The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (The Kauffman Foundation Series on Innovation and Entrepreneurship) Paperback – April 1, 2013

Prof. Wasserman's book on Founder's dilemmas is a must read for every aspiring entrepreneur. And by that I do mean every single aspiring entrepreneur. For full disclosure I am an entrepreneur in the biotech industry and have lived many of the choices than dilemmas that Prof. Wasserman has described. I so wish it would have been available earlier to me and my fellow founders. It certainly would have reduced the stress reduce the number of difficult choices we have had to make.The book is both comprehensive as well as a true reflection of the early start-up world from the human perspective. Nine times out of ten, the "technology" or the "market" or just the "idea" are at the center of the entrepreneurs mind, while the most important, in fact the first and pivotal piece of the puzzle receives too far attention - the founder. No founder is looking further ahead than 3, 6, 9 or 12 months - early stage ventures are simply in too tumultuous a stage of development for that. Furthermore rarely do they think about the strategic interpersonal issues that are so often overlooked - I know I didn't. But they should. And this book provides an approach that structures the thought process.Prof. Wasserman has done what few people (certainly not stressed entrepreneurs) could have done: he's asked the meta questions. Not to sound philosophical but it's a tough question to ask "why do we do what we do", and "what do we want [to achieve]". Even constricted to the startup space it's still a momentous question to answer but taking a data-centric approach has crystallized at least a framework within which Prof. Wasserman goes about exploring the motivations behind the people. That's what it's really about. What do the people (the founders) want?The power of the framework lies in it's simplicity: you can be either rich, or you can be in control of your venture, almost never both, notable exceptions notwithstanding.That's it. Nothing more and nothing less.Few founders I have spoken to, have had that clear a framework in mind, much less have been able to articulate it (myself included). Eventually one comes to a realization of what it is that one wants, but often than not, one is in a situation that is suboptimal, and could have been solved better if those motivations / questions were properly known and answered.This is truly a book written for founders. It must be mandatory reading in every incubator of which so many should be popping up; every VC should buy a case of the books and give every founding team (better late than never!); and every business plan contest should distribute this book to their contestants (charge an extra fee or do it free but do it!).

Every economy needs a steady flow of “start-ups” (new businesses,) to grow and create jobs. Estimates vary on the value to the country of small business, but there is strong support for the idea that small businesses create more jobs larger companies. And, behemoths such as Microsoft, Facebook and Google were once start-ups.The problem is that of seven start-ups only two will be operating in a year later! That is a 71% failure rate. Imagine if close to all business that started succeeded, and went on to employ only five people. In a short time our “national scar,” unemployment, would be on the way down and prosperity on the way up.Naom Wasserman has assembled superb data from his research on over 10,000 new businesses that were set to grow large. His research focused exclusively on businesses that were intended to grow large, not on lifestyle businesses intended only to keep the founder comfortable. He also accessed a wide range of reliable data from other sources to formulate this book.What makes Wasserman’s book so unusual is his focus on a fact over research overlooks. More business start-ups fail because of internal problems caused by the founders’ errors of judgement than by external causes. If founders in the initial stages could make better decisions, many more businesses would be saved, and more would thrive.Wasserman has identified clear a set of dilemmas facing founders. Choices have to be made between alternatives with no choice obviously better than another. All come with significant upsides and downsides. Solved appropriately, the founders will survive to face the next dilemma. Fail, and there could be no next dilemma.“This book’s central message is that these founding decisions need to be made by design, not by default,” say Wasserman.There are four primary founding decisions that make up the content of the book. Each dilemma is analysed, and its implications made clear. This clarity will help you, and those you care about make better, safer decisions.At the “Pre-founding” stage, there are a set of dilemmas regarding when to launch the start-up. There are at least three major areas of considerations. If you do not have enough money, it may be wise to work for someone else until you do. Perhaps you should you borrow money and start right now? If you delay the start of the business, will you have missed the wave?There is no one right answer to this question, and it requires the consideration of a number of factors. Are you able to ensure the security of your family (if you are responsible for one?) If you have savings or a retrenchment package will that suffice? Does your life-partner earn sufficiently to support the family? If she does, is she completely committed to your success to pay her part while you play yours? If not, the strain of founding the business may exhaust your strength and shatter your relationship. Are you locked in the golden handcuffs of a secure job?These and many more profound and difficult questions need probing and honest answers.Once you have made the decision to start a business, you face the “Founding Team Dilemmas” . Are you able to start a business alone or should you have others doing this with you? There are always skills that are required, but cannot reside in one person. Then there may be a need to work with another person who has your commitment to the success of the venture.The need to work with others raises the “Relationship Dilemma” of to attract. Will the business work best if you team up with friends, family, acquaintances or strangers? Should you seek someone you have actually worked with before?The “Role Dilemma” follows from this. What are the positions each one of you should assume in the new business?How should each person be rewarded for their contribution to the venture? If you reward with more equity than is deserved, you cannot take it back when this becomes apparent. “Reward Dilemmas” are especially dangerous at the beginning of a business when there is nothing tangible. Giving away half of nothing but a promise is easy. However, when the business makes money, paying dividends to someone who never deserved it takes on a different hue. Few mistakes sour relationships more profoundly.Beyond the dilemmas of the founding team are the “Investor Dilemmas.” Most businesses require funding to take off in a meaningful way.You can turn to family and friends, “angel” investors, or venture capitalists. Accessing each these sources become progressively harder, and each poses its dilemmas.For example, when take money from you pensioned parents, you do this believing you will succeed. Five of seven businesses never succeed causing great harm to people close to you. Borrowing from family and friends is best when it is a gift that come with love, not an investment.Angel investors are investors but tend not to be professional investors. They are often people who have money and are prepared to “take a punt” on what looks like a “good idea” in exchange for equity and a high return. As with all investors, you will be required give up a portion of your business to the investor in exchange for the support.At every stage there are dilemmas that if not confronted and not addressed thoughtfully, will do more damage to the fledgling business than problems that come from external forces.Self-inflicted wounds can be avoided. Forewarned is forearmed. Read Wasserman’s profound book.Readability Light ---+- SeriousInsights High +---- LowPractical High -+--- Low*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works.