Grow Slow? [ENT 600-50 Week 8]

I began this blog with a question and I ask it again.  Why are you going into business for yourself?  You could take any number of jobs out there, show up for work, do the A-Player thing, pick up a check, hang out with your family on weekends, go to bed on time, maybe even get some sleep occasionally.

Instead, you’ve chosen to follow your dreams and call your own shots.  But how long are you going to get to call the shots, even at “your own” start-up?  According to Noam Wasserman in The Founder’s Dilemmas, it all depends on how quickly your start-up grows, then wanders into that new territory, The Growth Stage.  “Young companies are indeed more likely to experience the departure of the founder-CEO when their revenue and employment growth are very low or very high; middling growth rates lead to the lowest rate of founder-CEO departure.” (309)

I get it.  If you have all kinds of trouble getting your start-up off the ground after spending copious quantities of other peoples’ time and money, you should probably get shown the door.  Your employees and investors owe it to themselves to protect their own assets in a situation like that.  But if you’ve brought your start-up to profitability in rapid order?   Your reward–like Wasserman’s example, Lew Cirne of Wily’s–is the wrong side of the door?

When you reach the end of the start-up road and enter The Growth Stage, as Glenn Solomon says in The Long March: Maintaining Big Ambitions in the Growth Stage,  after taking a bow, “Now, come to the frightening realization: If you want to build a big company, you’ve got much more work ahead.”  It’s no longer about controlling the cash burn rate…it’s about building investor value, because you have only reached this particular pinnacle because your employees and your investors who are now shareholders who, after waiting for years for this investment to mature, now want to see it produce some cash for them.  Or as the chairman of Greylock Venture Partners told Lew Cirne as he was absolutely killing it with Wily’s, “‘So we put it out there that there will come a time when we need a CEO with different skill sets.'”

This was the price of rapid growth.  You were able to hire everyone you needed and still meet payroll because your investors believed in you.  You bought everything you needed when you needed it because the checkbook was open. Now you’ve reached a new place where professional managers with fancy degrees from fancy schools and bank account balances and investment portfolios and suit closets we can only dream about hold sway and let’s face it.  That’s not you.

Time to bring in A Known Quantity the Board of Directors knows for sure from experience can take the business to the next level, which is where they make their money.  As Wasserman says, “In startups…the new CEO almost always comes from outside the existing executive team….In short the new CEO is being hired to do what the founder-CEO either could not do (for lack of skills or knowledge or because of deeply ingrained mental models, or schemata) or would not do (given his or her nonwealth motivations or … attachment to longtime participants or to the original strategy or idea).” (311)

Since failure is not an option, that leaves middling growth.  Or growing slow.  Don’t let it be lost on you that Lew left with a hefty check in his pocket.  Even if a bunch of venture capitalists ran off with his company.  Which brings us back to the original question.  Why are you going into business for yourself?  Because if you defy the odds and succeed, your own company with slow steady growth is one option.  And so is the hefty check.  Only you know the answer to this question.

1 Comment

  1. Arjay,
    Another great post! I love that you started off with a question and ended with it. Your post really makes a person think, “Can I do this?” and if the answer is yes, then they have to! The post was encouraging and also grounding.

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