Noam Wasserman's "Founder Frustrations" blog

12th Annual CompStudy Survey: Participate by July 31st, Get Free Compensation Data

2011-07-19T10:42:00.001-05:00

Our annual Entrepreneurship and Compensation surveys are under way right now. If you participate, you'll get free access to detailed compensation data. In the coming days, I will be getting back into a regular blogging routine, tackling new founder issues, covering new parts of the issues we've already tackled, and starting to delve into portions from my upcoming Founding Dilemmas book. In the

Topics Covered in This Blog (So Far)

2010-12-07T05:59:00.001-05:00

Here's the updated "thematic index" to the entries and links in this blog.*** COMING SOON: NEW ANALYSES FROMUPCOMING FOUNDING DILEMMAS BOOK ***"Founders' Dilemmas" MBA Course ContentNEW Post: Course OverviewNEW Post: Introductory Case and "When to Found" ModuleNEW Post: "Building the (Founding) Team" ModuleNEW Post: New-Venture Hiring CasesNEW Post: Founder-CEO Succession CasesNEW Post:

This Thursday: Annual CompStudy Webcast

2010-10-12T07:39:00.004-05:00

Apologies for my blog silence since the summer began, but I have been hibernating in my "book cave" writing my first book. After I finish the manuscript, I will be blogging about its content and some of the new analyses from it. For now, the one-line preview is that its working title is Founding Dilemmas, and that it will tackle the most important early decisions founders make that tend to get

11th Annual "CompStudy" Compensation Survey: Want to Participate (and Get Access)?

2010-06-01T07:30:00.001-05:00

Our annual Entrepreneurship and Compensation surveys are under way right now. Do you want to participate and get free access to compensation data?The surveys focus on private companies in the Technology and Life Sciences industries. We have conducted them annually since 2000, making this the eleventh year of the survey. I collaborate on the surveys with two professional services firms:

The Quick Handshake: A Valuation Penalty?

2010-05-26T06:30:00.002-05:00

When do co-founders split the equity equally, and does an equal split affect their venture's later valuation?We are currently conducting our annual CompStudy survey. (I'll soon be posting details about how to participate.) Over the last two years, I have enhanced the Founding Team section of the survey, so we can get a deeper view of various founding issues.The first issue I am revisiting is how

Salary Inequality Among Co-Founders: How Common?

2010-03-22T09:30:00.002-05:00

I have accumulated a backlog of interesting questions posed to me by founders and investors (and by my students!). For many of them, my quantitative CompStudy data should be able to provide some answers. In this post, I will tackle the first of those questions.In my past analyses of entrepreneurial compensation, I have focused on founder vs. non-founder salary differences (e.g., the Founder

CompStudy Highlights: "Live Tweets" from the Webcast

2009-12-16T09:00:00.003-05:00

Earlier this month, we had our annual webcasts to launch the 2009 CompStudy Reports for Technology and Life Sciences ventures. During the webcasts, I live-tweeted (via my @noamwass Twitter account) about interesting data tidbits and comments from the panelists. Below is a synthesis of those raw tweets. If any strike you as particularly interesting or surprising, please comment about it!Notes:

CompStudy 2009: Two Free Webcasts This Week, plus Overview of 2009 Survey

2009-11-30T10:00:00.001-05:00

This year’s CompStudy survey – our tenth-anniversary survey – ended up being our biggest ever (by far), with more than 700 private ventures responding to our detailed Entrepreneurship and Compensation survey. (Thank you again to all participants!) From our humble beginnings in 2000, when we attracted 211 Technology ventures, we have grown to having 489 Technology and 214 Life Sciences ventures

"Founders' Dilemmas" Course: Franchising, The Full Life Cycle of a Venture, and Exit Decisions

2009-11-17T06:00:00.000-05:00

Prior posts about my “Founders’ Dilemmas” MBA course included the following items:an overview of the course,details about the Introductory case and the cases in the “When to Found” module,details about four cases in the "Building the Team" module,descriptions of the core new-venture hiring cases, anddetails about the founder-CEO succession cases.This post describes a case that examines

"Founders' Dilemmas" Course: Founder-CEO Succession Cases

2009-09-29T08:00:00.003-05:00

In prior posts about my “Founders’ Dilemmas” MBA course, I provided an overview of the course, details about the Introductory case and the cases in the “When to Found” module, details about four cases in the "Building the Team" module, and descriptions of the core new-venture hiring cases.This post covers the course's founder-CEO succession cases. The first case ("Founder-CEO Succession at Wily

"Founders' Dilemmas" Course: New-Venture Hiring Cases

2009-09-08T07:30:00.001-05:00

In prior posts about my “Founders’ Dilemmas” MBA course, I provided an overview of the course, details about the Introductory case and the cases in the “When to Found” module, and details about four cases in the "Building the Team" module.This post covers the two core new-venture hiring cases in the course, one of which is part of the “Building the Team” module and the other of which is an

"Founders' Dilemmas" Course: "Building the (Founding) Team" Case Studies

2009-07-15T07:30:00.002-05:00

In prior posts about my “Founders’ Dilemmas” MBA course, I provided an overview of the course and details about its first three case studies (which include the Introductory case and the cases in the “When to Found” module).This post covers the four founding-team cases in the “Building the Team” module. (Another case in the module covers non-founder hiring issues, and will be described in my next

"Founders' Dilemmas" Course, Part 1: Introductory Case and "When to Found" Module

2009-06-16T10:29:00.006-05:00

As promised, this post outlines the first three cases of my “Founders’ Dilemmas” MBA course (see my previous post for the course overview).This post covers the Course Introduction case and the two cases from the “When to Found” module, and provides for each case the official case description, a list of the case’s core issues, and a link to the HBS Publishing entry for that case. As mentioned

Course Overview for "Founders' Dilemmas"

2009-06-10T09:37:00.006-05:00

Educating founders about the upcoming decisions and challenges they will faceLast week was HBS Graduation Week, marking the official end of the debut semester for my “Founders’ Dilemmas” course. I had a great semester with a terrific group of very sharp students (who generously bestowed on the course the 2009 HBS Teaching Award). In honor of those bold, risk-taking students who were willing to

Founder Cases in the News: Evan Williams (Twitter) and Apple

2009-05-06T12:36:00.005-05:00

One of this week’s more intriguing (and controversial) rumors in the IT industry was about Apple's possible interest in acquiring Twitter.I was planning to use my next blog-post to give an overview of my new MBA course ("Founders' Dilemmas: Money and Power in Entrepreneurial Ventures"), followed by posts on its individual case studies. However, given the Apple-Twitter rumors, I decided to jump

Just Launched: 10th Anniversary Compensation Survey

2009-05-04T07:00:00.000-05:00

Our annual Entrepreneurship and Compensation surveys are under way right now. Do you want to participate and get free access to compensation data?The surveys focus on private companies in the Information Technology and Life Sciences industries. We have conducted them annually since 2000, making this the tenth year of the survey. I collaborate on the surveys with three professional services firms

New: "A Note on the Legal and Tax Implications of Founders' Equity Splits"

2009-04-06T10:21:00.002-05:00

In January, I debuted a brand-new MBA course based on my research on founders. The theme of the course should be familiar to readers of this blog: the tough, early choices founders face that have important, long-term implications for them and their ventures.For the course, I wrote 15 HBS Cases about the challenges faced by founders as they decide: when to make the leap into founderhood, whether

The Gender Gap in Startups, Part 2: Compensation

2009-02-03T07:00:00.003-05:00

Is there a Gender Salary Gap in private ventures?My previous post showed the percentages of men versus women in IT versus Life Sciences executive teams, across various VP-level and C-level positions. In this post, I focus on salary differences by gender, first describing the overall results using our full 2008 survey results, then delving into various subsets of the data.The regressions included

The Gender Gap in Startups, Part 1: Women in IT and Life Sciences Ventures

2008-12-15T13:10:00.000-05:00

What are the actual percentages of women in startups? Do the numbers differ by industry, stage of venture, or position? And, are women and men paid differently in startups?On a regular basis, I read articles that refer to or lament the imbalance between men and women in startups. For instance, this Forbes article states that only 4.08% of venture funding in 2006 went to tech startups with

This Friday: Entrepreneurial Compensation Webcasts

2008-11-04T09:00:00.001-05:00

The annual Compensation Reports that are produced using the data from our "CompStudy" entrepreneurship survey are being unveiled this Friday, November 7, during the third annual Compensation Webcast. (The survey data also serves as one of the backbones of the research described in this blog.) The sponsors of the survey, Ernst & Young, WilmerHale, and J. Robert Scott, will walk through some of

The Perils of Being a (Successful) Serial Entrepreneur

2008-10-13T12:30:00.001-05:00

Succeeding as an entrepreneur comes with many benefits: heightened credibility, new skills, broader and deeper connections. However, once you've succeeded, are there any downsides you should worry about?There are substantial benefits to having already been a successful entrepreneur. (In addition to the things listed above, one specific example: My new "After the Firing" analyses -- details

Harvard Business Online: "Don't Wait Too Long to Become an Entrepreneur"

2008-09-23T09:30:00.001-05:00

Earlier this month, the folks at the Harvard Business Online site asked me to do a "Conversation Starter" blog post on their site about the challenges faced by people transitioning from being big-company employees to becoming entrepreneurs.The result was posted two weeks ago. More than three dozen comments later (thank you to everyone who contributed there!), I posted my thoughts on some of the

Unlocking Your Golden Handcuffs: How Common is Accelerated Vesting on Change of Control?

2008-08-31T08:45:00.000-05:00

"I'm negotiating my equity-compensation package. How frequently do people get accelerated vesting on change of control?"In private ventures, vesting of equity stakes is the major form of golden handcuffs (see posts here, here, and here) used to keep executives at their ventures. However, other terms, such as accelerated vesting on change of control (AVCoC), can shorten those vesting periods. (

Rich vs. King, Around the World

2008-07-21T10:10:00.000-05:00

If I live outside the United States, do Rich-versus-King tradeoffs apply to founders in my country?In recent months, one question I have gotten on a regular basis is whether Rich-versus-King tradeoffs are specific to founders from the United States or are more universal. (See here for a blog-post about the core concept, here for a fuller article in Harvard Business Review.) The data with which

The Idea Premium: How Much (Equity) is Your Idea Worth?

2008-06-17T09:00:00.001-05:00

How much more equity do you receive if you are the founder who came up with the original idea for your venture?Last month I posted preliminary analyses (here and here) of how the initial titles/positions adopted by co-founders are affected by which founder had the original idea. In a long-ago post about equity splits, I also suggested that past contributions -- including which co-founder(s) had

"Administrivia" Corner: This Blog is Now Email-enabled

2008-05-28T12:49:00.000-05:00

For those who prefer to receive new posts via email, I have integrated email subscriptions into this blog. Just enter your email address into the field in the right-side column to be emailed each new post.My one request to email-subscribers is that when you see something relevant or interesting in a post, please hop into the blog to post your insights/comments on it. If you can do that on a

A Second Look at "Idea People" as CEOs: Should vs. Do

2008-05-06T09:29:00.000-05:00

In response to last week's post showing raw data about the propensity of "idea people" to take the CEO position within their founding teams, Tadej commented:I don't think having the idea should generally affect your position in the company (that should be determined by your abilities and motivations) - some people say that having an idea is worth 20 bucks, the rest is implementation.Tadej makes

Idea People and Their Initial Roles Within Founding Teams

2008-05-01T10:56:00.000-05:00

Does being your venture's "idea person" affect your initial role within the venture and the size of your equity stake?Initial analyses of data from our 2007 Compensation Survey (the 2008 Survey is currently under way -- see here to participate!) suggest that being the idea person can affect your role and the size of your equity stake. In this post, I delve into the impact on roles, and in the

Looking for Private-Venture Compensation Data? (2008 Version)

2008-04-22T11:44:00.000-05:00

Our annual Entrepreneurship and Compensation surveys are under way right now. Want to participate? The surveys focus on private companies in the Information Technology and Life Sciences industries. (We have conducted the survey annually since 2000 for IT companies, and since 2003 for Life Sciences companies.)Survey participants receive a free, detailed "Compensation Report" that provides

Your Thoughts on Achieving Rich&King?

2008-03-31T21:45:00.002-05:00

Thank you to everyone who contributed thoughts about "The Founder's Dilemma." It was quite interesting to see your reflections on the specific Rich vs. King tradeoffs you have faced, and also your thoughts on what might separate the exceptional Rich&King founders from those who face those tradeoffs.Much of the current case-writing for my new course (more on the course in an upcoming post) is

New Article in Harvard Business Review: "The Founder's Dilemma"

2008-02-04T09:50:00.000-05:00

The new (February 2008) issue of Harvard Business Review has an article that delves into issues familiar to (and possibly of interest to) participants in this blog. Its title is "The Founder's Dilemma."Below is the article summary from the HBR site. For the full article, see here at HBR or here at HBS Publishing.If you want more details on the cases mentioned in the article, most are listed

Investors (and Managers) as Headhunters: Sources of New-Venture Executives

2008-01-08T13:30:00.000-05:00

How much of a role do investors play in helping portfolio companies find executive hires?A year and a half ago, two students of mine conducted a survey of entrepreneurs regarding how much value their VCs were adding to their ventures. One finding: 25% of the entrepreneurs complained that their VCs did not contribute enough value regarding the recruiting of senior executives. (On the list of

Hiring Into -- and Demoting Into? -- Executive Positions

2007-12-10T15:49:00.000-05:00

Our recent CompStudy webcast included a chart (originally conceived by Mike DiPierro) that showed a breakdown of founders versus non-founders in each executive position. For instance, in the 240 IT start-ups in this year’s survey, how many have founder-CEOs and how many have non-founding CEOs? Likewise for the other C-level positions and the next level down in the organization.The chart below

Hiring Frustrations: Can Goliath Work in a David-Venture?

2007-11-12T14:07:00.001-05:00

In describing their biggest hiring frustrations, founder-CEOs often mention hiring someone out of a big company who was not able to adapt to the challenges of a new venture. One founder-CEO recently described one of his hiring mistakes – a VP-level hire who had worked at Oracle and IBM – as follows: “He didn’t know how to create something from nothing. It’s like if you already have a crank, he

Next Tuesday: Start-up Compensation Webcast

2007-11-02T15:52:00.000-05:00

The Compensation Report that we produce annually (using compensation data from the "CompStudy" entrepreneurship survey on which I collaborate with Ernst & Young, WilmerHale, and J. Robert Scott) is almost done. (The survey data also serves as one of the backbones of the research described in this blog.) Last year, to help unveil the Compensation Reports, we started doing a Webcast that walks

Upside-down VCs, Part 4: Other Factors, and Performance Implications

2007-10-31T17:10:00.000-05:00

In prior posts about my "Upside-down VCs" research, I described my own experiences in venture capital that led me to question VCs' choices about their internal org structures, VCs' disincentives regarding hiring junior people, and the comments posted regarding the structural and hiring differences between early-stage and later-stage VC firms.In this post, I'll outline two remaining findings from

Upside-down VCs, Part 3: Synthesis of Comments

2007-09-30T23:25:00.000-05:00

Why do later-stage VC firms have more use for junior hires than do early-stage VC firms?Thank you again to all of the people who contributed comments to my query about junior hires in early-stage versus later-stage firms. As a whole, the comments highlighted most of the major differences between those firms; in this post, I'll summarize them and extend them to career questions.Breaking down the

Upside-down VCs, Part 2: The Costs Versus Benefits of Junior Hires

2007-08-28T13:45:00.000-05:00

In my first “Upside-down VCs” post, I asked for input on “upside-down” org structures in VC. Thank you to Jeff Barson and to two anonymous commenters (one of whom provided an excerpt from the "Understand the Math" part of this post from Seth Levine) for contributing their thoughts. Their comments are excellent starting points for the next stage of this discussion.Jeff and the quote from Seth

Upside-down VCs, Part 1: The "First Morning" That Sparked It

2007-07-31T21:10:00.000-05:00

"Does it matter how my VC structures his own firm internally? Why should I care whether he's doing all the work or whether he's delegating it to junior staff?"When you see the picture below, what's your first thought?"Org chart," right? The above "pyramidal" organization structure – in which the senior people at the top of the organization have a larger number of junior people working for them

Looking for Solid Compensation Data (2007 version)?

2007-06-28T11:55:00.000-05:00

Our annual Entrepreneurship and Compensation surveys are under way right now. The surveys focus on private companies in the Information Technology and Life Sciences industries. (We have conducted the survey annually since 2000 for IT companies, and since 2003 for Life Sciences companies.)Survey participants receive a free, detailed "Compensation Report" that provides position-by-position

Yahoo's New Founder-CEO

2007-06-22T16:10:00.000-05:00

Note: Harvard Business Online asked me to provide some reflections on the CEO succession developments at Yahoo this week. Below is an expanded version of what they just posted to their site.When a board replaces a founder-CEO with a “professional CEO,” the founder-CEO is often “demoted to Chairman” as a way to keep the founder involved with the company. The company issues a press release

Due Diligence on Your Investors, Revisited

2007-06-14T10:58:00.000-05:00

Note: For an overview of the issues covered in this blog's past posts, click here.Thank you to everyone who contributed suggestions and insights to the recent posts on founder scenes and split boards! Now that I have wrapped up my MBA teaching (thanks for an awesome semester, Sections A and D!), I am very much looking forward to diving back into our regular blog dialogue.The first item on my

Looking for (Movie) Suggestions: Your Favorite Founder Scenes?

2007-04-16T12:05:00.000-05:00

On Friday in class, we showed -- and discussed -- a documentary about life inside a start-up. The movie, "Startup.com," focuses on the birth and evolution of govWorks.com. In class, we showed scenes that focused on:How the founders' relationships evolved as the venture grew, and as the two core founders had to buy out a third co-founder (see my "Quick Follow-up" note here about the relevance to

Board problems: Even numbers? Multiple founders?

2007-03-31T23:10:00.000-05:00

Question #1: Is it good to have a split board?Question #2: For the founder-CEO, is having another founder on the board a good thing or a big mistake?In the Vermeer case with which we introduce the semester, the founding team of Vermeer is faced with a term sheet proposing an even-numbered, split board: 2 people from Vermeer and 2 VCs. Similarly, in my Ockham case that we did in class this week,

“Do I Have an Effective Board of Directors? (How Can I Tell??)”

2007-02-09T10:50:00.000-05:00

In April 2006, almost two dozen VCs, CEOs, and industry experts came together to form the Working Group on Director Accountability and Board Effectiveness (whew -- quite a name! I’ll take the liberty of using “WGDABE” instead :->), chaired by Pascal Levensohn. The impetus for the formation of WGDABE was a sense that VC-backed companies lack metrics for judging board effectiveness, and that

Interview about Founder-CEO Succession

2007-01-31T14:35:00.000-05:00

Hope 2007 is off to a great start for everyone!In the near term, I will be posting the results of analyses that my co-author (Matt Marx) and I have done of the factors affecting the stability of founding teams. Before then, I have 2 items to post that are related to past topics covered in this blog. This one is related to founder-CEO succession, and the next one will be related to boards of

Equity-Split Results, Part 2: Implications for Team Stability

2006-12-18T14:47:00.000-05:00

Does the founding team's equity split affect the team's stability as the venture grows?As I described in my original "Splitting the Pie" post almost a year ago, my initial interest in equity splits was sparked by the contrast between how the founders split the equity in our "Zipcar" case versus my "Ockham" case. Specifically, those two cases suggested that the equality of the split could have

"Rich vs. King" in HBS's Working Knowledge

2006-11-30T10:55:00.000-05:00

In case you want to read more about it, the new issue of HBS Working Knowledge includes a relatively extensive interview with me regarding my Rich vs. King paper, results, and cases. Or, as Working Knowledge titles it, "Rich or Royal?" (I've actually been wondering whether using "Royal" or "Regal" would be better than using the gender-specific "King." Guess HBS W.K. voted with its choice of

Equity-Split Results, Part 1: When Do Teams Split Equally?

2006-11-13T20:30:00.000-05:00

What makes a founding team more likely to split equity equally?In this year's Entrepreneurship and Compensation Survey, I added questions about equity splits within the founding team. These questions were sparked by my cases and field research about equity splits, which indicated that:there might be systematic patterns to which teams split the equity equally vs. unequally, and how the equity is

A Look Back, A Look Forward ... and a Request

2006-11-13T14:27:00.000-05:00

Thank you to everyone who has played a role in building the dialogue within this blog over the last 14 months! I've really enjoyed reading your observations and experiences regarding the most critical issues and choices faced by founders and those who work with them.A Look BackSince its launch in mid-September 2005, the blog has had almost 29,000 unique visitors, who have been responsible for

"Investor/Entrepreneur Value Expectation Gap": A Postscript (Entrepreneur-Investors)

2006-10-25T13:50:00.000-05:00

Note from Noam: Last year, 2 HBS second-year MBA students, Matthew Louie and Cali Tran, did a survey-based study of 51 entrepreneurs and 81 VCs. Part 1 was the project overview, Part 2 summarized the entrepreneur results, and Part 3 compared the VC and entrepreneur results.Of the 81 VCs who responded to the survey, 16 had prior experience founding companies themselves. Matt and Cali decided to

New Items on Entrepreneurial Compensation

2006-10-16T02:30:00.000-05:00

As mentioned, my Founder Discount entrepreneurial-compensation paper is coming out in this month's issue of the Academy of Management Journal. At least partly due to that paper's being published, there's been a flurry of activity about comp issues.If you're interested in reading about some of them, here are three:Magazine article -- Rick Spence's article in the October issue of MoneySense

"Investor/Entrepreneur Value Expectation Gap": Part 3 (Entrepreneur vs. Investor)

2006-10-06T17:50:00.000-05:00

Note from Noam: This is the third part of the summary of a survey project by Matthew Louie and Cali Tran, who were 2nd-year MBA students at Harvard this past year. Part 1 was the project overview, Part 2 summarized the entrepreneur results, and this part compares the VC and entrepreneur results. By: Matthew Louie and Cali TranInvestor’s Perspective: Investor Value-CreationThe investors in the

"Investor/Entrepreneur Value Expectation Gap": Part 2 (Entrepreneur Results)

2006-09-05T18:53:00.000-05:00

Note from Noam: This is the second part of the summary of a survey project by Matthew Louie and Cali Tran, who were 2nd-year MBA students at Harvard this past year. Part 1 was the project overview, Part 2 below summarizes the entrepreneur results, and Part 3 will compare the VC and entrepreneur results. By: Matthew Louie and Cali TranEntrepreneur’s Perspective: Investor Value-Creation

"Investor/Entrepreneur Value Expectation Gap": Part 1 (Project Overview)

2006-08-28T12:20:00.000-05:00

Do VCs deliver the "value adds" that entrepreneurs expect them to deliver?Note from Noam: This past year, to help inform their future careers in private equity, 2 HBS second-year MBA students, Matthew Louie and Cali Tran, did a survey-based study of 51 entrepreneurs and 81 VCs. The title of their study was, "The Investor/Entrepreneur Value Expectation Gap of High-Potential Technology Start-ups."

Bridge CEOs, Revisited

2006-07-30T23:10:00.000-05:00

Earlier this month, Business Week had an item entitled “The Temp in the Corner Office.” It described a “rise” (from 2 in 2004 to 9 last year) in the number of large companies using interim CEOs as a bridge between two “permanent” CEOs. (The most ironic one is Kelly Services, the big temp agency that hired Carl Camden as its own temp CEO. Here's an example from academia that hit close to home.)

Golden Handcuffs and Vesting: Initial Interpretations

2006-07-21T19:01:00.000-05:00

The "Summary of Vesting Data" post presented the overall patterns in my vesting data and delved into the founder vs. non-founder differences. My "Early Analyses" post listed both the most significant drivers from my regression analyses of vesting periods and some of the not-significant factors. The core table from that post is reproduced here:This post presents my initial interpretations (and

Golden Handcuffs: Summary of Vesting Data

2006-06-26T13:01:00.000-05:00

To complement the detailed early results, here are some high-level summary data on the years of vesting.Across the full dataset (1163 executives from 225 companies), the range of years is 1 year to 5 years. The widespread rule of thumb is that vesting occurs over 4 years, and as expected, the most common period is 4 years. However, more than a quarter of executives (28%) have vesting periods

Golden Handcuffs and Vesting: Early Analyses

2006-06-23T11:30:00.000-05:00

For people holding equity that has not yet fully vested: Does the vesting status affect your thinking about when you might leave your company?For investors or CEOs: Are you worried that a key employee will leave your company when his or her equity vests?Some background: My Founder Discount paper examined how founders' "psychological handcuffs" affect (negatively) the amount of compensation

"Rich versus King": Best Paper Proceedings Version

2006-06-07T02:04:00.000-05:00

My "Rich vs. King" paper made the Best Paper Proceedings of this year's Academy of Management meeting.For the Proceedings, I had to craft a 6-page version of the (30-page) original paper ... so if you want to take a look at the paper, you'll waste a lot less time reading the Proceedings version!Love to get critiques/comments from anyone who does read it, given that I'll be revising it soon for

Upcoming Posts: Summer 2006

2006-06-06T01:24:00.000-05:00

Here's a preview of some upcoming posts to this blog:"Rich versus King" paper, short version -- My "Rich vs. King" paper (past postings: core concept and charts and discussion) was recently selected for the Best Paper Proceedings of this year's Academy of Management meeting. The good news for anyone who might be interested in reading the paper is that, for the Proceedings, I have to create a 6-

Update: 2006 Entrepreneurship and Compensation Survey

2006-05-24T12:20:00.000-05:00

We had a blow-out year with the annual Entrepreneurship and Compensation surveys, which we wrapped up last week. In the near-final tally, we shattered our record for participants on the IT side, and are close on the Life Sciences side.Thanks to many of you who participated this year, it looks like we have full submissions from about 300 private IT companies (far more than last year's then-record

Back Online!

2006-05-22T11:21:00.000-05:00

We wrapped up our semester last week, so I'll now have more time to crunch numbers, write and revise papers and cases ... and, hopefully, do some blogging!Thank you to everyone who either posted comments or emailed me over the last couple of months. I hope to reply to as many posts/emails as I can, and will also start rolling out new posts about the founder issues I'm studying. In the next couple

Looking for Solid Compensation Data?

2006-04-24T15:01:00.000-05:00

Due Diligence As a One-way Street

2006-03-26T03:10:00.000-05:00

How much do you know about what goes on within your VCs’ own firms? During my time in VC, we did a lot of due diligence on the founders in whom we might invest, learning about their personalities, work histories, management styles, strengths, and weaknesses. We assessed their management teams, how well the members of those teams worked together on tough issues, and current and future holes in the

Doomed CEOs and Bridge CEOs

2006-03-19T02:26:00.000-05:00

Is the first non-founding CEO of a venture "doomed to fail"?On Monday, we debuted my new case on founder-CEO succession at Wily Technology. In class, we discussed the potential problems faced by Dick Williams, Wily's first non-founding CEO, if founder Lew Cirne were to stay in the company post-succession -- e.g., if Lew were to remain unhappy with being replaced, or were to oppose any of the

Founder Discounts in "Working Knowledge"

2006-02-26T01:57:00.000-05:00

If you want more details on my entrepreneurial compensation research, the results in my Founder Discount paper, and some of the implications for our views of founders, the new edition of Harvard's "Working Knowledge" publication has a feature-interview on it. If you have any insights regarding the patterns I discuss there and the underlying dynamics that lead to them, feel free to post them here!

Nike, Cyberposium, and Jim Estill: 3 Takes on Founder-CEO Succession

2006-02-19T18:14:00.000-05:00

With our required MBA course in Entrepreneurial Management under way, I have less time to post research results and related items here. However, here are three quick items I recently accumulated related to the "After the Firing" side of my founder-CEO succession research.Nike's Post-Succession WoesI recently got a call from Daniel Roth, a senior editor at Fortune magazine who is doing a story on

Splitting the Pie: Jumping the Gun?

2006-01-30T22:59:00.000-05:00

Is it good to split the pie “as early as possible”?I just ran into an equity-splits document at the site of MIT’s Deshpande Center. It is a summary from a workshop entitled “How to Split Equity – Faculty Entrepreneurship Workshop.” The workshop seems to have focused on founding teams where one member is a faculty member (often only working part-time on the venture) and the rest are non-faculty (

Splitting the Pie: Founding Team Equity Splits

2006-01-15T00:55:00.000-05:00

Let's kick off 2006 with an issue about which I get a lot of questions (and which StatCounter reports is one of the highest-ranking Google search terms that lead people to this blog). That issue is equity splits within the founding team.In our first-year MBA Entrepreneurship course, the Zipcar case represents the typical approach to splitting the equity. The two founders, who barely knew each

HR 101: Hiring and Scaling Challenges

2005-12-15T04:16:00.000-05:00

The chart below shows the percentage of start-ups that had each "C-level" position, categorized by the rounds of financing raised by the company. (This is from the start-up survey conducted in early 2005, which had responses from 263 private IT companies.)For some of the positions just below C-level, the chart below shows the percentage of start-ups that had each position.These charts bring to

Thanksgiving Dinner ... With Your Investors

2005-12-05T15:12:00.000-05:00

The "Founding with Friends, Founding with Strangers?" post suggested that starting a company with friends can introduced big risks, an assertion that was echoed and amplified by many of the comments, experiences, and insights that people posted in response. Among the risks: losing a great friendship when the friend underperforms, or making suboptimal business decisions because of emotional

Neverland, or Dictatorship?

2005-11-25T14:01:00.000-05:00

As a start-up grows, can the founding team continue to make decisions collectively, or does someone have to rise above the others and become the final decision maker?A couple of years ago at a panel discussion at HBS's annual Entrepreneurship Conference, the 4 founders on the panel disagreed about almost every topic raised by the moderator. The one thing on which all 4 agreed was that "a start-up

"Rich versus King": Charts and Impressions

2005-11-25T13:40:00.000-05:00

In the original "Rich vs. King" post (thanks to everyone who participated in the dialogue there and helped flesh out additional pieces of the puzzle!), I argued that most founders will have to choose between building valuable companies in which they are minor players (being "Rich") versus being major players in less-valuable companies (being "King").As promised, let's get into some data to

Founding with Friends, Founding with Strangers?

2005-11-14T04:50:00.000-05:00

Is it better to start a company with someone you know well (friends, classmates, family members) or with strangers?In my next post, I'll return to "Rich versus King" and show some data, results, and charts that shed light on the phenomenon. For this post, though, I want to take a brief detour to explore a different issue. (At the same time, the issue is related to scenario #1 in the "Rich versus

"Rich versus King": The Core Concept

2005-11-08T16:25:00.000-05:00

Here are three founder scenarios, all with parallels to cases I teach our MBA students:#1: You have an idea for a great product and want to start a company. Do you start it yourself (and keep all of the equity) or do you find a good co-founder (with whom you have to split the equity 50/50)?#2: You have 2 similar offers from potential investors. However, one is from angels (who want one board seat

"Founder Discount" Paper: Coming to an AMJ Near You

2005-11-03T16:46:00.000-05:00

The "Founder Discount" paper described in "Executive Compensation and the Founder Discount" was just accepted by the Academy of Management Journal. I have added a PDF version of the full paper to the links on the right side of this page.Now that it's complete, I'll be focusing on my "Rich versus King" paper, and will begin posting about it in the coming days.

3 Tidbits from the "Emerging Ventures" Conference

2005-10-17T18:13:00.000-05:00

On Wednesday, I gave a keynote address at the Emerging Ventures conference. I also chatted with several founders and venture capitalists, some at lunch Wednesday and some after my address. Three tidbits from those conversations that are relevant to this blog:Succeeding at Founder-CEO succession? -- A central issue in the "After the Firing" project and in my "Wily" case (which I explored for

After the Firing: Initial Research Questions

2005-10-06T12:38:00.000-05:00

When an "irreplaceable" founder-CEO is fired, does the venture's long-term growth suffer? Conversely, if the board waits a long time to replace the founder-CEO with a more experienced CEO, does the venture suffer? In each case, if the fired founder leaves the venture completely, does the venture's chance of surviving decrease or increase?Sparked both by a query from Tim Connors and by the

Building a Board: Composition by Company Stage

2005-10-02T02:14:00.000-05:00

Paul McManus of Boston Millennia Partners asked whether I have data on how board composition changes by company stage. I can slice my data using rounds of financing, company age, and a variety of other metrics. Most of those metrics tell similar stories. To pick one of them, the chart below shows board composition by company age:Angels are consistently 6-10% of boards (an interesting pattern),

Upcoming Keynote: October 12th in Boston

2005-09-30T09:44:00.000-05:00

I will be giving a keynote presentation at the "Emerging Ventures" conference in a couple of weeks. Title: "Founder Frustrations" (surprised?).Love to hear from anyone who attends. Feel free to post comments on the talk (or, if posting isn't appropriate, to email me directly).

Building a Board: The Impact of Company Stage

2005-09-22T15:25:00.000-05:00

In response to the original post about the "Building a Board" results (see below), Tim Connors of USVP inquired about the role played by the company's stage of development. Even though our analyses (and the original blog posting) focus on the linkage between Board characteristics and CEO characteristics, we also controlled for the impact of the company's stage of development. (Other controls were

Building a Board: Mentorship? Monitoring?

2005-09-21T16:37:00.000-05:00

You’re a founder-CEO with deep technical expertise but little business experience. VCs tell you that they’ll help guide you through the treacherous business issues you’ll face as you grow your business. (In fact, you are having trouble finding any VC firms whose Web sites don’t tell you they’ll do that.) Do they, indeed, provide such mentorship when it’s needed?In contrast to boards of directors

Preview of Upcoming Posts

2005-09-15T12:53:00.000-05:00

In addition to the studies described in posts below, my other Founder Frustration research includes the following studies:Building a Board - In new ventures, do CEO characteristics (prior years of work experience, functional background, founder status) and equity holdings affect Board characteristics (board composition, frequency with which the board meets, board size)?Splitting the Pie - Does

Executive Compensation and the Founder Discount

2005-09-14T18:01:00.000-05:00

Who makes more cash compensation, founders or non-founders? More specifically, taking 2 similar executives (same position-title, similar years of work experience and equity holdings, working in companies that are at the same stage of development), will the executive who was a founder of the company make more or less than the executive who didn't help found the company?Academic aside #1: From an

Founder-CEO Succession

2005-09-13T02:10:00.000-05:00

My initial research on Founder Frustrations focused on Founder-CEO Succession, examining the events and circumstances that increased or decreased the chances that the founder-CEO would be replaced as CEO.Not surprisingly, I found that founder-CEOs are much more likely to lose their jobs when their companies perform badly, as is also the case with CEOs in large public companies (on whom past

A Note on My Research Approach and Data

2005-09-13T01:22:00.000-05:00

The creation of new organizations is a major driver of economic development (Schumpeter 1934). Despite this, founders, the people who create those new organizations, are largely absent from past academic research. It is much harder to get systematic data on privately-held companies, so past research has focused almost exclusively on public companies, where founders rarely still number among the