The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup

Author(s): Noam Wasserman


Often downplayed in the excitement of starting up a new business venture is one of the most important decisions entrepreneurs will face: should they go it alone, or bring in cofounders, hires, and investors to help build the business? More than just financial rewards are at stake. Friendships and relationships can suffer. Bad decisions at the inception of a promising venture lay the foundations for its eventual ruin. The Founder's Dilemmas is the first book to examine the early decisions by entrepreneurs that can make or break a startup and its team. Drawing on a decade of research, Noam Wasserman reveals the common pitfalls founders face and how to avoid them. He looks at whether it is a good idea to cofound with friends or relatives, how and when to split the equity within the founding team, and how to recognize when a successful founder-CEO should exit or be fired. Wasserman explains how to anticipate, avoid, or recover from disastrous mistakes that can splinter a founding team, strip founders of control, and leave founders without a financial payoff for their hard work and innovative ideas.
He highlights the need at each step to strike a careful balance between controlling the startup and attracting the best resources to grow it, and demonstrates why the easy short-term choice is often the most perilous in the long term. The Founder's Dilemmas draws on the inside stories of founders like Evan Williams of Twitter and Tim Westergren of Pandora, while mining quantitative data on almost ten thousand founders. People problems are the leading cause of failure in startups. This book offers solutions.


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Wasserman's book is on track to take as lofty a position in the entrepreneurial literature as HBS's Clayton Christensen's The Innovator's Dilemma did in the field of technological change. -- Peter Cohan Forbes [A] seminal work... Sure to be required reading in business school curricula, this illuminating and captivating read will also appeal to aspiring entrepreneurs or founders who want to make better decisions in existing ventures. Publishers Weekly [A] first-aid manual to help resuscitate ailing start-ups. sica Bruder, journalist, author, and adjunct professor at Columbia University's Graduate School of Journalism on the You're the Boss blog at the "New York Times Wasserman illustrates his findings with real world examples that translate into immediately applicable advice. But rather than creating a prescriptive list of commandments that would be impossible to follow, he adopts a more holistic approach. Encouraging entrepreneurs to study how others have handled similar challenges in the past, his insights highlight the common ground found in seemingly unique situations. ForeWord Harvard Business School professor Noam Wasserman is one of the writers and teachers who best captures the high stakes decisions that entrepreneurs face every day. -- Scott Kirsner Boston Globe There are plenty of books, lots with stories, anecdotes, and suggestions, but none that are particularly systematic about going through all of the issues. Noam's book is the first I've read--and he totally nails it. -- Brad Feld Feld Thoughts [T]he definitive book on the topic... If you are a founder or thinking about becoming one, you should read this book. -- Dharmesh Shah This is a serious book for a serious endeavor: creating a company from scratch that can be a world-beater and life-changer... Wasserman's book is a towering guide to making these decisions thoughtfully and purposefully. Every founder should read it--and take the time to digest its rich data and lessons. -- Jeff Bussgang Seeing Both Sides [A] wonderful book... It's a must read before you have even one more discussion with anyone about starting a company with them. inda Thomas, Entrepreneur-in-Residence for the City of New York Highly recommended for those who plan to embark or are already living the entrepreneurial lifestyle, it can serve as a guide to very tough situations for founders to evaluate the best possible way out. -- Bernard Leong SGEntrepreneurs Ten years of extensive research combined with winning case studies make this a trustworthy source not only for the potential startup owner but also for the classroom. Library Journal [A] must-read for anyone thinking of creating a startup, who is currently involved with one or who is an investor/advisor in the startup ecosystem. -- Dilip James Business Standard This book, upon release, becomes the single-most indispensible guide for founders of startups. Comingling research, straight talk, and a human voice--so often lacking in books with an academic bent--Dilemmas totally rocks as a business school required read and a founder's gripping, absolute must-read. Turning the last page, anyone with an entrepreneurial femur in their body will be fully armed with a battery of knowledge that can make or break a passionate first or even fifteenth venture. Do not start a startup without this book. -- Ted Sturtz New York Journal of Books [S]obering... Professor Wasserman provides a great deal of data and stories about high-potential technology and life-sciences startups. His book offers much more information than most entrepreneurs can handle at once, but it is probably essential for them to know. -- Harvey Schachter Globe & Mail Wasserman presents a series of entrepreneurship vignettes and case studies, drawn from a massive 10,000-founder survey he created. Due to the size of this business start-up survey, several of the stories, including accounts from founders of Blogger, Sittercity, and SmarTix, should prove fresh to readers. Much of the advice in the book governs key decisions founders have to make and factors that can cause decisions to turn out well or badly... [T]his work includes valuable, unique content. Choice [A] uniquely valuable resource for any entrepreneur. -- Terrence Murray Financialist The Founder's Dilemmas can't prevent entrepreneurs from repeating the mistakes of their predecessors; we all know how well human beings learn from history. But it's a worthwhile, prudent read for anyone considering or engaging in entrepreneurship. In pointing out the patterns, the common quandaries and routes, The Founder's Dilemmas can eliminate one headache along the path of business-building. -- Tamara Micner LSE Politics and Policy blog

Noam Wasserman is an associate professor at Harvard Business School.

List of Illustrations vii Part I: Introduction and Pre-founding 1 Chapter One: Introduction 3 Chapter Two: Career Dilemmas 27 Part II: Founding Team Dilemmas 69 Chapter Three: The Solo-versus-Team Dilemma 73 Chapter Four: Relationship Dilemmas: Flocking Together and Playing with Fire 89 Chapter Five: Role Dilemmas: Positions and Decision Making 117 Chapter Six: Reward Dilemmas: Equity Splits and Cash Compensation 145 Chapter Seven: The Three RsSystem: Alignment and Equilibrium 186 Part III: Beyond the Founding Team: Hires and Investors 205 Chapter Eight: Hiring Dilemmas: The Right Hires at the Right Time 209 Chapter Nine: Investor Dilemmas: Adding Value, Adding Risks 249 Chapter Ten: Failure, Success, and Founder-CEO Succession 297 Part IV: Conclusion 329 Chapter Eleven: Wealth-versus-Control Dilemmas 331 Acknowledgments 387 Appendix A: Quantitative Data 391 Appendix B: Summary of Startups and People 403 Notes 425 Bibliography 451 Index 467

General Fields

  • : 9780691158303
  • : Princeton University Press
  • : Princeton University Press
  • : February 2013
  • : 229mm X 152mm
  • : United States
  • : March 2013
  • : books

Special Fields

  • : Noam Wasserman
  • : Paperback
  • : 658.11
  • : 496
  • : 51 line illus. 6 tables.