A VC« Positively 10th Street | Main | Hackoff.com - Chapter Three »
Founders
I just finished John Battelle's The Search.
It's a great book. I highly recommend it to anyone who is interested in business, technology, marketing, and the internet.
One of the things I that I enjoyed most in the book was John's comparison of Google and Yahoo!. I won't quote from the book here. If you want to read that part, get the book.
The most interesting thing about the comparison was the roles of Jerry and David at Yahoo! and Sergey and Larry at Google. Both were Stanford grad students. Both started the companies in their dorms. Both are still with their respective companies. But at Yahoo!, Jerry and David are part of the management team, but don't run the company. At Google, Sergey and Larry are in charge, along with the third member of the troika, Eric Schmidt. It's a very different model.
And it got me thinking about the role of founders in general.
Founders contribute something to companies that is very special. It's the core DNA of most companies. Many founders step aside at some point from the CEO role. Many times that happens at the urging of the VCs. Many times they do it on their own, recognizing that they don't enjoy actually running a company.
But the tricky part is keeping the founders engaged and involved once they'd stepped down from the CEO role. So in that regard, I am actually more interested in Jerry and David than Sergey and Larry. From reading John's book, Sergey seems like Bill Gates. I suspect he'll be at the helm for a long time at Google.
But how do you get someone of the caliber of Jerry Yang or David Filo to stick around and keep working on moving the company forward. I don't think its a coincidence that Yahoo! alone out of the web 1.0 portals has made the transition to web 2.0.
In fact, Terry Semel's talk at web 2.0 was essentially a description of how a large portal can use web 2.0 techniques to remake themsleves. How did Terry come up with that plan? Not alone, I am sure.
My bet is that the founders had a lot to do with this. They are still of the web. They get what's going on and they can translate it into a strategy that Terry, Dan, and the team can execute.
That is enormously valuable. But how did Yahoo! keep them around?
Marc Andreessen moved on from Netscape.
Joe Kraus moved on from Excite.
Fuzzy Mauldin (Lycos) and Louis Mounier (Alta Vista) are long gone too.
Many web 1.0 founders left their companies and moved on to start new companies. That's fine and frankly expected. But not great for the companies they founded.
I'd like to find a formula (like the one Yahoo! has found) and bottle it. Because I believe companies that can keep their founders engaged and motivated are so much better off than those that cannot.
Comments (9) | | TrackBack (2)
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451b2c969e200e5503682598834
Listed below are links to weblogs that reference Founders:
» Founders, a Perspective from a VC from AndrewKoch.com
A VC: Founders Founders contribute something to companies that is very special. It's the core DNA of most companies. Many founders step aside at some point from the CEO role. Many times that happens at the urging of the VCs.... [Read More]
Tracked on Oct 10, 2005 2:58:47 PM
» Founders, a Perspective from a VC from AndrewKoch.com
A VC: Founders Founders contribute something to companies that is very special. It's the core DNA of most companies. Many founders step aside at some point from the CEO role. Many times that happens at the urging of the VCs.... [Read More]
Tracked on May 2, 2006 6:21:01 PM
Posted October 10, 2005 in Venture Capital and TechnologyComments
What a beautiful post on a wonderful topic. I too am looking for that secret.
They say it takes three qualities for people to go out and be founders. The first two are boring; it’s energy and insight. There hasn’t been a founder out there who doesn’t have an extraordinary amount of “go”. It never stops to amaze me just how much energy founders have run around town pitching total strangers, trying to deal daily with things they have no idea about and amongst all this, doing 18 hour days to build a company to proud of.
The second thing founders have in common is insight, and I’m sure everyone would agree that there is no point being a founder unless you have that “scoop” to do something significantly better than others, or understand the problem in a completely different way to the rest of the industry. Larry and Sergey had it with Backrub, Fred Smith had it with centralized distribution, Michael Dell saw direct distribution, Ray Croc saw a family friendly franchise etc etc.. You can’t be a company founder unless you have some special perspective, a vision different to most….when that dies, you are not a founder anymore, you’re an executive.
But like I said, these are the boring qualities.
The interesting quality essential for foundership is; dissatisfaction. Company founders don’t come from rich families; they also don’t come from dirt poor families because they would never have anyone to aspire to. Company founders come from middle class environment where they’ve been exposed to amazing achievement by other people and they almost always have a deep seated sense of dissatisfaction with their own life and them selves. I don’t think I’ve ever met one well adjusted, totally content, happy, perfectly sociable company founder. It just simply doesn’t happen. Company founders need very strong emotional reasons for what they are doing and outright hatred for their existing employer, trying to beat somebody, proving something to them selves or somebody else, usually does the trick. What ever it is, in my experience, company founders thrive on a deep seated sense of dissatisfaction, with them selves or the world around them.
So, Fred, thanks for the post! I am also looking for that formula, and maybe Yahoo just got lucky, it’s hard for me to see a person operating as a bona fide founder unless they have a lot of energy, have unique insight they’re free to apply, and – most importantly- unless they really have something to prove. In my books, anything outside of that is a derivative of classic foundership.
Posted by: Daniel Nerezov | Oct 10, 2005 2:18:35 PM
I respectfully disagree with Daniel's post....I suspect that founders are represented from all socio economic classes, but would be much more likely to come from rich or upper middle class families (top 15%): Yang, Filo, Andreesen, etc notwithstanding.
Anecdotally, many of the successful founders of the dot-com era (particularly in the media sector) were dyed-in-the-wool preppies from Ivy League schools: people like Bo Peabody, David and Tom Gardner, Halsey Minor and others. Bill Gates had a wealthy lawyer for a Dad and went to Lakeside, the toniest school in Seattle.
The young middle class nerd as company founder is a quaint stereotype -- but I bet less than half of high tech companies have a technologist as a founder. The Steve Jobs skill set is ultimately more valuable than the Wozniak skill set, the Clark more valuable than the Andreesen.
I think socio-economic background ultimately has very little to do with a tendency toward entrepreneurship, except in two ways: Elite higher education is important (places like Stanford, where Google and Yahoo were both founded add credibility and tend to open doors to the VC network), and (2) wealthier founders have a fall-back plan if the venture doesn't work out, and therefore an increased tolerance for risk.
I personally think that key qualities for founders, (in addition to the three you mention), are high degree of risk tolerance, and a stubborn belief in your own crazy ideas. Those aren't necessarally good qualities to keep around once a company grows to a certain size.
Sometimes keeping a founder around is good for a company...Sometimes, like Michael Dell or Bill Gates, the founder is also able to grow into each successive role as the company expands. But note...they kept control.
Steve Jobs, on the other hand was fired because of his stubborn persistence in the belief in his crazy idea...the Mac vs. the Apple II...but after he had given up control. He also showed a lot of risk tolerance...putting up pirate flags and the like. Essentially he said, "Go ahead, fire me." And they did.
History tells us he was the right guy to run the company after all. But what do you do if you are John Sculley, and dealing with a founder who is tearing the company apart, pirate flags and all?
Posted by: Andrew Boer | Oct 10, 2005 6:07:45 PM
I respectfully disagree with Daniel's post....I suspect that founders are represented from all socio economic classes, but would be much more likely to come from rich or upper middle class families (top 15%): Yang, Filo, Andreesen, etc notwithstanding.
Anecdotally, many of the successful founders of the dot-com era (particularly in the media sector) were dyed-in-the-wool preppies from Ivy League schools: people like Bo Peabody, David and Tom Gardner, Halsey Minor and others. Bill Gates had a wealthy lawyer for a Dad and went to Lakeside, the toniest school in Seattle.
The young middle class nerd as company founder is a quaint stereotype -- but I bet less than half of high tech companies have a technologist as a founder. The Steve Jobs skill set is ultimately more valuable than the Wozniak skill set, the Clark more valuable than the Andreesen.
I think socio-economic background ultimately has very little to do with a tendency toward entrepreneurship, except in two ways: Elite higher education is important (places like Stanford, where Google and Yahoo were both founded add credibility and tend to open doors to the VC network), and (2) wealthier founders have a fall-back plan if the venture doesn't work out, and therefore an increased tolerance for risk.
I personally think that key qualities for founders, (in addition to the three you mention), are high degree of risk tolerance, and a stubborn belief in your own crazy ideas. Those aren't necessarally good qualities to keep around once a company grows to a certain size.
Sometimes keeping a founder around is good for a company...Sometimes, like Michael Dell or Bill Gates, the founder is also able to grow into each successive role as the company expands. But note...they kept control.
Steve Jobs, on the other hand was fired because of his stubborn persistence in the belief in his crazy idea...the Mac vs. the Apple II...but after he had given up control. He also showed a lot of risk tolerance...putting up pirate flags and the like. Essentially he said, "Go ahead, fire me." And they did.
History tells us he was the right guy to run the company after all. But what do you do if you are John Sculley, and dealing with a founder who is tearing the company apart, pirate flags and all?
Posted by: Andrew Boer | Oct 10, 2005 6:10:51 PM
"I believe companies that can keep their founders engaged and motivated are so much better off than those that cannot."
This is heartening to hear from a VC, because everything that I have seen/heard to date says the opposite: that founders are more likley than not to be moved aside once a business starts to grow.
Posted by: Gen Kanai | Oct 10, 2005 6:35:57 PM
Keeping founders motivated and creating an entrepreneurial environment is not an easy task. Clearly Yahoo has motivated folks to stick around... I gotta think it has something to do with a) pride/legacy and b) the ability for folks to give up control.
We both know plenty of folks who are not big on giving up the control/direction of a big company like Jerry/David have (I'm assuming they have).
Also, there is something about the start of a company that is magical... getting your first client, launching your first product, getting your first investors. You can't do that at an established company.
For me, frankly, I'm tired of the startup thing! I can't wait to go to meetings, develop a three-year plan, budget stuff out, and have legal/PR/HR/accounting/tech/etc. resources to hand stuff off to.
The last couple of days have been great... AOL's like "here's our INSERT_SERVICE_HERE team, they're going to take care of all this stuff for you." We hand it off and they have a team of 10-100 folks who have done this a million times for 20 years. It's like "ahhhhh..... I don't have to worry about my legal bills any more!!!?!??!?! Have I died and gone to entrepreneur heaven?!!?!?"
Posted by: Jason | Oct 10, 2005 8:54:21 PM
I would contend that generalising about the socio-economic background of founders doesn't help assess their ability to run a company.
While an upper-class founder might have an elite education, a lower-class founder will spend the time to self-educate and in the process learn to become self-reliant.
While an upper-class founder might have a higher tolerance to risk, a lower-class founder who has everything to lose will fight tooth and nail to make sure they succeed.
While an upper-class founder might have access to greater resources, a lower-class founder will bend over backwards to network and to further their business interests.
What may appear to be benefits can, on the flipside, be viewed just as easily as weaknesses. In the end, founders should each be judged on how they've played the hand they've been dealt, not categorised by its contents.
Posted by: Paul | Oct 11, 2005 7:59:22 AM
Family run companies historically have higher returns than other types of companies. Some of the most successful companies in the IT world are run by founders for a long time (SAP, Goggle, Dell, Microsoft, Hewlett Packard, Apple, Go Daddy, Salesforce.com, Oracle, etc.. ). Has any one done a study of the success rate of VC backed companies with founders who have been at the company in a leadership role for more than 5 years? What is the average return for companies whose founders have been moved aside compared to actively engaged founders.
Posted by: Dan Cornish | Oct 11, 2005 9:33:04 AM
I have to respectfully disagree with your assessment of "The Search". Well, at least so far. I've started the book and the first quarter is about how John Batelle illustrates to everyone how he "knew" what Google would be useful for before Google did. Does Batelle's arm hurt from patting himself on the back so much?
Additionally, Batelle uses the old cred establishing cliche of, "I used Apples back when they were just two bricks of plastic and a punchcard." Even back then ol' John *knew* that the Mac was ushering in a new form of communication: "Point here...changes there."
Then he postulates that search will solve the AI problem. And like the true journalist that he is he doesn't do anything to support the claim. I imagine that web cogniscenti *understand* this claim already. Whatever.
Let's face facts: John Batelle wrote a book about Google with actual input from major players involved. He then spends the first part saying, "It's not about Google, it's actually about search!" Again - whatever dude.
I'm not looking forward to finishing this book but I'm gonna just so I can snicker more informedly at anyone who kisses Batelle's ass with a good review.
Posted by: Bayman | Oct 11, 2005 6:22:00 PM
Some thoughts:
Do investors fear founders as much as they revere them? I suspect so.
I'm a founder. What is my class?
I'm dissatisfied. Am I a founder? What is my class?
I'm building a company without venture and starting to make money. I'm not in it for the money. Am I an entrepreneuer?
Sexy is not about who you are but how you are perceived.
My VCs pushed me out of my first company and I'd blame them for not paying attention and me for being too intense. They wanted to cash out; I was astonished that management and investors didn't want to build a great company. I couldn't fathom anything else. I built huge value relative to investment. People worldwide still use my software. Investors made 12x. So what.
So what. The venture game isn't always about value, it's about value at a specific time and context. Cash in the chips and move on--there's always another table.
Founders, don't think you're in love just because you've gotten laid.
Posted by: Charlie Crystle | Oct 16, 2005 1:15:34 AM
Main RSS Feed of All Posts
VC and Technology Posts Only
