Founder Control Is Still A Good Thing — Despite WeWork & Uber
With the recent failings of WeWork & Uber, there has been much talk about how investors made the mistake of giving the founders or WeWork & Uber too much control.
Founder Control Is Not A Bad Thing
I think that that’s the wrong conclusion to come to.
Founder control is not a bad thing, many of the best start-ups and companies are successful solely because the founders had enough control to make the right decisions so the company can stay true to their mission rather than being pressured to make bad short term ones that eventually killed the company.
Facebook Would Not Be Facebook If Not For Founder Control
Facebook would probably be never be as valuable as what it is today if Mark Zuckerberg did not have control over the company.
If his investors had been able to force him to sell his company for 1 Billion USD when Yahoo offered to buy them out or to remove the newsfeed when 10% of their users were protesting the introduction of the newsfeed, Facebook may never become the default social network that everyone uses in the world today.
Ousting A Founder Destroyed Many Start-Ups — Including Apple & Friendster
Investors have made the wrong decision in ousting founders and have destroyed many start-ups — or at least for a short period — in the process.
Friendster is one example, Apple is another when Steve Jobs was famously ousted from his own company before he made a comeback to save the company.
You can read and find out more about these stories from this podcast about Friendster’s story here or these documentaries about Apple here.
LISA CHOW: From Gimlet Media, I’m Lisa Chow. You’re listening to Startup, the show about what it’s really like to start…gimletmedia.com
A lot of start-ups failed because investors ousted the founder and forced the start-up to focus on monetisation before it was ready or simply lost its vision and allowed competitors to come in and take their pie away from them.
Know Why WeWork & Uber Failed — It Is Not Because Of Founder Control
If you ask me, Uber & WeWork did not perform up to expectations simply because they were not truly scalable tech companies and were overvalued because investors were attracted by the huge amounts of early revenue that they generated.
Of course, bad management and what they founders did caused some damage too, but that is not the main cause of why they so severely underperformed financially.
The main reason has to do with their business fundamentals and investors mistaking them for a true tech company like Google or Facebook and overvaluing them.
There Will Be Bad Founders — And Yes They Should Not Have Control
There will always be bad founders who result to unscrupulous or questionable behaviour in terms of management, lying, abuse of power or unfairly enriching themselves.
Yes, they should not have control of a company, and it is up to the investors to get to know a founder enough to know whether they are such founders or not.
It can be hard to assess that as an investor, but that is just a risk that investors have to take, because a lot of times, founders having control is crucial to the success of a start-up and whether it makes it out of its early days or not.
But There Are Also Good Founders — And They Need To Have Control
For every bad founder, there are also good founders, and they need to have control of their start-ups in order to truly implement their vision and steer their companies towards success and not be pressured into doing the wrong things that could derail them.
Founder Control Is Crucial To Building Disruptive Companies — It Is Good
Founder control is crucial to building disruptive companies, because if a company is truly disruptive, they are probably going against conventional wisdom, building something new that no one has done before and is by default contrarian but right.
You are by default going against convention and conventional wisdom.
Founders of such companies would need to have the power to make bold decisions and go against what most people, including smart investors think about what should be done.
It is a good and crucial thing that founders of such start-ups have control.
Judge On A Case By Case Basis — A Necessary Risk We Have To Take
I know it can be hard to judge this based on a case by case basis, but that is what needs to be done, and is a necessary risk that investors would have to take if you want to be part of a disruptive start-up that could eventually become the next Facebook or Apple.
Founder Led Companies Are Often The Ones That Generate The Most Value
This is because founder led companies are often the ones that end up generating the most value and becoming the world’s most valuable companies.
It is common sense because they founded the company, it is their baby, and they understand their vision best. They are also not afraid to stand up to investors and make bold decisions that most people might disagree with in order to truly build disruptive products and take the risks required for them to dominate a market.
These are things that a non-founder who might be too busy trying to cover their asses and be politically correct in order to keep their jobs or sacrifice a company’s long term well-being for short term performance so they can be rewarded during their tenure might not be able to do if they are not a founder of the company.
Founder control is a good thing and is necessary to build truly disruptive companies.
Perhaps this is a risk that investors would just have to take.
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