This post is about startups, although it can apply to small businesses too. I’m going to cover the pros and cons of sharing power and having one person with the ultimate say. This is a heated topic. There is a vocal group that will not even entertain investing in the solo style of running startups. I appreciate their view notwithstanding the fact that I don’t agree with them in my own personal situation. OK, let’s get into it.
Disclaimers: Do your own research. This is a casual blog post. I’m not a lawyer. If you have specific questions talk with an attorney. Use this information at your own risk. Results are not guaranteed. All information is subject to change. I think a high percentage of startups and new companies fail regardless of what strategy you take so make sure you have a backup plan. I’m reporting on one of several forks in the road for founders, I’m not telling you what decision to make. My backup plan is school, content creation, marketing, and others.
I’m going to start off by writing about sharing power and decision making control in startups and small companies. Let’s say you have a company. It might be you by yourself or you may have a few partners or co-founders. In a perfect world, as the company develops, professional accredited investors will offer you money to take a piece of the company. In return for the money, they might want to have a say in how the company is run. They could request to be on the board. There are additional ways they can gain control over your company. For example, investors might want to replace the CEO.
There are examples of when breaking up the control of a company and spreading it over a half a dozen or a dozen individuals has worked out. Of course there are. Investors have experience and contacts. Professional startup investors might have knowledge that will help you make educated decisions. Top investors have a track record of overseeing tens or hundreds of millions of dollars being spent with other investments throughout the years. Professional, accredited investors may give you the advantage to speed past a majority or all of your competitors. Investors might take what you have, add a few pieces to the puzzle and next thing you know your startup is worth enough money that you can sell out for $10 or $20 million. That’s nice money. Enough for a luxury car and condo. They may also run the company into the ground and it will be worth $0.
I always look at things from everyone’s perspective, not only my own. The group dynamic if I had to guess is the way the majority of companies are run. I assume there are exceptions where you have a CEO or Chairman of the Board who runs a company and no one questions her or him. If I had to guess the majority of startups are being run by a group. Meaning, the CEO has to answer to people. Again, the majority of companies fail so it doesn’t matter how most companies are being run because a high number of them are going out of business. With that in mind, you should set things up the way that makes you feel comfortable after an attorney educates you on your options.
One more thing to think about in the sharing power model is the distribution of control amongst founders. In addition to the companies putting up the money, your fellow founders might want to have a vote in every decision. If everything is in sync, it just might work. The ideal share control over the company model includes everyone pitching in money, experience, knowledge, and contacts. It has happened and it will happen again. It makes perfect sense. Just because it’s not for me right now doesn’t mean everyone has to follow my blueprint. Not everyone wants to take all the hits themselves and be solely responsible if the ship sinks or sails.
Now let’s move on to the one person who has the ultimate authority to run the company playbook. Regardless of what anyone says, there are several companies being run like this. I’m not going to name names, you can research yourself and use your imagination. There are startups where one person holds the ultimate decision-making ability. There are small businesses where one person runs the show. That is not to say people in this position aren’t open-minded. People with the ultimate control over companies might be the best listeners too. They might even go as far as to question their employees about what the company can be doing better and then implement those ideas.
If you are someone who only believes in the shared power model of running companies, it’s time for you to click on the next post. I’m not trying to convert you, I’m sharing my point of view about my experiences and how I operate. I have seen so many people fight, argue, sabotage companies and every additional horror story you can imagine. I have seen people raise millions and completely lose control of their company. I have seen people raise money and then spend the bulk of their time fighting with coworkers and investors. I have seen so many companies get run into the ground because no one had the ability to make a decision. Also, I have seen people raise money, the investors run the company into the ground and then the person who lost control ends up with all the lawsuits. Remember, I’m in New York City, not Silicon Valley. Maybe it’s better in California for startups.
Also, if you are trying to create a hundred million dollar company, a billion-dollar company or trillion-dollar company, the money has to come from somewhere. The odds are you’re going to be stepping on existing player’s toes or at least trying to step on some toes. Do you like it when people step on your toes? I don’t think so. Guess what, no one likes having their toes stepped on. Point being if there are multiple people making the decisions at your company and your competitor gets their hooks into one or more of them, you are toast. You’re done. You’re out of here. Go home. It’s a wrap. Do you know how many times that has happened? It happens every day. I have seen people’s lives ruined because of that scenario.
Investors want to make money but they don’t want real drama for the most part. Usually, investors are already rich. You might be ready for war, but many of them aren’t. Most investors want returns, not friction. The odds are your investors will run for the hills when the drama starts. They will say it’s not so but believe me it is. I’m working on several startups. I’m not sharing power in any of them. I’ll provide marketing for companies for a fee and take zero percentage. When it comes to my personal startups that I plan on being responsible for, I don’t care if you offer me $1 billion, I’m not giving up any say unless the SEC (the government) tells me I have to. Of course, I will have attorneys guiding me. I will go above and beyond to be transparent and do everything by the book. When it comes to sharing power, I’m not until I have to by law. I’m 43 years young. I’m too old to be arguing with people about every little decision in regards to my startups. That doesn’t mean I’m not a great guy. It doesn’t mean I’m not open-minded. It doesn’t mean I don’t want to hear what you have to say because I do. It means I’m the final word at all my startups and it’s going to be written into every contract if there is anyone who is a big enough gambler to invest money into one of my startups. People who basically want to throw their money into the garbage because that’s where it’s probably going. If I have to get the money from marketing, blogging, vlogging, crowdfunding, etc., that’s OK. I’m not bending on the power share in my startups.
I do not care how much anyone offers me, I’m not sharing control in any of my startups. I’m not going to get into all the reasons why right now. I don’t care if someone offers me a $1 billion cashiers check, bank transfer, etc. I don’t care if an investor is famous. I’m responsible and transparent but I’m not letting anyone have the power to sink the ship. My goal is to earn billions of dollars and have a positive impact on society. My goal is not to spend the next ten years in court arguing with my investors and making excuses about why all my startups tanked. Also, people say you should only focus on one company at a time. My plan is the exact opposite. The second I breakthrough, my aim is to launch one company after the next. My theory is it will increase the odds of me having a hit. Plus I have a lot of ideas.
I’m not saying the committee foundation for companies and startups doesn’t work. If that is the route you decide to go, it might work for you. If major Silicon Valley investors want to give you money and in return want control over your company, it could be worth the tradeoff. You could end up with a percentage of ownership in something significantly valuable. All I’m saying is that a lot of people get excited about people investing money into their company and before they know it, it’s not their company anymore. Plus they have no say about how its being run. It all depends on what you want and what you are looking to accomplish. I want to earn billions of dollars like everyone else in the startup universe. I also want to have a positive impact on society. If I’m not in the driver’s seat, how am I going to be able to help anyone? If you are going up against the people who are already running the Internet, can you trust investors who you don’t know? Not only do you not know the investors, but you also don’t know who they are friends with.
I want to see people change the world and make it a better place. Not get sabotaged. This reminds me of when I help companies with web marketing. People will dangle a check in my face and start asking me to guarantee this or that. I kindly tell them, there are no guarantees. I can’t guarantee how a multi-billion dollar company is going to react. I can be transparent, I can carefully explain the strategies regarding what I’m going to do, although the web doesn’t always react the same way. There are several variables outside my control. I’ll walk away from any amount of money before I guarantee anything that I don’t control. I’m always thinking about the big picture and long term.
Speak with an attorney, research how companies operate and try to make the most educated decision as possible. Don’t get excited just because someone is investing a few dollars into your startup. One minute you might be one of the top executives or founders, then you become an employee who can be fired and has no power. Try and figure out how to earn money so you’re not desperate when investors show up.