Make It Crystal Clear Who The Owner Is
A common pattern among early-stage companies built around a technology seed:
I frequently run into a situation where, listening to the discussion, it’s unclear who actually owns the project or product.
Ideally, the same person should be:
- the one qualified to make management decisions and take responsibility for them
- the one holding the largest equity stake
- the one with the highest level of commitment
- the one who knows the most about industry information and customer needs
In a reasonably mature company these often are different people, but in the early stages, especially at startups, it’s strongly desirable that they coincide. When a spin-out fails to work well, it’s often because some of the above elements, equity in particular, stay with the parent company, leaving the team on the ground unable to perform to its full potential.
Companies built around a technology seed follow various patterns, but in most cases, “the person who knows the most about industry information and customer needs” is simply whoever spent years steadily building up that technology. A researcher who stays with a single theme for 5 years, 10 years, sometimes a whole career, can’t help but deepen both industry expertise and connections.
The “ability” a manager needs also changes with the company’s stage. Note that I’m talking about ability, not quality. Quality here is an innate trait, or one cultivated over many years; ability is simply what that person can do.
Once revenue reaches a certain scale, what’s mainly demanded of a CEO is the ability to formulate financial strategy, or to make sound judgments in that domain: how to raise capital, deploy it into investment, build a cycle for recovering returns, review it, and keep improving it. Building networks, negotiating on equal footing with large corporations, and securing deals favorable to your own company matter too.
But in the early stage specifically, the abilities a manager needs are somewhat different in nature: – judgment that lets you handle a variety of situations faster and more accurately than anyone else – the drive to keep a project moving forward even if you end up completely alone
If you belong to a company that is still early-stage, and you’re not the one taking ownership, yet you find yourself thinking “wait, doesn’t all of this apply to me?”, then the structure of the company you’re at has already failed.
If it’s not too late, start by fixing the structure. If it is too late, get out as fast as you can.
As a kind of runner-up, nice-to-have qualities worth adding are: – the power to get others excited and pull them in (call it “swindler’s charisma,” lol) – the delusional power to surrender to a kind of obsession that says “there’s no one to do this but me”
Plenty of startup managers are more than excellent without possessing these, but no matter how they’re used, they’re good qualities to have.
Having reached something of an old-man stage myself, I’ve watched plenty of people end up in unfortunate positions. Among them, one particular cluster is, without exception, being exploited.
A state of exploitation is one where the balance of risk and reward is unreasonably skewed. The typical case is being saddled with excessive responsibility without being granted sufficient authority or reward in return, and honestly, this accounts for most cases.
If you’re reading this as a salaried employee, let me offer one prescription that works well. In truth, a salaried position carries only limited “responsibility” in any real sense, and your degree of freedom is relatively far greater than it feels. All you need to do is notice this. Once you recognize it correctly, a happy salaryman life awaits.
But in the context of a startup, where you’re sacrificing your career, income, time, lifestyle, in some cases everything, it would be genuinely lamentable if what you’re actually experiencing is exploitation. A company, organization, system, or project like that can never work out in the end, so there’s no choice but to cut your losses quickly. Unfortunately.
So the key to avoiding this situation is: don’t let the founding of the company get settled by half-measures.
That said, no one wants to lose momentum through endless drawn-out discussion, so it’s best if someone decisively takes on the “should be the same person” condition described at the start.
Don’t split it fifty-fifty. Even 6:4 falls short. Take it as 9:1, or even 10:0. That makes ownership unambiguous. In other words, whoever accepts landing on the 1 or the 0 in that split is thereby committing to always carry an “escape switch” going forward.
If an owner spouts pretty words at this point, take it as a sign of future exploitation.
Things like declaring, “we are an equal team!”
A manager who instead states clearly, “this is my company, so when it truly comes down to the wire, I’m sorry but I’ll make the final call. Some of what I do might look unilateral. Anyone unhappy with that should leave now. But anyone who trusts me, please stay and lend a hand,” is still more trustworthy. At least to me.
I don’t know an effective way to restore ownership once it’s been unfairly lost. It’s probably too case-by-case for anyone to have a formula. In most cases there’s a gap in perception that can’t be bridged.
That gap opens up around both risk and reward.
“Something this small doesn’t even count as risk.” “A reward this size is an exceptional deal.” “I don’t understand why I’d hand over this right.” “Bearing this much responsibility is only natural.”
These positions typically depend heavily on past experience, on the people who once agreed with them on some level of risk and reward, and on personal values. There’s a nonzero chance that, given enough time to patiently persuade them, or by showing them a different world, they’ll change their minds after much struggle.
But our lives are too short to wait patiently for such a miracle.
Author Profile
 | Yuichiro “kuz” Kuzuryu, Engineer/Executive. Has fallen into all manner of deep valleys, from launching new businesses at major Japanese corporations to startups in Silicon Valley. CEO, Founder, ClayTech Inc. Director, EYS-STYLE Inc. Director, 144Lab Inc. Visiting Professor, Tohoku University. Also serves as technical advisor to several other companies. https://twitter.com/qzuryu https://www.facebook.com/qzuryu https://www.linkedin.com/in/yuichiro-kuzuryu-kuz-27b92838/ |
Originally published in Japanese at https://clazytech.com/2019/10/249/. Translated with LLM assistance and reviewed before publication.