Founder and Control

Founding a company, recruiting, hard work, and finally lost control of the company, this is the true story of many company founders. The reason is that a company from scratch, from the weak to the strong, from the poor to the rich, can not rely entirely on the founders of their own power-the financial network partners, these will not fall from the sky, they have to seek help from others.

However, the business world is very realistic. No one is going to help someone for no reason, they must have something in return--more benefits. And in a step-by-step process of ceding benefits, the founders became increasingly reliant on investors and their partners, a process that gradually weakened control. What's the consequence of losing control? That is, the company can not follow the founder's true intentions to develop, if the founder is still the same, the result is to be left out, or even driven out of the company. Don't believe it? Here's a real story to share with you (don't worry, it's definitely not Steve Jobs).

With the recent Facebook IPO as a topic, the name of Sean Parker has come back frequently to the eyes of the people who have suffered before. In 2009, the 19-Year-old co-founded Napster with Shawn Fanning, who helped write the Napster client code that allows users to freely share the music they own. At the time, he persuaded Shawn's uncle to invest 50,000 dollars to set up a company that was the first of Napster's financing. In the year that Napster was founded, with 10 million users, however, in just one year, he was squeezed out of the company by Shawn other partners in the middle of the year. The reason is that some of the e-mails that Sean wrote to users included the content of "encouraging users to steal copyrighted music", which caught the hand of a traditional music publisher who had seen Napster as a thorn in the butt. If Sean had had enough control over the company, he would have struggled to leave his own company – the first time Sean had been kicked out of his company.

After being kicked out of Napster, Sean started a second venture, creating a company called Plaxo, which provides users with automatic real-time updates of their Address Book network services. It was Sean's first first-hand creation, and he solved the company's early fundraising problems, and he persuaded Sequoia to invest 2 million of billions of dollars in the same time. Plaxo has pioneered the use of "viral" marketing techniques, which have been widely used, such as Dropbox. Sean is proud of the company, he once said, "to some extent, Plaxo is the most proud of the company, because it brings the world the most innovation." However, in 2004, he was once again driven out of the company. This time it was because of Sean's strange work habits that he would work very, very hard for a while and then disappear for a few weeks. But his relationship with the board was bad, and after he left the company, the board hired a private investigator to investigate whether he was supplying drugs to his staff.

If you count Facebook that time, Sean took part in the creation of three companies from 2000 to 2005, without exception being expelled by the board and investors. On the surface, it is some of his imprudent behavior, or some strange habits. But we cannot ignore that the companies he has been involved in have had a significant impact--napster let the network become the center of Music, Plaxo inspired a large number of later, Facebook changed people's virtual life. Sean can't say no. Why does his experience always float? Only a lack of control over the company can be explained, perhaps not enough board seats, perhaps in the face of investors did not ensure their own dominance in the company. In short, when those who hate his management and investors join forces, he can not stay in the company. No matter how clever he was, he helped the company a lot. I'm sure Sean Parker's experience will remind you of Steve Jobs.

To be honest, why is it so important for founders to hold control over the company? In one respect, this is the founder's will, from another point of view, this is to ensure the birth of a great company foundation.

"The Innovator's Dilemma" mentions how Sony has started to go downhill. From 1950 to 1982, Sony was very good at watching what consumers wanted to do. Whether it was the world's first battery-powered portable radio, launched in 1955, the first removable black-and-white TV, cassette player, portable VCR, developed in 1979 and changed music in the WalkMan, 3.5-inch floppy disk developed in 1981. However, this has changed in the case of Morita unloading substantive and starting to run away from the operation, and since then Sony has developed products that are no longer disruptive and innovative, but continuous innovation: just perfecting existing products. Because the company began to hire senior professional managers to run the company, they are proficient in the use of attribute-based market segmentation technology and market potential assessment methods, but this approach can be a good way to reveal the existing market and what gaps in the field can be mined, but lack of intuitive insight.

Successful companies need great founders to shape their genes. Steve Jobs made Apple full of art and humanity; Larry Page, Sergey Brin made Google open and equal. The company's founders ' values and ways of behaving will deeply affect a company. Some accuse Apple of closing, Mr. Jobs admits, and admits it is related to his early career with Mr Watts: "Because all things are done by Watts and me when we start a company, we are not very good at working with people." I think it would be nice if Apple were born with a little bit more teamwork. "In the case of Sony, it is not easy for a company to shape its own genes, but it is easy to lose it," he said. Morita a "Leave" Company, Sony is no longer a market wreck.

Why do investors hinder business success? Because when a company is completely influenced by investors, it will face tremendous growth pressure.

The source of the pressure is equities. According to the innovator's dilemma, it is that "investors have an extreme tendency to equate the vision of the future with the stock market value of the current enterprise." "To get the share price up, the company's growth rate must keep up with the growth of the market, otherwise the stock will fall, and if the share price rises sharply, the growth rate of the firm must exceed the number predicted by the public opinion." Under such tremendous pressure, enterprises must not be anxious to pursue progress in order to meet the expectations of investors. Often this time, the enterprise began to make blind decision.

Luckily, Mark Zuckerberg met Sean, who lost control of the company, and ensured Mark's absolute control of the company:

In earlier investment deals, Sean ensured that Mark was able to control two board seats, one of his own, and that investment convenience could not shake the firm's original power base. And when he was expelled from the company by Accel, he fought hard to give his board seat to mark--so that Mark accounted for three of the company's five board seats.

In addition, Facebook in November 2009 established the company's equity structure as a "dual-track", the company's shares into A, B two categories. According to Facebook's S-1 file, class B shares have 10 votes, while category A shares only one vote. Mark holds most of the voting rights and guarantees his control of the company, as Mark's shares are all in class B and executive officials and employees give him the vote.

Some people are puzzled, why does Mark still have so much stock after several rounds of fundraising? The answer is that every time the company chooses to raise money. Every time Facebook raises its finances, it chooses to do so at a time when valuations are soaring. As a result, companies can get more money with fewer stocks. The following chart is sorted according to Adam Rifkin's data:

According to another collation by Carlos Tobin on Quroa, it also shows that every round of financing is done at a time when valuations are more than 10 times times the revenue:

In fact, even Google is doing its utmost to keep the founders ' grip. April 12 This year, Google announced the adjustment of the new equity structure, the new introduction of a "non-voting" C-class shares, each holding 1 shares of shareholders will receive 1 shares do not contain voting rights, that is, a 2:1 share. In an open letter, Google said the move was meant to keep the founder's grip on the ground, as it does with Facebook today, to "guarantee the long-term interests of the company". After adjusting, the voting rights of Sergey Brin, Larry Page and Eric Schmidt add up to 67.4%.

At present, as Mark sold more shares at the time of the company's listing, the Wall Street Journal noted that Mark's voting power could now fall slightly below 55.8%, but still more than half, with enough control-to ensure that he will be able to achieve his ideas without hindrance for a long time to come.

Source: http://www.ifanr.com/89947