VC Cliché of the Week

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VC Cliché of the Week

One of the best lines I have heard in a long time was uttered by an entrepreneur we know. He was talking about one of his co-founders who one day decided he didn't want to work anymore. He said about his co-founder, "he called in rich". I laughed so hard I almost cried.

I've witnessed this situation more than a couple times. People work really hard, build something valuable, realize the value in some sort of transaction, get paid a lot of money, and then one day they wake up and don't feel like working anymore. They call in rich.

It's a funny line but it's not always a funny situation. Because it can tear apart partnerships that were working really well. People are wired differently. Some people are not be affected by wealth. They will work as if they don't have a dime until the day they die no matter how much wealth they accumulate. Though they appreciate wealth, it's not what motivates them to work. Others are doing it only for the money. And when the ones who are only in it for the money call in rich, they are walking away from others who don't want to stop. And it can cause problems. I've seen relationships ruined over such situations.

But it's really all about how it's handled. If partners are honest with each other about what motivates them, what they want to do with their lives, etc, then you can manage the hole in the partnership that gets created when one person calls in rich. Giving people plenty of time to plan for the departure is really the key. Telling your partners that you are leaving in a year or 18 months is fine. That's enough time to fill the gap.

But truly calling in rich, leaving little or no notice, is a disaster for those you are leaving behind. And its surprising how often it happens.

Comments (16) | Posted July 26, 2006 in Venture Capital and Technology

Comments

At least they called!

Also, for the record, I plan on PINNING in rich.

Calling in rich is so 1990's

Posted by: howard lindzon | Jul 26, 2006 8:26:40 AM

Sorry - it is a very important and good thought piece but could not resist.

Really a point that needs to be talked about early in all stages of partnership development

Posted by: howard lindzon | Jul 26, 2006 8:28:53 AM

Reg motivations, a great lesson we had ... right at the beginning of our adventure: lay founder's motivations on the table to understand where people are going, how they are going to contribute, and how much of the life they are going to sacrifice to the project.
Once it was done, we were working so much better: you knew what to ask, how to ask, how much to expect.

And I can't imagine anyone "calling in rich" (if ever he could) cause we know pretty much exactly when to expect a seat back situation (if ...).
Great post, good point !

Posted by: Laurent Kretz | Jul 26, 2006 9:18:48 AM

By the way, a great line I heard last week that puts clearly what we had/have to do every day:
Find People's Currency

Put this way, regarding team motivation, it's crystal clear.

Posted by: Laurent Kretz | Jul 26, 2006 9:21:46 AM

The only thing worse and more distracting is "calling in poor."

Posted by: Mike Orren | Jul 26, 2006 9:37:28 AM

Nice catchy phrase.

Contrast with this:
http://www.flickr.com/photos/frankfarm/154373622/

Posted by: Keith Fahlgren | Jul 26, 2006 9:40:56 AM

Thanks for starting my day with a great laugh!

Posted by: walterwong | Jul 26, 2006 10:21:06 AM

It's a real issue, and it's one of the first ones I try to cover with co-founders when I'm working with them on a new venture. And the issue really goes farther than just getting the money in your pocket - it's also relevant when your company raises a big round, even if the founders don't get to pocket any of the cash. I've seen a couple of situations where a founder is the "idea" person who conceives of the idea, holds a big chunk of the equity, gets funded, has no strings tied to his/her equity and goes to the beach even when the company hasn't really gotten going. I know the VCs are sensitive to this problem, but founders should be just as concerned about their partners and plan accordingly.

Posted by: JayR | Jul 26, 2006 10:40:01 AM

I love that line, but the bigger issue is that once a company reaches a certain level of success, there needs to be an conscious effort to build some bench talent and do some succession planning.

A small startup doesn't have the resources to have a deep bench, but a company successful enough for the founders to "call in rich" has no excuse for not having a plan for when a key person leaves or gets hit by a bus.

The (mistaken, I believe) attitude often seems to be that "this guy is irreplacable, and/or we'll need to bring in outside talent if he leaves, so we can't replicate his skills in someone else inside the company." This leads to organizations more fragile than they should be, disruptive departures, and big recruitment fees to replace the "irreplacable" individuals when they inevitably quit or die.

Posted by: Shivering Timbers | Jul 26, 2006 11:01:46 AM

i would humbly submit that this issue isnt confined to entrepreneurs. partners at VC firms "call in rich" too -- and often in a way that is much harder to deal with: by calling in rich but not actually separating. no, they stick around the firm, and even do some deals, to keep their salary and perks and of course their carried interests. but they're not really working worth squat. maybe show up for partner meetings and maybe attend a few board meetings but otherwise, its junkets and golf outings and travel and heaven knows what else while the portfolio companies wonder where is the "value add" and junior partners and staff at the firm labor long and hard and wonder where's the boss.

Posted by: steve | Jul 26, 2006 11:24:46 AM

Shivering Timbers (or anybody else),
As the situation happened before to us, what do you call a "bench talent" ?

Posted by: Laurent Kretz | Jul 26, 2006 12:31:54 PM

Reminds me of a certain CEO I met who knows you pretty well I believe who when discussing the sale of her company told me she was "post-economic"! cue silence and confused looks from those of us in the room who were not "post-economic"!

Posted by: scott | Jul 26, 2006 1:11:04 PM

Posted by: scott | Jul 26, 2006 1:11:05 PM

At last - I have an ambition!

Posted by: John Dodds | Jul 26, 2006 4:04:13 PM

There was a corallary to calling in rich that I witnessed at Y! back in the 99-00 time frame.

Vesting in Peace

People who refused to do anything the least bit risky (you know, the kinds of things that create value) lest they endanger their status. They just quietly sell every month. They never pitched a new idea. They never questioned the status quo. They never pushed the envelope.

Posted by: Erik Schwartz | Jul 26, 2006 11:19:07 PM

Laurent:

By "bench talent," I mean individuals who have been identified and groomed for leadership positions with the expectation that they will step up when the time is right.

A small startup can't really afford to do this, but once the company is successful there should be a plan in someone's desk drawer which says "If Bob Smith gets hit by a truck, then Betty Smythe will take over as VP of Marketing. If Jane Doe catches the black plague, then John Roe will take over as VP of Finance," and so forth for all the key leadership positions.

Then those identified successors should be made aware of the fact that they'll be running the department someday: "Jane, we think you're doing such a great job that we'd like to train you to take over for John some day. Part of your job is to be able to do John's job so well that if he comes down with the black plague you can seamlessly step into his shoes....."

Posted by: Shivering Timbers | Jul 31, 2006 6:00:33 PM

A VC

Musings of a VC in NYC