[Edited 4/16, see notes at bottom]
I’ve worked with scores of founders and companies over the years and I’ve come to make bright-line distinction between founders and managers. Let me demonstrate it with a story.
One day long ago I was in a board meeting. We were discussing the coming year’s budget. The hotly contested question was: do we spend $8M or $9M on R&D? After much wrangling, the board agreed that we should spend $8M. The meeting adjourned shortly thereafter. The VCs left first and I was walking out of the room with only the founders. The CEO said to the CTO as we were leaving, “spend the $9M anyway.”
My jaw hit the floor. I was aghast, dumbfounded. What the CEO said was literally incomprehensible to me. It wasn’t possible. That’s just not how things are done.
At that moment I realized the difference between a manager and a founder.
As a professional manager [1], we grow up climbing the corporate hierarchy. We have savoir faire. We know the rules. We disagree and commit. We horse trade. We split the difference. But, unless we want to do a deliberate end run to the person in charge, we abide by the decisions of the group. We are team members in an organization, after all.
Founder aren’t. While they may strive to be some of those things, in this case, the founders were fresh from university, with little work experience and certainly no ladder climbing. This wasn’t some organization they were part of. They started it, based on their research. It was their company. And if they thought it spending an extra $1M on R&D was the right thing to do, well, they were going to do it. That’s a founder.
I write this post in two spirits:
- To former-manager founders [2] as a reminder that you are now a founder and need to think like one. It’s your company. Your investors and advisors will have plenty of opinions but if you end up buried, you will be buried alone. Unlike your VCs and advisors, you have but one life to give for your company [3]. Act like it — you’re not an EVP at BigCo anymore!
- To investors [4], advisors, and startup execs as a reminder that founders are not managers, even though sometimes we might like them to act more as if they were.
Example: a founder is raising a seed round off $1M in ARR and a VC is asking a lot of questions about CAC and LTV.
- Manager response: “Well, I know a CAC of 1.7 is high but we are ramping quickly and carrying a lot of unproductive sales capacity that hurts the CAC ratio.”
- Founder response: “This is a seed round. I have two barely qualified SDRs and me selling this stuff. We don’t have a sales model, so why are you calculating its efficiency? The only thing we’ve been trying to prove — and we’ve proven it — is that people will pay for our software.”
The manager tries to be reasonable, answer the question, and preserve optionality in raising money from this target. The founder highlights the absurdity of the question, wonders if this is a VC that they want to partner with in building their company, and isn’t shy about letting their feelings leak out.
The first example, combined with many other experiences, has led me to create the three “un’s” of founders. Compared to managers, founders are:
- Unreasonable. Heck, the whole idea of starting a company is unreasonable. Taking it to $10M in ARR is unreasonable. Thinking you have the best product and company in the category is unreasonable. Becoming a unicorn is unreasonable. There’s nothing inherently reasonable about any of the things a founder needs to do. In fact, that’s one reason why some founders are successful: they don’t know what they can’t do. Don’t expect someone take a series of very unreasonable risks and then be entirely reasonable in every subsequent management discussion thereafter. It’s not how it works. We expect every parent to think their child is the greatest and want what’s best for them; the same holds for founders and companies.
- Uncompromising. Managers are trained to split the difference, find middle ground, and keep options open. In essence, to compromise. Founders can’t compromise. They know they will fail if they try to be all things to all people; they know the old saw that a camel is a horse designed by committee. They know intense focus on being the best in the world at one thing is the key to their success. If one VC on the board wants to go North and another wants to go East, a manager will tend towards Northeast, North, or East. A founder — because in their mind it’s their company — will make up their own mind about what’s best for the company and potentially travel in another dimension, like up or down. Getting promoted in a big company is about keeping those above you happy. Creating a successful company is about getting the right answer, and not whether everyone is happy with it.
- Unapologetic. Managers are professionals who are paid to do things right. Thus, they tend to count negatives like errors and strikeouts. They apologize for missed quarters or bad hires. Founders own the team. They want to win. While they don’t like errors and strikeouts, they neither obsess over them nor even necessarily care about minimizing them; they’re not trying to keep their resume free of red correction ink. They’re trying to win in the market and create a leading company. Errors are going to happen. Fix the big ones so they don’t happen again, but let’s keep moving forward. Yes, we missed last quarter, but how do we look on the year? We don’t belabor the mistakes we made in getting to where we are, we focus on where we are and where we’re going.
I’m not saying all these un’s are great all the time, and I would encourage founders to recognize and appropriately mitigate them. I am saying that manger-founders, particularly those who founded companies (or took over as CEO) after long successful careers at big tech companies, need to think more like founders and less like managers.
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Notes
[1] Having never founded a company and as someone who has indeed climbed the corporate hierarchy I view myself as a manager — an entrepreneurial, and perhaps difficult, one — but a manager nevertheless.
[2] And, to some extent, first-time CEOs
[3] You are not living, as one friend calls it, the portfolio theory approach to life.
[4] Who probably don’t need the reminder, but the advisors might.
[Edited] I remove the word “successful” from the title as it was a last-minute, SEO-minded addition and a reader or two correctly called me out saying, “plenty of unsuccessful founders have these three traits as well.” That’s true and since arguing that “the three un’s” somehow separate successful from unsuccessful founders was never the point of the post — they are, imho, what distinguishes founders (or founder mentality) from managers (or manager mentality) — I removed “successful” from the title.