Being King, Getting Rich, and the Best Laid Plans

Here's Guiding Principle Number One for attracting and retaining top talent to/at your company: know before you start your venture whether you want to be "Rich" or "King." This is a reference to a classic concept where you can create wealth (Rich) or control the growth of your company (King), but doing both at the same time is incredibly rare (Exception) -- so rare that no one should go into a venture assuming that they'll be the Exception. Usually, they'll either be replaced by a new CEO as investors bring on the right talent for the task at hand, or, conversely, they'll remain CEO and majority shareholder, but investors will not invest past one round. Noam Wasserman, a professor of entrepreneurship and longtime researcher of entrepreneurial economics, has studied this dynamic for years (in fact, he's coming to JumpStart next week to conduct a seminar on the topic). Wasserman found that under 25 percent of founders remain CEO of their company at the time of IPO. The Journal of Leadership and Organizational Studies found that on average, half to two thirds of founder CEOs of venture backed companies are replaced. So, this Guiding Principle is fun because it's simple, timeless and classic and yet I would speculate that few people starting a venture actually know for sure whether they want to be Rich or King. Why? I suppose because most entrepreneurs believe they can be both, and so rather than seeing it as an "either/or" proposition, they see it as "both/and." "I can be both Rich -- creating wealth for myself and others -- and King -- controlling my company rather than having investors control it." Bill Gates was both Rich and King. Larry Ellison too. I find it hard to refute their reasoning: this "both/and" mentality and confidence is what attracts people to entrepreneurs and what keeps entrepreneurs going through the hard times. Furthermore, I barely know what I'm having for dinner tonight, never mind knowing for certain which entrepreneur is going to be exceptional over the next eight years. So, what right do I have to counsel anyone not to go after being exceptional!? Instead, rather than playing the part of Esteemed and Lofty Counselor in the feature film called Growing Your Company to Greatness, I just ask a couple of very simple (Myers Briggs it ain't) trade-off questions. Unlike politicians, entrepreneurs have to answer the questions - they cannot punt! First, which do you admire more: a) The anonymous, wealthy founder who didn't single handedly take their company to the promised land and barely even gets credit for the technology they created, but made some nice money in the process, or b) The noble individual who fights barrier after barrier to retain control of their company and grow it at a nice pace, even if it means turning away investors at every turn? Second, what do you want written in your obituary: a) That you founded a company or even two or three or more, and generated wealth, or b) That you grew a company through thick and thin and took care of your employees? If you chose (a) in both instances, then when all the cards are played out ("at the end of the day," "in the final analysis," yadda yadda yadda) you'll likely be able to found and grow a business that has investors, and you will always be founder but be prepared: you might not always be leader. If your answer is (b) in both instances, then, when the cards are played out, you may found and grow a great business, but be prepared: you might not get investors.* Which brings me back to Guiding Principle Number One: Know before you start your venture whether you want to be Rich or King. You can plan to be both, but you should be prepared to be one or the other. *Don't ask me what it means if you answer (a) in one case and (b) in another. I'm a simple investor/operator, not a psychologist. Becca Braun is a past president of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.