HBS Working Knowledge: Entrepreneurship: The Founding CEO's Dilemma: Stay or Go?

HBS Working Knowledge: Entrepreneurship: The Founding CEO's Dilemma: Stay or Go? "NB: Is it inevitable that founders will not be able to go the distance? Wasserman: Not inevitable, but probable. We teach a case in our first-year entrepreneurship course on a Silicon Valley VC firm called Onset Ventures, which lays out a 'test' for all entrepreneurs it considers backing. It's called the 'Rich versus King' test. It gets to this essential trade-off around what drives an entrepreneur: Is it the need to control the company (that is, to be King), or is it the drive for success, particularly financial success, which may require that the entrepreneur step aside once certain business milestones have been reached? Onset does not like to invest in founders who 'want to be King' out of concern that they will not want to be replaced if such a step is required in order for the company to be successful. Once the company's product is defined and the business model has been developed, Onset—and indeed most VC firms—wants to be able to bring in a new CEO if required. Thus, the only founders who can assure their ability to continue as CEOs are those who don't raise outside money from Onset and its peers. Of course, that outside money is often necessary to build a valuable company, so King-motivated founders usually have to give up a lot of potential growth to remain King. In the entrepreneurship class, I push students to think hard about why they are choosing to be founders to begin with, and then to make conscious choices that are consistent with those motivations. The founders who get into trouble are often the ones who make decisions without regard for 'Rich versus King,' and who therefore decrease the chances that they will achieve their goals because they haven't made choices consistent with their motivations."