Posted by: Peter Carrescia | 07-10-2010

Turning Founders into Employees

Last night I saw the movie The Social Network, based loosely on the story of Mark Zuckerberg and Facebook.  Watching the movie made me feel the way I did in the early 1990’s when I was young and believed that with technology, anything was possible.  On my drive home I thought about the very early stages of a company and how critical the Founder is at that stage.  It is only through intense personal drive that a Founder, against all odds, can be successful.  When many around that Founder tells them why it won’t work, they work endless hours and inspire those around them, to do what is necessary to make it work.  The Founder’s passion and excitement for what they’re doing often is the key ingredient in capturing early customers, and is the best (and often only) marketing the company needs at that point.

With the knowledge of just how critical a Founder is in early stage companies, I thought I’d share a thought or two that I’ve learned along the way (unfortunately the hard way).  It is already too hard to be successful with an early stage company than to try to do it without the Founder at the lead.  No “professional” manager will care as much or be as passionate or work as hard as a Founder.  No sales person will be better at closing those first sales than a Founder.  And nobody will be better at recruiting great talent to come and work at an improbable startup than the Founder.

But beyond having the Founder in charge of their early stage company, they must truly be in charge.  So often, VC investments in early stage companies come with extensive controls and protective provisions that give investors complete control of the business.  The negotiation of these terms can often beat the Founder into thinking they’re an employee, and they then ultimately act like one too.  That, in my experience, is the kiss of death at an early stage company.

When I’ve looked at early stage investments in the past, I used to think that the Founder could work alongside a professional CEO or ultimately be replaced.  I’ve learned though that no matter how good the idea, and no matter how great the opportunity, that if the Founder truly has issues that do not allow them to run the business from the outset, that it then becomes necessary to decline the opportunity and not invest.  What issues rise to this level?  The two that immediately come to mind are the openness of the Founder to take guidance and be mentored, and the second is trust.

It’s already too hard for an early-stage company to be successful.  No amount of professional management or contractual legalese can replace the necessary qualities that a Founder brings to an early-stage company.

So my strong recommendation is don’t even try.



  1. So true.

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