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

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Overview

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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Editorial Reviews

Publishers Weekly
In this seminal work on the startup phase of the entrepreneurial venture, Harvard Business School professor Wasserman shares his findings from a decade of research on common issues faced by founders. The author not only addresses the traditional issues of entrepreneurship such as startup capital, equity agreements, and compensation, but also delves into human capital issues, tackling meaty topics, such as founder motivation, early influences, and the pros and cons of starting a business with a family member, significant other, or friends (as well as the probability of success under various scenarios). With a research-driven approach and scholarly tone, this hefty text escapes the tediousness that characterizes some academic works through the use of anecdotes about real-life founders, each very different, whose stories are woven through the chapters. Also peppered throughout are observations of such well-known entrepreneurs as Apple’s Steve Jobs and Steve Wozniak, and Microsoft’s Paul Allen. 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. (Apr.)
Library Journal
Many unsuccessful business ventures blame external factors when assessing their own failure. Wasserman (business administration, Harvard Business Sch.) takes a decidedly different approach, investigating the lesser-known, internal pitfalls that can derail new businesses. Beginning with the premise that most failed fledgling businesses succumbed to "friendly fire or self-inflicted wounds," Wasserman expertly takes readers through the most common dilemmas that dog startups and demonstrates ways to encourage success and longevity. Topics discussed include the tricky dynamics of teams, interpersonal relationships, job roles, hiring, investors, and the personalities of founders themselves. Woven throughout the lessons are relevant stories about individuals who faced startup challenges and how those challenges were resolved. Wasserman examines the practices of the founders of Blogger and Twitter and other well-known business people. VERDICT 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.—Poppy Johnson-Renvall, Central New Mexico Community Coll., Albuquerque
ForeWord
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.
Boston Globe
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
OnStartups.com
[T]he definitive book on the topic. . . . If you are a founder or thinking about becoming one, you should read this book.
— Dharmesh Shah
Seeing Both Sides
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
Forbes
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
SGEntrepreneurs
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
Business Standard
[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
New York Journal of Books
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
Globe & Mail
[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
Choice
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.
Financialist
[A] uniquely valuable resource for any entrepreneur.
— Terrence Murray
LSE Politics and Policy blog
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
Feld Thoughts
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
Forbes - Peter Cohan
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.
Boston Globe - Scott Kirsner
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.
Feld Thoughts - Brad Feld
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.
OnStartups.com - Dharmesh Shah
[T]he definitive book on the topic. . . . If you are a founder or thinking about becoming one, you should read this book.
Seeing Both Sides - Jeff Bussgang
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.
SGEntrepreneurs - Bernard Leong
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.
Business Standard - Dilip James
[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.
New York Journal of Books - Ted Sturtz
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.
Globe & Mail - Harvey Schachter
[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.
Financialist - Terrence Murray
[A] uniquely valuable resource for any entrepreneur.
LSE Politics and Policy blog - Tamara Micner
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.
You're the Boss blog, New York Times - Jessica Bruder
[A] first-aid manual to help resuscitate ailing start-ups.
From the Publisher

Winner of the 2013 Silver Medal Book Award in Entrepreneurship, Axiom Business

Finalist for the 2013 George R. Terry Book Award, Academy of Management

"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."--Jessica Bruder, journalist, author, and adjunct professor at Columbia University's Graduate School of Journalism, You're the Boss blog, 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, OnStartups.com

"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 blog

"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 (India)

"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

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Product Details

Meet the Author


Noam Wasserman is associate professor and Tukman Faculty Fellow at Harvard Business School.
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Table of Contents

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

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Customer Reviews

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Sort by: Showing all of 3 Customer Reviews
  • Posted December 20, 2012

    more from this reviewer

    Smart, complete guide to entrepreneurship

    Most people admire self-made men and women – the Bill Gateses and Anita Roddicks who establish successful companies and reap a multitude of rewards. However, the path to start-up success is fraught with roadblocks, detours, washouts and dead ends. Harvard Business School professor Noam Wasserman identifies the common “founder’s dilemmas” and details their short- and long-term consequences. More specifically, he exposes the tacit tension that exists between creating wealth and maintaining control. This isn’t a quick read; it’s an in-depth, intelligent analysis based on 10 years of extensive research. At times, you may find yourself wishing for a bullet-point list. Yet getAbstract encourages would-be founders, entrepreneurs and venture capitalists to keep reading: You’ll find Wasserman’s insights and solutions well worth your time – and they may make the difference between your start-up’s success or failure.

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    Posted May 3, 2012

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