We all have been there one way or another. Your company fails and the IP gets sold for pennies on the dollar to a large corporation where they proceed to bury it as protection. My IP Baby you moan. An investor pulls their funding when the co-founder splits right before the big meeting. The company is bigger than just one guy you scream. Or your board decides that you are not the future captain of your own ship and asks you to resign. I built this from my own idea in my garage, how dare you exert control over my creation you think.

You vow, "this will never happen to me again"! And thus you embark on the overreaction strategy. And you will probably fail again. These situations occur every day to good and bad entrepreneurs alike. Your strategy to take full control of every potential situation is a fools errand.

Lets break down the examples I outlined above.

IP. You vow to never let the IP get out of your control. So you set up a separate LLC to hold the IP and license the IP to the startup you want to get off the ground. Good luck getting investors. No savvy investor will ever invest in an entity that does not control its own IP. The IP is part of the IP that I want to invest in in the first place. The IP protects me against bad execution.

Co-founder splits. You vow to never work with a co-founder again. The thinking is that a co-founder creates uncertainty that cannot be controlled. By eliminating the co-founder, you never have to place faith in a person that can change the outcome of the company's trajectory. Wow. No co-founder--no second brain in the room. Maybe your personality needs a second brain to protect you from you. You may be worse off as just you as you might have been with another co-founder's uncertainty.

Your board fired you. Welcome to the venture world friend. This is where we all put on our big-boy pants. Tom McMurray is a good friend, a former Sequoia partner and an advisor and mentor for The Startup Factory that I run in Durham, NC. One of Tom's first lessons for founders is that you will most likely be replaced. The reasoning is simple--if the company grows like we all want it to, the needs of the company will quickly outpace your skills and experiences. There are numerous case studies supporting the notion that we all have a management sweet spot. Outside of that sweet spot is where we need help.

Attempting to create contractual language that removes the ability for a board to push you out will only prevent investors from investing. Other than providing capital, this is the only tool they have to exert their control.

In general, your startup journey will be bumpy and you should expect situations in which you may not have total control. Like the young protg in Karate Kid, don't fight the flow, go with the flow and you will find that you and your company will be more successful.

Published on: Jan 8, 2015
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