercise a good deal of humility. I.e. Seeking the expertise from individuals with skills not inherent to the founder.