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The Wealthy Founder Dillemma

Simple question: as an employee, investor, co-founder, are you better or worse off having a very wealthy founder running your company? The obvious answer would seem to be better. Very wealthy people bring lots to the table, including very often a proven track record of great success (hence their being very wealthy).

But it's more than that. There are actually tangible assets that the very wealthy often times bring with them. Obviously, financial wherewithal is one. If your company runs into financial peril or just needs some money, there is no need to look to outside sources. The wealthy founder can personally make the necessary financial commitment. But it goes beyond just finances. Usually a very wealthy person's name is well known. This makes getting the much desired press/ media attention for your company's efforts much, much easier. Very wealthy people also often have a wide network of contacts, so introductions for purposes of deals, hiring, sales, etc. all come easier. All good and very valuable stuff.

So the answer is yes then? Well, maybe. I'm reminded of why it might not be always the best idea after reading a recent post on Valleywag. This particular entry was rebutting an ill-conceived post on Tech Crunch suggesting that the Huffington Post was gearing up for an IPO. The Valleywag piece, after explaining how that is not a likely scenario right now, added this little tid-bit at the end:

[Founder] Huffington is a successful writer and got a fat divorce settlement.... This is their pet project and I can't see them selling anytime soon. Huffington -- like Michael Moore -- has world-changing aspirations. With plenty of money in her pocketbook, she doesn't have to worry about cashing out.

In other words, even if the company was offered an amount that would be very interesting to employees, co-founder, investors, etc., they might not take it because the main founder isn't interested. This isn't the first time this scenario would have played out in the Valley. I know some folks who work for a company that was made a pretty sweet offer by Google pre-IPO (i.e. life changing money for the employees) and it was turned down by their uber-wealthy founder. That company is still floundering around today trying to find itself.

So why does this happen? Different agendas. Everyone wants challenges and the satisfaction of overcoming them. As people get more successful, the stakes raise. If an entrepreneur hit the equivalent of a 400 foot home run in his or her last company, very often they won't be satisfied with anything less than a 450 foot home run with their new company. In the meantime, investors, employees, etc. would be very happy just getting one over the wall.

So if your answer to my simple question was yes, you might be right. Just like anything else though, be careful what you wish for.

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This page contains a single entry from the blog posted on October 2, 2007 1:24 PM.

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