The Founder's Dilemmas by Noam Wasserman

This article was inspired by Noam Wasserman's The Founder's Dilemmas . If you enjoy this article then consider purchasing or borrowing the book.

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How to Successfully Found a Start-up

“It’s unfortunate but true: If entrepreneurship is a battle, most casualties stem from friendly fire or self-inflicted wounds.”

When starting up a business from scratch, your earliest decisions will have both short term and long term effects on the success of your start-up. Ask yourself the following questions before creating a business:

  1. “Should I become an entrepreneur?”
  2. “If so, when should I make the leap?”
  3. “How can I dispassionately evaluate my idea?”

Determine whether or not you have the skills to run a business before taking risks. Do you know how to develop and sell a product? What experience do you have with human resources? Consider attending a training course relevant to your particular industry. If you have a co-founder, find out what they know about operating a business.

Research demonstrates that over half of potential entrepreneurs fail because they don’t have enough “financial capital” – money to actually pay for a start-up while still meeting daily expenses.

Whether or not you found a start-up by yourself or with a team is up to you, but bear in mind that complex businesses thrive when more than one person runs it. Though it is natural to turn to friends and family for business partners or workers, know what you are getting yourself into. Relationships can be strained when working with people so emotionally close to you. Follow the five following steps to make working with friends and family more profitable:

  1. “Compartmentalize relationships” – Don’t organize your business in a way that friends or relatives have to report to one another. Keep business and your personal life separate.
  2. “Envision negative scenarios” – Forecast the damaging effects crumbling relationships can have on your business.
  3. “Create a disaster plan” – In the event that people have a falling out, it is best to have “an exit contract” ahead of time.
  4. “Force sensitive distractions” – Family and friends will often have trouble reporting bad news to you. Everyone must agree to deal with potential problems before they turn into actual ones.
  5. “Involve a referee” – For difficult situations, having an intermediary can make solving problems and reporting troubles easier.

Though idea makers seem like the most reasonable people to make CEOs, you must realize that the person who envisioned your product or service may not have the skills to run a business. Pick the person right for the job.

Determine the best way to divide up the equity among the founders. Create a plan and put it in writing, but also be prepared to change it when necessary. Also, ensure that the people you hire early on adapt as your business develops and expands.

Understand what you want from your business. If you want to spend your life controlling every aspect of your business, you will be less likely to receive investors, as they will want equity in your company. If money is your object, be willing to relinquish some, if not all, control of your business.


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