Bringing "Moneyball" to Startups
/Extracted 05APR2012 from http://www.forbes.com/sites/petercohan/2012/04/05/hbss-noam-wasserman-brings-...
Harvard Business School (HBS) professor Noam Wasserman’s new book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup, guides entrepreneurs through their most important decisions. And since it topped the Amazon (AMZN) charts, it’s clear that founders are hungry for information that can keep them from stepping unwittingly into pits of start-up quicksand...
And if the entrepreneur chooses a co-founder, the book helps decide whom to pick and how to split up the management roles. Mistakes in this area are among the most critical to get right — and naturally the most perilous at which to fail.
One of the most common questions that start-ups ask Wasserman is how and when to split up the equity among the founders. His data and case studies highlight the most common mistakes, which include:
- Splitting the equity early and equally to avoid confrontations that could spur team members to spar – then later discovering that their contributions are unequal; and
- Finalizing the equity split without allowing for how inevitable changes in the start-up would make that split obsolete or counterproductive.
Wasserman’s book also offers advice on how to avoid the problems caused by bringing other key players into the venture. These include new hires as well as investors. For example, he helps founders decide when and whether to bring in friends and family, angel investors, and venture capitalists; teaches them to balance the potential pitfalls and benefits; and shows how to mitigate the risks.
Wasserman’s book also guides start-ups on when the board should replace the founder – or whether the founder should initiate such a change – and if so, how best to handle the process and whether the founder should stick around in an advisory role, help search for a successor, or leave the company altogether.