HBS's working definition of entrepreneurship is Howard Stevenson's assertion that entrepreneurship is "the pursuit of opportunity beyond the resources controlled. Getting those resources will help the entrepreneur build a more valuable company.
However, getting those resources is far from a free lunch. To get co-founders, investors, hires, and others to come on board and provide you with the resources you need, you have to give up things that are worth a lot to you and to them. In new ventures, the most prominent things you have to give up are equity stakes and sharing control of decision making.
Both of these have implications for how much you'll gain financially from the venture and whether you'll be able to keep control of it—in other words, whether you'll be able to achieve the profit motive versus the control motive. Interestingly, a colleague, Richard Tedlow, pointed out to me that this choice may be a more general managerial tension that exists long after companies pass through the start-up stage.
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Q: Is it better to be focused on one or the other? Is it possible to have a healthy balance between the two and be both? A: Most of the founders I have studied started off wanting to become both Rich and King—"Rich and Regal," if you will. What's ignored is that these people are so well known precisely because they are the exceptions, the rare founders who are able to achieve both.
Many others I've studied who tried to achieve both have ended up making some decisions consistent with Rich motivations and others consistent with King motivations, and in the process of mixing the two, ended up with neither.
A more successful approach seems to be that the entrepreneur step back to really understand what his or her true motivation is, Rich or King, and then to recurringly make decisions consistent with that motivation. This may reduce the chances of becoming Rich and Regal, but it may dramatically increase the chances of achieving what really motivated you to become an entrepreneur to begin with.
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At the same time, initial analyses of my dataset have helped me start understanding what separates the Rich and Regal entrepreneurs from those who have to choose between Rich versus King. The strongest factors that emerged from those analyses were whether the entrepreneur had leveraged his or her own prior assets in building the venture—in particular, regarding financial assets, whether the entrepreneur had provided the seed capital for the venture, and regarding social networks, whether the entrepreneur had been able to tap investors who had previously invested in a company of the entrepreneur's.
These entrepreneurs were much more likely to achieve Rich and Regal status than entrepreneurs who didn't provide their own seed capital and who took money from investors with whom they did not have a prior relationship. In my current analyses and case writing, I'm trying to explore further what separates these rare entrepreneurs from those who have to choose between Rich versus King. Q: Is this perspective helpful to investors in these ventures?
Should investors care whether a founder leans toward Rich or leans toward King? A: From an investor's perspective, Rich versus King is a fundamental issue. During my internship in venture capital, I heard the phrase "Rich versus King" several times, and it even appears in a case we used to teach about Onset Ventures.
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In that context, it refers to what VCs look for in the entrepreneurs they might want to back. VCs invest in a company in order to maximize their financial returns from the company—i. They are driven by the profit motive. If an entrepreneur wants to become Rich, then VCs see that entrepreneur's interests as being aligned with theirs, for they both want to maximize financial returns. However, if an entrepreneur wants to become King, that entrepreneur is more driven by the control motive and is willing to sacrifice financial gains in order to keep control. The interests of such an entrepreneur are not aligned with those of the VCs, and in fact may be in direct conflict with them.
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Thus, from the beginning, many investors want to find out whether an entrepreneur is motivated by Rich or by King, and then only want to invest in the "I want to be Rich" subset. At the same time, savvy entrepreneurs know that this is what VCs are looking for, and are able to "talk the Rich talk" convincingly. For many VCs, seeing through to a founder's real motivations is critical, but can be very tough. A: Of the surprises I described above, the biggest was that there is, in fact, an inherent conflict between these two major motivations, making it hard for most entrepreneurs to achieve the Rich and Regal status that's motivating them to become entrepreneurs.
An even bigger surprise will be if we can actually nail down a relatively complete picture of what separates the Rich and Regal entrepreneurs from the others! A: The first follow-up to this paper includes further efforts to nail down what separates Rich and Regal entrepreneurs from the others, to see if we can find overall best practices that might help guide entrepreneurs.
This effort includes two parallel projects. The first entails more sophisticated and detailed quantitative analyses of my datasets. The second is a richer exploration of a smaller number of cases where founders were able to achieve Rich and Regal. In my current case writing, I'm looking at a couple of entrepreneurs who have been able to keep control of the CEO position for much longer than we might expect, along with more creative ways that founders were able to achieve Rich and Regal status.
For instance, a current case I'm developing examines whether franchising might be a good "almost King, almost Rich" option for both the potential franchisor and the potential first franchisee, one in which they give away a small portion of the profits and a small amount of control in order to increase dramatically their chances of ending up with high levels of both. However, I'm always looking for new cases and new examples of founders who were able to achieve both. In particular, I would love to write a case on a serial founder who either made King-consistent choices in one venture and then made very different Rich-consistent choices in a subsequent venture, or who achieved Rich and Regal status only after falling susceptible to Rich versus King tradeoffs in prior ventures.
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