The Immortality Superpower
Have you heard of Theil’s Law?
“A startup messed up at its foundation cannot be fixed.” Peter Theil
Misalignment in a team at the start of a business is impossible to unravel. The chances are, a tension will emerge and the business will inevitably fail in the future. It might take years. But it will.
During my time at Pollenizer I have seen so many businesses fail for this reason. It is rarely because people are greedy, evil or stupid. It is often because teams feel uncomfortable having a tough discussion at the start and then don’t establish rules that make it easy to adjust alignment as the business grows.
The classic failure pattern is something like this:
3 founders start a business
Each founder gets 33.3% of the shares
These shares have no vesting schedule
From here, many things can go wrong.
Founder A was there at the start but then got busy with her day job. Founders B and C are working day and night but feel quietly bitter that Founder A is going to get the benefit of their effort.
Investors ask what Founder A contributes to the business and refuse to invest when they hear that Founder A does not have an active role but sits on 33.3%.
There are many variations of this and they involve every party that has a stake in the success of the business and what it will need to do to get there.
To succeed, I have learned that teams need to:
Have a shared expectation of effort from each party
A transparent comfort around the compensation (cash and equity) that each party gets for that effort
A shareholder’s agreement that describes what happens when things inevitably change.
We call this Immortality for a company, because it creates the conditions to live forever.
There are some templates to help you figure this out in the Startup Science Toolkit at startupscience.com