I have written in the past about entrepreneurs who are the center of their company’s universe. All information flows to them, they participate in all decisions, and they are the visible face of the company. These entrepreneurs relish being ‘King.’ However, it is a very rare individual who can be the right leader for all stages of a business. The spirit and creativity it takes to start a new venture is very different from the dogged determination required to get a company off the ground, and different still from the operational and administrative talents required to lead a growth company.
Most early stage companies experience turbulence as they transition these phases. For software businesses, the start-up phase, building revenue from $0 to ~$3M, requires a unique set of skills. At the start the entrepreneur has to make a leap of faith and commit to risk it all on the possibility that their big idea will have legs. They operate in creative survival mode doing whatever it takes to make a go of it.
Growing from ~$3M to more than $10M requires a different set of skills. Instead of just trying to find the first customer, the business now needs to establish product-market fit and broad appeal. It needs sales leadership, marketing talent, finance skills, product management, and customer management. For the entrepreneur that started at $0, this phase is exciting, but it is also when the path starts to diverge between wanting to be the center of the universe or recognizing the need to hire domain experts. The entrepreneur who wants to remain ‘king’ retains all operational control, and often hires lesser leaders into functional roles, or stifles qualified talent and diminishes their contributions.
As the business continues to grow beyond $10M, the need for experts and mature management accelerates. Rarely is a king-like leader able to successfully transition from a start up to running a $25M or $50M business, and almost never to a business above $100M. At some point, the entrepreneur has to build a team and step back from being the center of the universe, or else they become a bottleneck and an impediment to growth. A self-aware, mature entrepreneur will recognize that they are faced with the choice of remaining king or letting the business reach its full potential - the Rich or King dilemma. Either one can be a correct answer, but if there are outside investors involved, remaining king is rarely acceptable if it stifles growth.
Growth usually requires external fuel in the form of investment capital. Part of the calculus entrepreneurs face involves a fear of sharing ownership and ceding control. At the start, they own 100% of their baby, and they can make all of the decisions without any oversight. With external investment comes external involvement, and kings do not share power well. Along this dimension, the Rich or King dilemma can be viewed through a very simple economic lens. “Do you want to own 100% of a grape or 10% of a watermelon?” Entrepreneurs who choose ‘rich’ and truly believe in the potential of their business, will opt for 10% of the watermelon. Entrepreneurs who prefer to remain ‘king’ only see the downside of external investors, and are content with slow organic growth as long as they continue to own 100% of the ‘grape.’
Control is a different element of the calculus. Kings view themselves as the Smartest Person In The Room (SPITR). In a meeting, they bend the room to their will. I once listened to a ‘king’ describe his management meetings by saying “I can do all of my executives’ jobs better than they can, and they all know it, so sometimes it is just awkward.” Control is very important to a king. Inviting investors into the business, and accepting a board of directors means ceding some level of control. CEO SPITRs see little or no value in the input from their board. In their view, board meetings are performative and a waste of time. Conversely, CEOs who choose ‘rich’ are more focused on success, and carefully curate the involvement of investors and independent board members. They select their investment partners as much on valuation and money as on expertise and non-monetary resources. They choose independent board members who will complement their own skills and bring expertise or opportunity to the business. They value collaboration, not just control.
Rich or King, control or collaborate, grape or watermelon, are all sides of the same dilemma an entrepreneur has to navigate. The important thing is to have sufficient self-awareness and intellectual honesty to recognize the decisions you are making and the likely consequences.