One of the inherent dichotomies in entrepreneurship is that of "rich versus royal".
Most entrepreneurs want to be both: receive a majority of their firm's profits and have control.
In practice, however, this seldom works out.
A short 🧵
Most entrepreneurs want to be both: receive a majority of their firm's profits and have control.
In practice, however, this seldom works out.
A short 🧵
Capital is often required to start or grow a company and when that money takes the form of equity, it is dilutive to the existing owners/managers, thereby reducing control.
Thus, an entrepreneur often needs to decide between getting bigger (taking $) or maintaining control.
Thus, an entrepreneur often needs to decide between getting bigger (taking $) or maintaining control.
Even the sources of capital (individuals writing small checks compared to institutional investors) can have an impact on this dynamic as 'less sophisticated' and smaller investors may require less control for any given investment amount.
Thinking critically about your own motivations and preferences along this spectrum (as an entrepreneur OR as an investor) is vitally important.
The better you know yourself, the more likely you are to arrive at an outcome that makes you happy and not resentful or regretful.
The better you know yourself, the more likely you are to arrive at an outcome that makes you happy and not resentful or regretful.
For those with more interest on this topic, two good articles covering different aspects of it are:
hbswk.hbs.edu/item/rich-or-r…
and
yale.app.box.com/s/dciqksl4erql…
hbswk.hbs.edu/item/rich-or-r…
and
yale.app.box.com/s/dciqksl4erql…
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