High-jacked by Backseat Drivers

Let ‘s continue the conversation about investor’s dilemmas by looking at the time when your product or the idea that you have birthed, nourished and brought into maturity, has been high-jacked! How could this be? This baby is yours. It can happen with growth. You may think, “Isn’t that an indication of a successful start-up, to have growth?” Yes it is, but it can come at the expense of your position. With each round of additional funding that may be gained from investors, there is also a drilling down of control once held by the founder. Wasserman states in The Founder’s Dilemmas that by the third round of funding, “…more than half start-ups have replaced their Founder-CEOs.” (2012, p. 299)

Can you imagine being replaced at a peak in your company’s performance? It happens. This “paradox of entrepreneurial success” is found with the flip of a coin between product development and fundraising. (p. 303-304) As a founder, what is your true area of expertise and how does that translate into value as the company progresses. The developed product now needs a different level of expertise to move it forward (marketing, sales and service). Does your skill set guarantee your seat to continue driving? Wasserman states, “The leap from leading product development to leading a multifunction startup challenges not only the founder’s skills, but-perhaps even more profoundly-his or her value.” (p. 306)

The board that shifts as new funding sources are embraced brings with it the power to fire. “The new board, made up of investors and independent directors who are motivated by the creation of shareholder value, may have a very different view than the CEO does of who is the best person to tackle the startup’s next set of challenges.” (p. 308) What you as a founder may see as growth, investors see as challenges that you may not be able to overcome. This marriage could end in divorce with irreconcilable differences. Unfortunately this reality of substantial loss seems heartless. Even though your start-up began in your heart, it ends as business. So think about your get-away, before you are kick out of the car.

Wasserman, Noam. (2012) The Founder’s Dilemmas. Princeton, NJ: Princeton University Press.

2 thoughts on “High-jacked by Backseat Drivers”

  1. I recently encourage a fellow classmate to face risk by being informed. I know of people, who didn’t want to release their ideas for fear on them being “high- jacked” (I’ll admit at times I’ve felt the same). Knowing you can be “high-jacked” is unnerving, but it can happen. Founder can and are release for their own businesses! As appalling as it may seem, it is reality and as an aspiring entrepreneur, it has me thinking, how would I handle being dismissed from a business I started? I guess a way to approach this is to Hope for the Best, Plan for the Worst.

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