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translated from clazytech.com

Make It Clear Who Actually Owns The Company

original Startups

As a common pattern among early-stage companies built around a technology seed,

“it’s often unclear from conversations who actually owns the project or product”

is a situation I run into often.

Ideally,

should all be the same individual. In a reasonably mature company these are often not the same person, but in an early-stage company, especially a startup, it’s strongly desirable that they be one and the same. When a spin-out fails to go well, it’s often because several of the above (equity in particular) remain in the parent company’s hands, which keeps the people on the ground from delivering sufficient performance.

For a company built around a technology seed, there can be various patterns, but “the person most knowledgeable about industry information and customer needs” is usually the very person who has patiently accumulated that technology over time. A researcher may stay with a single theme for 5 years, 10 years, sometimes a lifetime, and that inevitably makes them deeply versed in the industry, with a deep network to match.

The “capability” a manager needs also changes depending on the stage. Note that I say “capability,” not “aptitude.” Aptitude here refers to a trait one is born with or has cultivated over years, while capability is simply “what that person can do.”

Once revenue reaches a certain scale, the main capability the CEO needs becomes formulating financial strategy, or making sound judgments in that domain: how to raise capital, deploy it into investments, build a cycle for recovering it, review that cycle, and keep improving it. Building a network, negotiating with large companies on equal footing, and having the leverage to secure deals advantageous to one’s own company also matter.

The capabilities a manager needs in the early stage, however, are somewhat different in nature.

If you belong to a company that is still early-stage, and you are not the one taking ownership, yet you find yourself thinking

“wait, doesn’t all of this apply to me?”

then the way your company was formed has already failed.

If it’s not too late, start by fixing that formation. If it is too late, get out quickly.

Let me also add, as a kind of “runner-up,” some nice-to-have qualities:

Plenty of startup managers are more than excellent without possessing these, of course, but regardless of how they’re used, these are good powers to have.

Having reached a certain age myself, I’ve watched a fair number of people end up in unfortunate positions. Among them, one particular cluster all share the same trait: they’re being “exploited.”

A state of exploitation is one where the balance between risk and reward is unreasonably skewed. The classic case is someone saddled with excessive responsibility without being given sufficient authority or return, and honestly, this describes most of them. If you reading this happen to be a salaried employee, let me offer one prescription that tends to work well. As a salaried employee, your “responsibility” doesn’t in truth amount to much, and your degree of freedom is relatively far greater than you think. All you need to do is notice that. Once you recognize it correctly, a happy salaried life awaits you.

But when it comes to startups, where people sacrifice their careers, income, time, lifestyle, and in some cases everything they have, it’s lamentable when the reality turns out to be exploitation. A company, organization, system, or project like that cannot succeed in the end, so all you can do is cut your losses quickly. Unfortunately.

So the key to avoiding this is:

don’t leave the founding of the company vague and unresolved.

That said, no one wants to lose momentum by dragging out endless discussions, so it’s best if someone decisively claims the “should be the same person” condition mentioned at the top.

Don’t split it half and half. Even 6:4 is unsatisfying. Take it as 9:1, or even 10:0. That makes ownership clear. In other words, the person who resolves to end up with the 1 or the 0 is thereby committing to keep an “escape switch” within reach at all times going forward.

If the owner at this point talks in platitudes, take that as a sign of future “exploitation.”

Something like, “We’re an equal team!”

Compared to that, a manager who says clearly,

“This is my company, so when it really comes down to the wire, I’m sorry but I’ll be the one making the final call. Some of what I do might look unilateral. If you’re unhappy with that, leave now. But if you believe in 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 that has been unjustly taken away to where it rightfully belongs. It’s probably too case-by-case for anyone to have a formulaic answer. In most cases there’s a gap in perception that can’t be bridged.

That gap shows up on both the risk side and the reward side.

“Something this small doesn’t even count as risk.” “This level of reward is an exceptional deal.” “It makes no sense to hand over this right.” “It’s only natural to bear this much responsibility.”

These views usually depend heavily on past experience (the people who agreed to that level of risk and reward with them before) and on personal values. There’s a nonzero chance that, given enough time to persuade them carefully, 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 inside major Japanese corporations to Silicon Valley startups. CEO, Founder, ClayTech Inc. Director, EYS-STYLE Inc. Director, 144Lab Inc. Visiting Professor, Tohoku University 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.