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Thursday, May 19, 2011

There are two kinds of people in the world

from Lee Weinberg





There are two kinds of people in the world” is the title of a recent blog post by Chris Dixon (April 26, 2011) that mirrors EXACTLY what I have been saying for quite a while:

“You’ve either started a company or you haven’t. ‘Started’ doesn’t mean joining as an early employee, or investing or advising or helping out. ”

As someone who has founded companies with no more than an idea and some elbow grease, it is nice to see I am not an arrogant jerk for pointing this out — or at least I am not alone.

When it comes to the “worth” of advisors and investors in early-stage companies, I would suggest that the experience of being a true founder is invaluable. The ability to share that special experience with clients in my legal practice< has saved the day more than once. And at our new Dauntless Founders Fund, we like to highlight that most of our managers have gone from start-up through to exit.

If you are running an early-stage company, which investors/partners do you want in your corner: true risk-taking founders who have done it, or joiners and money people? While those who join in or pile on can (and do) add a lot of value for execution of a company’s growth phase, if you are at the “idea level” or just beyond I would suggest you seek the guidance of real start-up folks every time.

A number of people responded to the aforementioned Chris Dixon post (set forth in full below) by complaining that not all founders are ramen-eating, cubicle-borrowing, recent grads with credit-card (or trust fund) habits. That is 100% true, including with respect to yours truly. Yes, some of us are more mature, have had a career first, and have hard-earned dollars in the bank from prior, more traditional, efforts (whether just a bit of money or a substantial sum). In fact, I would also agree that many folks who have had a job or two and leaving a career path (and with family responsibilities) actually take much more risk when they leave it all to start a company. After all, as Bob Dylan said, “When you got nothing, you got nothing to lose” — and recent grads with an idea aren’t exactly “throwing it all away” if they try and fail for a year after graduation. In fact, they may simply be doing an extended job interview for a slot at Google. Working for 5 months for an “acq-hire” is not really entrepreneurship, folks.

On the other hand, I think the “haters” are over-reacting. Do they really think that by writing about one type of company founder (young, single and living on the edge) Chris meant to denigrate other true entrepreneurs? I doubt it, and I am sure Chris and others recognize a true founder and entrepreneur when they see one. Be confident. If you are a true founder, people will know it. Just tell them how you started your company from scratch.

Here are two touchstones I would suggest cover this issue –

A true founder/entrepreneur:

- puts his or her own financial reputation and assets at risk, and

- generally engages others in his/her enterprise very early on in order to grow faster.

Even the ramen-loving recent grad is putting capital at risk with those credit cards or $$$ from friends and family. And it is a rare person who really is an entrepreneur/founder of anything significant who did not quickly have to find partners or employees to make the project go.

So, if you are a founder, why does it matter whether or not someone advising or investing in you is a true risk-taking founder? Simply put, someone who starts a company has a different and passionate road to travel, and the experience garnered is seared into their being. I believe that only another founder can truly understand this, and I think that when it comes to early-stage companies true founders (who risk their own capital and employ others at the earliest stages) can give better advice (and are generally better investors) than “joiners” or “advisors” of true founders. So, if someone was employee number 7 or an early advisor at XYZ successful company, that is very, very cool, and that person may be very, very smart. But unless he or she guaranteed the lease and put in capital, that person did not start the company and is not a founder (or, the more frequently claimed “co-founder”).

Of course, many viewpoints and experiences are valuable in their own ways and areas, and there are a lot of roles to play. And sometimes money is all one is seeking from an “advisor.” But if you actually want great start-up advice from someone who “gets it” and will best understand what you are feeling and doing, you will want to have experienced, risk-taking founders/entrepreneurs to guide you and invest their time and money in you.

After all, there really are only two kinds of people in the world…

Chris Dixon says:

You've either started a company or you haven't. ”Started” doesn't mean joining as an early employee, or investing or advising or helping out. It means starting with no money, no help, no one who believes in you (except perhaps your closest friends and family), and building an organization from a borrowed cubicle with credit card debt and nowhere to sleep except the office. It almost invariably means being dismissed by arrogant investors who show up a half hour late, totally unprepared and then instead of saying “no” give you non-committal rejections like “we invest at later stage companies.” It means looking prospective employees in the eyes and convincing them to leave safe jobs, quit everything and throw their lot in with you. It means having pundits in the press and blogs who've never built anything criticize you and armchair quarterback your every mistake. It means lying awake at night worrying about running out of cash and having a constant knot in your stomach during the day fearing you'll disappoint the few people who believed in you and validate your smug doubters.

I don't care if you succeed or fail, if you are Bill Gates or an unknown entrepreneur who gave everything to make it work but didn't manage to pull through. The important distinction is whether you risked everything, put your life on the line, made commitments to investors, employees, customers and friends, and tried – against all the forces in the world that try to keep new ideas down – to make something new.

Lee Weinberg Lee Weinberg likes to use his entire background as an attorney, entrepreneur, investor and board member to help captains of industry (from little admirals to true 5-stars) sail their ships and achieve their goals. He is an investor in more than a dozen early-stage and growth companies, a partner with Weinberg Gonser LLP and a principal of Dauntless Founders Fund. His own start-up story is posted on his blog at CapitalistCounsel.com.


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