Founders: You're Not The Best At Everything
When non-founders can save the day
I’ll repeat to you something I heard recently: “It seems like people only take ownership when they have significant, meaningful equity.” The implication: if you want someone to treat the business like their own, you’d better hand them a big slice of it.
Not so. Non-founder team members often create just as much value than those with the biggest stakes—if not more.
Yes, the founders of great companies often seem indispensable in the early days. Travis Kalanick, for example, had the rabid energy, machiavellianism, and disregard for ethics that helped turn Uber into a verb. He was the wrong person to lead a mature organization. But nobody else was taking that idea from nothing at all, to something big.
While it’s true that the average employee isn’t creating anywhere near as much value as putting an Uber, Airbnb, or Datadog on the map, I still don’t believe we should infer universal rules about hiring from the few colorful case studies that became household names.
I can think of three reasons why.
SaaS is a Team Sport, Not a Heroic Journey
The first reason is that there are only so many meaningful equity stakes to go around in one given company. So if we only solve our hiring problems by handing out big share grants, then that tap will run dry after one or two hires. If I go overboard on equity a couple of times, there goes my cap table. Better to develop a talent system that doesn’t require such enormous outlays.
The second is that I don’t always want to marry the future of my business to someone just because they are great at their job. Sometimes I just want to work with someone and pay them well, and that’s what they want from me too. Having a co-founder is a special kind of relationship. Sharing a cap table takes a greater level of intimacy than sharing an office or a Slack channel.
Why? Founders have a distorted risk and return profile: even in a cash-flowing, bootstrapped SaaS environment (which is my strong personal preference), salary is almost never the primary way that a founder gets paid. For entrepreneurs, that’s not just how they want it. It’s the only way they want it.
Their returns shine in the distant future: the lion’s share of a founder’s personal wealth creation happens only once in a while, when a lot of equity changes hands in a single transaction. My net worth graph is similar: it dawdles along for several months or a few years, until I wake up one day after an APA has been signed and a big wire transfer has landed in my account. But if a business is full of people like me, nobody is content to merely do their actual day to day job.
Third: many top-tier people bring an even greater level of skill and commitment to their craft than founders do—but without the founder title. They take fewer risks, specialize deeply, and don’t need to prove themselves to the world. Whereas as a founder I have to spread myself across a dozen functions because I must, a great VP of Engineering or Sales Manager can focus entirely on mastering one area. If each function is overseen by people who are focused on just one thing, the whole operation grows smoothly.
Don’t Just Hire Other “Founder-Like” Types
Don’t get me wrong: I’m not saying that founders are mediocre at every job. I’m saying that we need to get better at identifying and compensating people who don’t want to be founders, but can do a hell of a job at their chosen craft. And we need to spend more time sorting out the people who will actually be top performers in our own unique setting. Sorry—I don’t like recruiting and interviewing for months either, but that’s how you find the best people!
I’m also cautioning that people like me, who can set our sights on potential liquidity events far in the future, often assume others’ motivations are wired the same way. But they’re usually not, and we’re liable to disappoint—or even offend—people who aren’t motivated by these same things.
The Answer? Get Better At Recruiting
What should we do instead? My strategy is: invest more energy into finding high performers, structure their compensation plans so that their mix of incentives make sense to everyone, and create an environment that suits their professional growth.
When I build a phenomenal culture of accountability, listen actively to the people I work with, hire carefully, pay fairly, and fire low performers promptly, top quality team members tend to have fun and excel at their jobs. Regardless of their equity position.
And while you’re at it… 👇