02 November 2006

Rich or King? A founder anomaly.

A phrase often used by venture capital investors when investigating the motives of a founder entrepreneur is: "would you rather be rich or king?" This arguably gets at the crux of whether or not the founder would give way to the greater good and relinquish his CEO role in return for the riches of success without him leading the way. Savvy founders looking for capital from these deep pocketed venture investors have learned the right answer from the VC's perspective is Rich!

It's not clear whether the Venture Investors are really seeking the truth or just want to see if the founder is savvy enough to answer this inquiry "correctly." But virtually every founder that I've interviewed has a good deal of king (or queen) in his (her) plans. Sure, founders may be seeking riches and financial rewards for their sacrifices and hard work. But ultimately, most founders found companies in order to run their own show (translate into rule their own kingdom).

And doesn't that make sense? Many of these founders were very successful corporate executives, earning good salaries, receiving nice perks, and enjoying the supporting casts of their established employ. Founding a startup involves leaving most of that behind, starting over from little, doing it mostly on your own, and usually getting paid very little for the effort. While founders may dream of some day hitting it rich, that may be a long way off. But the very day they start - they start as duke, albeit over what may be a very small duchy.

The transition to professional CEO usually occurs (is forced upon them) well before they begin to enjoy the promised riches. So the choice for the founder is more appropriately: "would you rather be king or would you rather bank on someone else to lead you to what might someday be the riches you originally envisioned." Not quite the same choice originally posed by the VC during the courting ritual.

So VC's will most often hear the answer that they desire. And founders who need the capital, will continue to answer expeditiously, no matter what their actual motivation.

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