by Mason Myers, general partner of Greybull Stewardship business investment fund
Silicon Valley veterans ask entrepreneurs the question: Would you rather be rich or be king? The question is a little crass, but there is also deep wisdom in it. The veterans are trying to prompt the entrepreneur to think about what is most important to them in the venture.
Some entrepreneurs want to be king even if they sacrifice some financial upside — the freedom of an entrepreneurial endeavor is more important than money. Some entrepreneurs want to be rich even if they get sidelined at their own company — the financial success is more important than anything else. Do you think venture capitalists prefer entrepreneurs who want to be rich or want to be king? Answer at the end of this post.
And, what do you think the data shows about which entrepreneurial companies do better? The chart below from by Noam Wasserman of Harvard Business School and presented in his book The Founder’s Dilemmas shows the various financial results obtained by business owners or founders who shared various amounts of control in their enterprise. The data shows that founders who give up control (opposite of king!) end up being (more) rich.
Rich versus King: Business owners who share control do better financially.
All entrepreneurs can benefit from thinking about this question and what they prefer. Particularly if you are focused on creating a high potential enterprise going after a very large market, you should be prepared to share control to get the best other people involved that you can. To that end, this is a good question to ask yourself: What is the optimal way to manage a growing enterprise with big potential? The things high on my list would be:
- Get the right people in the right roles. A growing enterprise needs to spread the work over a team, and a founder should put good people in roles to complement himself or herself as soon as possible. A team working together is very powerful. So, the ability to attract good people and put them in places where they can bring their maximum capability to bear is most helpful.
- Share control to harness the power of others. It helps to have as many forces working for success as possible through a good board, good investors, and others aligned for the company’s success. Bringing in investors, board members, and others who are working for the success of the company can really help the company make the most of the opportunity. Like some sort of Zen saying, improve success by sharing control. You can also think about it this way: You could either have a small pie to yourself, or you can have a piece of a much, much larger pie.
- Think carefully about the CEO role. This is a key role that the founder may choose to delegate or not. There is no one right answer, and this role is particularly difficult to fill. However, it is one lever that a founder should always remember is in his or her toolkit of options.
The higher potential your startup has, the more I would encourage you to share control and get others involved because you will need all the help that you can gather.
What type of founders do venture capitalists prefer? Hands down, those founders who want to be rich. This is because it gives the venture capitalists confidence that the investors and founders are more likely to have the same priority of making a good financial return. When people have similar priorities, it makes it easier to make decisions. Good luck in becoming both rich and king!
Greybull Stewardship Business Investment Fund provides business financing & funding sources in support of a company’s unique growth.
Mason Myers, general partner of Greybull Stewardship business investment fund, offers expertise on business financing & funding, and business management on his business financing blog.