Startup Founders: The Involved vs. The Committed

About This Blog

This site is for  entrepreneurs.  A full RSS feed to the articles is available.  Please subscribe so we know you're out there.  If you need more convincing, learn more about the site.

Community

Google+

And, you can find me on Google+

Connect on Twitter

Get Articles By Email

Your email:

Google

Blog Navigator

Navigate By : 
[Article Index]

Questions about startups?

If you have questions about startups, you can find me and a bunch of other startup fanatics on the free Q&A website:

Answers.OnStartups.com

Subscribe to Updates

 

30,000+ subscribers can't all be wrong.  Subscribe to the OnStartups.com RSS feed.

Follow me on LinkedIn

OnStartups

Current Articles | RSS Feed RSS Feed

Startup Founders: The Involved vs. The Committed

 

I’m going to refrain from starting this off with the story about the chicken and the pig (there’s something about the former being involved and the latter being committed).  I’m vegetarian so this particular folksy tale doesn’t have a resonance with me.

In the startup world, the phrase that is often bounced around, is to have “skin in the game”.  This is a short-hand for saying that a given individual has some incentive to see the company succeed.  One of the most common examples is:  “Susan just wrote our startup a $100,000 check – she has skin in the game.”

I’m going to argue that there are multiple levels at which parties can be involved in a startup.  Certainly, writing a check is one way to align interests, but that is an over-simplification.

The reason people like to see “skin in the game” is that it motivates the right kind of behavior on the part of the individuals with the skin.  Interests are (supposedly) aligned and those with skin in the game are expected to do the right thing more often than not for the company.

But, there’s a big difference between the degree to which interests are aligned and more importantly the degree to which an individual really has skin in the game.  

On one end of the spectrum, you have those that are lightly (or heavily) “involved” in the startup.  These can be advisors, could be passive angel investors could be members of the management team working for reduced salary – and of course, could even be one of the founders.  Yes indeed, you can have involved (but not committed) founders.  And, on the other end, you have those that are committed.

Here’s the litmus test for how I try to distinguish between the two:  If your startup dies next week, what will be the actual impact on a given individual?  

The point here is that just because someone quits their day job, just because they write a relatively large check, just because they take the founder title – none of these necessarily means that they’re committed.  It’s possible that in all of these cases, the actual impact on the individual is relatively minor.  They find another day job or they mourn the loss of their investment for a week or a month.  What I consider “real” co-founders are those that are financially and emotionally committed to the startup.  For the founders to be committed, if the startup dies tomorrow, it will forever change their life.  They can’t just wake up the next day and have it be life as usual (yes, they’ll recover – but the failure will have a lasting impact).  

In the startups that I’ve kicked off, much to my dismay (and my wife’s dismay), I’m always committed.  And I’m particularly emotionally committed.  Sure, I make substantial investments in the startup, but I really get emotionally committed.  My identity becomes tied to the company.  I meet great people, I experiment with new ideas, I (hopefully) build great products.  But, what really reels me in is that everyone I know, knows that I’m working on a new startup.  Sure, I might fail, but it will not be a quiet, subdued failure.  It will be (in my own way) – spectacular.  Just as everyone I know will know I started, everyone I know will also know it didn’t work out.  

For my current startup, HubSpot, it took me some time to “draw in” my co-founder, Brian Halligan.  I didn’t have to find him (we already knew each other pretty well, and he was already involved in the company for over a year – but he wasn’t committed).  This past summer, he joined full-time as co-founder, but I still wasn’t absolutely sure he was committed until an important thing happened:  He started talking to his friends, family and colleagues about HubSpot.  He told them why he was doing it, and how great the company was.  Now, for good or for bad, he is in.  If by mistake or misfortune, HubSpot does not go in the direction we hope, I do not think he will be able to walk away untouched.  He is committed, as I am.  And that’s what you want in a co-founder.

How about you?  Have you had a hard-time getting people to shift from the “involved” stage to the “committed” stage?  Would love to hear about your experiences.  Please leave a comment.

Posted by Dharmesh Shah on Mon, Feb 19, 2007

COMMENTS

Hi Dharmesh,

The breakfast analogy is a winner and your vegetarian ways got in the way. Over the year that you were trying to convince me, I was committed like the chicken to breakfast (pop out an egg or two). Once I joined fulltime, I was committed like the pig to breakfast. Extracting bacon from a pig is a far more painful process than extracting an egg from a chicken (or hen).

( - :
Brian.

posted on Monday, February 19, 2007 at 11:25 AM by Brian P Halligan


Good article...I can definitely empathize. Another metric on level of commitment comes when you have employees and you hit a cashflow blip that requires you to call friends and family, etc. for short term loans so you can make payroll. He who makes the call is the pig...he who says (mouse in pocket) 'we need to make the call' is the chicken...

posted on Monday, February 19, 2007 at 12:18 PM by Mike Betts


Dharmesh, Many congratulations on getting a co-founder...trying to build a startup myself, I can understand that this might be the biggest milestone for hubspot. It would be great if could share your thoughts on equity sharing amongst co-founders who join the startup in different points of time which could be spaced out by as much as an year ..and maybe also taking into account the funding stage of the startup ..eg. a co-founder joining before an angel round vs one joining after an angel but prior seed round vs one joining after the seed round.

posted on Monday, February 19, 2007 at 12:27 PM by xyz


This is the "Kool Aid" theory of startups. It works. Lots of startups work this way. Lots of big companies got big by subscribing to it, too. It makes me nervous, though. Its emotional aspects can drain away a lot of time and energy that might be more productive if spent on something besides emotions. But, sure, you want people to care and you want them to care deeply. Do you want them to be crusaders or martyrs? Is there a difference?

posted on Monday, February 19, 2007 at 12:53 PM by Dan Howard


Insightful article, Dharmesh. Identifies significant raw mental aspects of startups.

People who are involved in startups are skiing today. Those that are committed enjoyed light traffic on the way to the office.

How people describe what they are doing is key-
"Working on a new project" signals to me that a founder isn't committed. Projects have an end date.

"What will you do if your startup doesn't work?" I think people involved say they will find something else to do. People who are committed say we will make it work. (change the focus, find a different market, whatever it takes).

If you have no plan B, operate without a safety net or a fall back-- you are committed, driven and motivated. You have no choice but to succeed.

I try to find people who commit vs. trying to transition them. Just like you can't teach a salesperson to have drive and determination; they have it or they don't.

posted on Monday, February 19, 2007 at 1:04 PM by Mike Ford


I am a fan of the chicken and pig story, but if you don't want one involving eating animals there are others. Though it is a myth, you can use the example of Cortes burning his ships upon arrival in Mexico to make sure his men were committed (since they could not return home).

posted on Monday, February 19, 2007 at 7:19 PM by Mike Volpe


I think you are absolutely right that is important for a founder / investor to be committed, but I'm not sure if betting all you have is a good thing in general.

Take for example two medium sized companies who have approximately the same amount of assets trying to do the same thing. One of them might make a "big bet", as Microsoft would say, and put everything behind that idea. The other might make a smaller bet but make sure that failure won’t utterly kill them. Clearly if they both succeed the company who bet it all has the advantage, they did more and they are going to win big because of it. However, if they both fail the more prudent company is the only one left to try again.

Now let’s consider a longer timeframe where failure is bound to happen eventually. Again, the big bet company may do better initially, but if they don't absolutely dominate the other company then eventually here the prudent company will win again.

So how does this same reasoning applied to founders and startups? Again, I would argue that in the long term a founder showing prudence wins out, but there is an exception to the rule: for startups it is sometimes an advantage to win big or fail quickly. Investors want/need big returns to make it worth their time, and failing quickly lets everyone move on one way or another.

My take is that that the smartest people are those that are as prudent as they possibly can while maintaining a solid chance of success. They will bet big when they must and they will bet small whenever they can get away with it. If this is the case then having all your skin in the game isn’t necessary a good thing, and could even be a sign in the long term you tend to overcommitted yourself and are going to lose everything in the long run.

I like the image of a founder working all hours to make their business a reality, but if at the same time they put their whole life at risk for something that has only a 50% chance of success, I'd think they were crazy. There is no way I would bet my life on a coin flip. No reward in my book could be worth it, the varience is just too high.

Great article. Lots to think about.

posted on Monday, February 19, 2007 at 10:11 PM by Evan Moran


Hi Dharmesh, The question that comes to my mind is, how do you exactly decide who is committed and who is not. Who is involved but not committed. Everybody views it differently. I am working on a startup by myself for over 7 months now (Info @ http://onista.wordpress.com/ ) and mostly I am doing is actually developing an application. It is taking long time as I have full-time job to support my family and my kid. In given situation, I am able to work only 2 hours on weekdays and full-time on weekend. But I am very persistent and I will CERTAINLY launch it around April-May time frame. The question is, since I am not providing full-time because of my other obligations, does that mean I am less committed? I hope not. It's all about how one looks at everybody's contributions. In my opinion, everybody's contributions should be respected in group environment and that applies to startup as well. GREAT Post though. I always like to read your blog. You have very interesting views. BTW, Congratulations on finding Co Founder. Indeed its big step. I am still looking for one.

posted on Tuesday, February 20, 2007 at 3:00 AM by Joe Entrepreneur


To Jonathan Tang, <p>"I'm curious - do you think it's possible to be committed and yet still keep one's day job? " <p>No. You are not commited. You are involved. If you were commited you wouldn't be spending the most important hours of the project working for someone else. Simple as that. Been there, done that. The situation you are in is not easy. Sure you are talking about it etc, etc, but loads of people do that (I certainly did, still do), but you are spending 27% of your time on the business you think you are commited to and 73% of your time on someone elses's business. <p>3 / 11 is approx 27%. (3 hours out of every 11 hours)
2 / 11 is approx 18% <p>You worked Presidents Day. We don't have that here, but I assume you think that is a big deal, working on a public holiday. I don't wish to be harsh but you should be willing (if you have to) to work Christmas day (I check email on Christmas day - some of my customers are non Christians and work that day, they expect customer support, same for Sundays every week of the year). <p>For me, you are involved (and thats great), to be committed you have a way to go. Sorry if that isn't what you wanted to read. <p>Stephen <p>I guess the above also applies to Joe Entrepreneur.

posted on Tuesday, February 20, 2007 at 10:20 AM by Stephen Kellett


Dharmesh, How are people adding formatting to their posts? I've tried just writing it as it should be, and adding HTML tags and I just get a mess.

posted on Tuesday, February 20, 2007 at 10:23 AM by Stephen Kellett


My co-founder, Spencer, and I met in 2001. I left my day job in early 2002 to start organizing and developing business for a new web content tool startup. Spencer kept his day job. He worked nights, weekends, holidays, sick days, whenever he could. Was he committed or involved, I'll let readers decide that. But I will say this...a couple things happened along the way. Products rolled out painfully slow. Sales and development fell off one another's schedules. Customers were left hanging without delivery. We kept building websites and doing SEO to make ends meet. The business continued to grow, but based more on my web design and SEO skills and less on web tool product development and sales. We were getting swamped and side-tracked in services and the overhead brought on by services. (You only have 24 hours a day to perform services.) So, our model was evolving wrong. To try and cut this short, Spencer left his day job in Spring 06. In anticipating a decrease in income, he had been saving for nearly four years. The results have been that in less than a year we have relaunched two of our original web tool products (Merchandiser and Portfolio) that were constructed with spotty focus, we have completed new Locator and Newsroom modules, and we are revamping our Jobs module. We have an FAQ and Contests module wrapping up. For marketing, we have two professional looking brochures now, our website is improving (although needs more), we have sent out two mail campaigns, even our business cards got better. Best of all, we will have nearly 25 installs by roughly May 1 (on record). Needless to say, commitment has a price tag, but it definitely has it's rewards. My estimates suggests that 40 more module installs will keep Spencer and I from having to build another website, or advising on another SEO job entirely. Twenty more after that, and both of us will return to approximate pre-startup incomes. Here's to a great 2007 and sticking to it.

posted on Tuesday, February 20, 2007 at 12:07 PM by Tim Justice


I did work on Christmas, actually. I'm looking for information, not validation, so a negative response is still helpful. If there's enough evidence in favor of quitting the day job, it's certainly an option. I'd actually much prefer to do that - programming for my startup is more fun, I make more progress, and I get a bigger reward for it. But my gut instinct tells me that it's not quite time to leave yet. Here's why: <br />
1.) The aformentioned money issue. I'm not worried about living expenses; for me, they're effectively zero (I live with parents, and even if I didn't, I'd have close to 4 years saved up). I'm worried about hosting costs, which in another post Dharmesh indicated can run up to $1000/month. <br />
2.) Experience. By sticking it out with my current employer, I'll hopefully be around when we launch my current project, which also happens to be a high-availability and hopefully high-traffic website. I can learn from any snags we meet on the way and avoid them in the startup. This isn't really working out the way I planned, though, because at present development rates the startup may launch before the day job, despite starting 6 months later and having 1 developer working about 20-25 hrs/week instead of 2.5 developers working ~100 hrs/week. <br />
3) Time. In my experience, the biggest enemy of software projects is haste, because it makes you take shortcuts that mortgage the long-term health of the project. If I quit the day job, the clock starts running on the startup, and there's a strong incentive to push something, anything, out there, even if it doesn't quite work right or won't be maintainable or will do stupid things like store passwords in cleartext (*cough**cough* Reddit). <br />
The particular market space we're going for is already crowded, so we don't gain anything by being faster. Other firms have already beaten us to the punch. We could, conceivably, gain by being *better*. <br />
(On formatting: I'm guessing that the br tag works but none of the other HTML tags do. If this post comes out properly formatted, that's it.)

posted on Tuesday, February 20, 2007 at 12:50 PM by Jonathan Tang


(Formatting: it has to be br tags at end of lines; putting two breaks on a line escaped the first one. Is there a way to edit posts?)

I forgot one other reason:

4.) Training. I'm hoping that by eeking out every bit of efficiency I can while working part-time, those same habits will carry over when I go full-time. If I develop habits, practices, and procedures for sustainably doing 50 hours of work in 20 hours, then when I actually start working 60 hrs/week on it, I'll be able to accomplish 150 hours of work. That can be critical when you don't have money to hire developers.<br />

posted on Tuesday, February 20, 2007 at 1:04 PM by Jonathan Tang


Jonathan, If you have 4 years saved up, regardless of your living expenses you have no excuse not to be full time. Thats more than I had when I did my thing. Tim Justice's comments are similar to my experience, although in a different domain. As for hosting costs, you don't incur them until you launch, so all your development time when you could be working 100 hours (from your post- thats too much BTW) on your project don't incur hosting costs. Re: Haste, you are more likely to skimp now with your present over-worked regime working for two outfits than you are if you work solely on one project, especially if its your project. As for point 2 - if that works out, you are lucky. Plus what you learn there may not be at all relevant to what you are planning to do. The issues/scaling etc may all be interested but have no applicability when it comes to whatever unknown problems lie in your path. I think this should not be a deciding factor in your decision. I still can't change my opinion on this. 27% percent for you, 73% for someone else AND 4 years savings in your pocket and NO living expenses. Definitely not committed. You have everything you need to make the jump. Do it.And be prepared to accept that it may not work out. Good luck.

posted on Tuesday, February 20, 2007 at 1:05 PM by Stephen Kellett


I previously wrote

"Jonathan, If you have 4 years saved up, regardless of your living expenses you have no excuse not to be full time."

That sounds a bit harsh.

What I'm trying to say is that you have the biggest safety net of anyone I've ever met who is thinking of going full time on a project of their own (except people that are finanically independent like millionaires etc). I just cannot fathom a reason for not doing except that you don't completely believe in your own idea.

Anyway if you do do it, good luck.

posted on Tuesday, February 20, 2007 at 1:37 PM by Stephen Kellett


Jonathan Tang,

The worry with working part time is that you will never finish at all. Having a job extends the time it takes to make your product, and given enough time other parts of life tend to kick in (promotions, job offers, marriage, babies) and 80+ hour work weeks stop being viable. Personally I think you sound plenty commited, and should be proud of how hard you are working. Keep at it and keep reevaluating if now is the time to go full time. Don't miss your chance.

Good luck.
Evan

posted on Tuesday, February 20, 2007 at 1:37 PM by Evan Moran


I'll expand a little to Jonathan's point. The further out your day job, or even a part time job, is that it keeps you from delivering your product. Thus, the more chance you run of missing your window. My experience is that we missed a lot of opportunity while trying to finalize our initial applications. Waiting for my technology partner to become 100% committed allowed areas of our market to get ahead of us and we eventually saw other competitors gain footholds that we can't afford to unseat at this point.

posted on Tuesday, February 20, 2007 at 1:46 PM by Tim Justice


Scott Cook, founder of Intuit, once guest lectured in one of my classes. He told the story of how Intuit got started: he was so committed, so involved, that he put every last penny he had into the venture. VC's still wouldn't touch it, and the initial prototypes were not getting much traction. His parents then chipped in from their retirement savings. Try as he might, he wasn't able to find a market. If this was a VC-backed company, he would have walked away. However, because it was his parent's retirement money, he didn't have that option. He kept at it, and the rest is history. One interesting twist is that he is actually quite ambivalent about the "against all odds" success of Intuit, and sees this as a cautionary tale against putting so much into a single venture - the risk of failure just has too much pain associated with it.

posted on Tuesday, February 20, 2007 at 6:02 PM by Rahul


Is there such a thing as being 'too committed' which is what I think I might be...
I have eaten, slept this dotcom for 6 years now, and survived the time well....with a cash flow positive business. I need to go to the next level...and the need for funding/another co-founder exists. How does one find someone who is 'commited' when all the initial heartburn is over....but of course loads more to come.
VC's want to see more co-founders to this business....where does one go looking....particularly when they havent shared the last 6 years, and still have the same level of commitment?

posted on Wednesday, February 21, 2007 at 12:32 AM by Meena Kapoor


Jonathan, Stephen, Evan,



Both approaches (1) Keeping one Full-Time job going and work on startup (2) Quitting job and committing self to a startup have their advantages and disadvantages.



The biggest advantage of first approach is that you do not need to ask for funding. If you have full-time job then you can keep on using the money (from your paycheck) as funding to the company. If you are lucky and if everything goes fine, you may never need to talk to VC. Also using the money you have, you can get some pieces coded on elance or rentacoder as well

But the disadvantage is that it takes much longer to build an application. Agreed... but it is not impossible.




Honestly, in my case I don't even have option of quitting job as I have family to support. But I am using my limitation to my advantage by funding my own startup. I started almost 5 months back, and I'm almost 60% done on developing my app. I am also using programmers from elance. I will certainly be able to launch around April, May time frame. I will continue funding my company with my paycheck until I come to stage where my startup is ready where it needs me full-time.




But I totally agree, that same strategy might not apply to every situation.

posted on Wednesday, February 21, 2007 at 2:58 AM by Joe Entrepreneur


Apologies for using two breaks between each para. It created more vertical space than what I anticipated. Can't even edit my post now.

posted on Wednesday, February 21, 2007 at 3:03 AM by Joe Entrepreneur


I'd say keep your personal and professional lives separate. You aren't your company and the company is not you. If you get over involved with the company (or your product) you tend to get totally irrational about its failures, of which there will be a reasonably large number. i've been in a situation where we refused to let a product go. It just wasnt working for us, and the emotional and financial investment in it was driving us to believe that we could turn it around. Like a losing gambler that thinks that "one last bid will change the game", we kept at it...till we ran out of moolah. Thats the absolute worst time to switchoff your product, because at that time the only thing you can think is: If only I had two months of cash more... You've got to be objective. Some people say that's what investors are for - they provide that objective outlook when founders are irrational. I don'tknow, but I would much rather prefer that founders make the tough decisions. A good-cop-bad-cop situation doesn'twork. One founder that will be emotionally over-committed will resent the one that isn't; and by over-commited I mean someone who will breathe, drink eat and dream about the company. Dont make it your baby; your company never loves you back.

posted on Thursday, February 22, 2007 at 3:14 AM by Deepak Shenoy


I agree that you have to live and breathe the product and remain committed, but doing it full-time (initially) may not be an option for those who have a family to support and no other source of income.

posted on Monday, February 26, 2007 at 2:56 PM by Karthik Ram


The job of the entrepreneur is to slowly nudge all the parties from involvement to commitment without their even realizing it. It is a delicate dance, but boy is it fun to pull off.

posted on Wednesday, February 28, 2007 at 6:18 PM by Chris Yeh


Comments have been closed for this article.