In this episode of the Startup Therapy Podcast, Ryan and Will discuss the complex dynamics of maintaining control in a startup. They explore the misconception that not having investors means maintaining control and highlight the various ways founders inadvertently lose control—from customers, co-founders to their own staff. They delve into the idea that control is a currency spent for growth and emphasize the importance of understanding and strategically managing the areas founders are willing or unwilling to cede control over. They reveal how seemingly routine decisions can lead to significant shifts in control, urging startup founders to be proactive in understanding and negotiating these exchanges.
00:18 The Illusion of Control in Bootstrapped Startups 00:56 The Reality of Losing Control 02:05 Investor Control Myths 02:27 Defining Control in a Startup 07:44 The Co-Founder Dilemma 13:19 Customer Control Dynamics 17:58 The Weight of Client Dependency 19:41 Hidden Costs of Customer Control 20:20 Cultural Impact of Challenging Clients 21:16 The Burden of Unwanted Work 22:13 Legacy Products and Market Shifts 23:35 The Illusion of Control in Large Organizations 24:58 Staff and the Division of Control 28:13 Control as a Currency for Growth 36:00 Strategies for Managing Control 37:06 Join the Startups.com Community
What is Startup Therapy?
The "No BS" version of how startups are really built, taught by actual startup Founders who have lived through all of it. Hosts Wil Schroter and Ryan Rutan talk candidly about the intense struggles Founders face both personally and professionally as they try to turn their idea into something that will change the world.
Audio_TST EP274_How We Secretly Lose Control of Our Startups_1
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Speaker: [00:00:00] Welcome back to their episode of the startup therapy podcast. This is Ryan Rutan joined as always by my friend, the founder and CEO of startups. com. Will Schroeder. Will, let's just say I bootstrapped this thing. I built it from the ground up. I don't have a co founder. I never took on cash. I control 100 percent of this business and I will forever.
Right.
Speaker 2: I think not getting an investor, not giving up control is the easiest part of not giving up control. The hard part is maintaining it and actually running your company because the way you're going to lose control of your company is actually operating your company. I think that's the part that most people don't get is that.
You lose control of your company by operating it. You lose control of the people that you work with day to day. And no one believes that. No one believes it. No, I was like, Oh, no, that doesn't actually happen. I control the cap table. So I actually run it. No, you don't. You are going to lose control of this thing in so many ways.
You don't realize. And as this thing goes on, if you talk to founders have been doing [00:01:00] this long enough, you know, and we do all day long, And they're nodding their heads going, yep, you're going to lose control to your customers. You're going to lose control to your employees, your, your vice presidents.
You're going to lose control of your co founders. You're going to lose control of so many ways that you don't realize. And the whole time you're thinking, yeah, but I didn't give it to investors. Let me tell you, doesn't make a lick of difference. Things you should be concerned about. You're not even looking for.
That's what we're going to talk about today.
Speaker: Yeah, that's fair. No. And I think that is, it is funny because we talked to so many founders that get so caught up in that, even to the point where they're like trying to decide whether that's why they should take on investment capital or not. And that's really, okay.
It's part of the decision, but that's not the main consideration there. Right? Like does your business need it to move forward or not? Um, and instead they're conflating that decision with giving up control and you and I are sitting there nodding your heads going, yep. Yep. But like, this is already happening in the background.
You've already started to lose control of your company and you don't know it yet. So it's, it's all the secret ways that this happens that, that are also certainties. Right. I know that it's a [00:02:00] certainty that happens. I think that's the, that's the part that's most, most alarming for me. Is it like, they're, they're not concerned about it at all.
It's like, well, an investor might take control just because also let's, let's put that out there. Just because an investor does invest in your business, you give them equity. It doesn't mean that they take control. They generally don't want to, right. They want you to make money with their money, not them to have to take control of the company.
But all of these other ways, all these other kind of phantom secret ghosty ways that you're giving up control are happening. And we'll, we'll happen, right. There's a certainty behind those.
Speaker 2: Let's start with what control actually means, because I think people hear control and they, they think of this like this amorphous thing.
That means I get to make decisions in generally that that is what it means, but they won't really define what those decisions mean. Mean or more specifically, what are the key decisions? Okay. So let's lay out a few of them. So as we're talking about what control means, we can really, really like hone in on what you've lost.
Okay. So here are the big ones. Okay. We'll just lay them out. [00:03:00] The big ones are, can I sell when I want to sell? Meaning when it comes time to sell the company, can I say, yes, that's always the big one. Okay. Because when we talked about investors and you talk about them coming in and be able to control the company, the biggest one that always is the ultimate C block of all time.
Is I want to sell the company and investors won't let it. Now, to be honest, that's kind of a high class problem. That very, very high
Speaker: quality problem. Yeah.
Speaker 2: Like it's like, I wanted to sell for billions and investors wouldn't let me. Okay, dude. Right. I'm so sorry about your problem. Right. Happens never. Okay.
But, but it's, it's still kind of the hypothetical big one. Right. The other ones though, while kind of minor are what people actually deal with. A big one is, can I get fired? Right. Can I get pushed out? That's a safety one, right? Huge, huge kind of top of the list. Right now, what people don't understand about that one is there's two levels to that [00:04:00] there's, can I get taken out of my company at all?
Ergo, do I have an ownership stake and can I get fired? Guess what? Right. You could have a hundred percent ownership of your company and get fired as an employee. Right. I mean, that is possible, right? Like people can get fired. Right. Um, the other side of it is your ability to be able to maintain control of decisions has a lot to do with what's in the operating agreement of the company.
And for those that aren't super familiar with how these things work, and a lot of people aren't until they have to look at that operating agreement, the operating agreement. States how the company will work on all of the most important things. What has to happen if, uh, if the company is to sell, what has to happen if the company makes a key hire or fire, things like that.
Speaker: Yep.
Speaker 2: All of these things spelled out ahead of time. And it's, it's again, it's the operating agreement for how the company works. All of these key decisions are spelled out when we're talking about losing control. We're talking about what's hard coded into that agreement. Our ability to [00:05:00] exercise control is kind of what comes back to that agreement.
Ryan, when you think about the big things that people lose with control, what do you think about?
Speaker: Yeah, well, I think it's, it's the ability to, to either make decisions or to act on them. Right. It's funny because like the thing that we always hear people come back to is like, I, you know, I'll never give up my control.
I will never let anybody tell me what to do. Right. That rarely happens, right? It's really somebody telling you what to do. It more often comes down to, I want to go do this. And then you're like, well, you can't write to your point. It's the, it's the moment in the, in the boardroom with the, with the investors where it's like, I want to sell this thing.
No, you can't do that. Right. I want to bring on another, I want to bring on a co founder and go up a chunk equity. No, you can't do that. Right. So it's, it's when, it's when you start to see. Your decisions become limited, but I think there's a lot of places that that starts to happen that are very non obvious.
You've got a great story. And I think we're going to get to it a little bit later when we talk about one of the customers taking control, right. Or, or even our staff taking control. Right. Right. But at some point [00:06:00] where it's like, okay, I'm the founder, I decided we are going to be a sales led organization.
And I go to our CEO and say, Hey, we're going to be a sales organization. He's like, no, we're not going to do that. Like it doesn't fit within the right. And all of a sudden, like, and even if it isn't a hard stop, but all of a sudden there's a ton of resistance and you don't just have control of being able to make a decision and have something go into play, right?
That's a loss of control, right? At the moment where you no longer just have the ability to dictate and something happens, this is where we start to lose control.
Speaker 2: When we think about those control mechanisms, I think the first thing we need to do when we go into any of this is be very, very upfront with ourselves about what specifically we want to retain control of.
Now, what's really hard about that really hard is if you haven't been doing this for a long time, it's hard to know what to defend if you've never had to defend this before. So you go into this saying, well, I just know I want to control stuff, but I don't know what [00:07:00] that stuff is. Cause I've never done this before.
I've never lost anything. So I don't know what to defend. I know that's difficult. And you think about things like, well, I want to be able to control the product where I want to be able to control our strategy. And again, those are broad, amorphous things. You don't know what you need to do. But what we're going to talk about is we're going to talk about the types of things that start getting taken away from you that lead to the loss of control.
Yeah, let's talk about the first thing that we jump over ourselves. To add that destroys control. And we high five the hell out of ourselves in the process. In fact, it trumps what would otherwise be bringing on an investor as far as a loss of control. And that is a co founder. We cannot wait to find a co founder.
The startup business celebrates the concept of a co founder. And when we bring on a co founder and we're not saying co founders are bad, but when we talk about a division of [00:08:00] control. There's no way to faster divide our ability to have singular control than handing it to a co founder. Yep. By definition.
Speaker: Right. By definition. talk about like why that's so much more magnified than investor. Think about the number of decisions that investor might get involved in. They're a few and far between their friend far between think about the number of decisions a co founder might get all of them literally everything from like, where are we going to go to lunch today, right?
Right, right, right. Literally everything. And so at that point, I think that's part of what I did. And of course, like, well, no, you know, we've we've created our lanes and we've got that. And yet everybody always drives in their lane, right? Everybody always stays and only follows the operating procedures and the protocols because they're human.
And that's what humans do. So, yeah, it's the co founder is such a big one. And it is so funny because. People are so, so excited to take it on. And look, there are a lot of reasons to do it. And there, there, and there are a lot of good can come out of it. But again, like you have to recognize the consequences of your decisions.
And then one of the consequences of this [00:09:00] particular decision is that you absolutely do forego some control when you do that.
Speaker 2: You're, you're talking about it at so many different levels. You're, you're saying, I want control. Well, I'm going to bring in a co founder because we're on the same side of the table until you're not.
Yeah. Until you're not. Right. Wait, so you mean it's easy
Speaker: to agree when you're agreeing? Uh huh. Yeah.
Speaker 2: Right. Isn't it the same way with an investor?
Speaker: Exactly.
Speaker 2: Cool. I want, I want to give up control because I just want to, I only want to bring on people that agree with me. Cool. Only bring on investors that agree with me.
Right. And you're never giving up control because you're only bringing on people that agree with you. It's never a control issue. How sweet is that? Right. But the reality is. When we, when we bring on anybody else, right? Our best friends are, you know, our, our spouses, whoever we're gonna bring on that would otherwise, you know, be totally theoretically on our side.
It changes the moment we're not in the same spot and look, it's, it's no one's fault per se. Dude, life happens. Life happens, right? I'm getting a situation where you got two co [00:10:00] founders that are, that, that are joined at the hip and all the decisions are the same. And then life happens. One co founder has a kid and then has a totally different set of responsibilities, right?
And then, so there's an opportunity to sell the company and they're like, I need this liquidity. I've got a whole different set of responsibilities. I have to do this. And then you're like, no, I have no responsibilities like that. I want to push this thing as long as I can. Right. Right. Right.
Speaker: All
Speaker 2: of a
Speaker: sudden, they never see it coming.
They never see it coming. And it comes down to something very simple for me, which is that they came together in a moment of parody. They came together and they agreed, they agreed. These are, this is how we have put it in balance. And that's great. That balance existed for exactly one second, right? In that moment in time.
And then to your point, life happens. And now all of a sudden we're making decisions. We're doing things. Out of parity, right? The balance will only exist on the day that you agree with the balance looks like, and then everything's gets out of kilter in different ways. After that is up for you, down for them, down for them, up for you, whatever.
[00:11:00] Over time, it all changes. And, and you don't recognize that at the time, right? At the time, of course, it's all hunky dory. You know, like we said before, when you, when you're agreeing with somebody, it's easy the moment there's a disagreement, this is what we're talking about, right? That's where that lack of control shows itself.
It happened the minute you signed the equity agreements and brought that person on, but it starts to manifest itself when things aren't going perfect anymore, when things aren't in balance. And so you bet. Again, just being prepared for it. Understanding that that's what you're signing up for is a good first step.
Speaker 2: I see 10 X more co founder disagreements than investor disagreements. Not because not because co founders are bad, just because there's way more co founders, right? Just the number of, of instances there is just way higher, right? Because almost everybody has a co founder versus everybody having an investor.
And the nature of it is. There, there are often tend to be more co founders in the nature of it is there's just so many touch points between the co founders. And because of that, when we jump into these relationships and again, we're [00:12:00] like, Hey, I want to maintain control. It's like, then, then why did you, why did you add a co founder of control was so important.
Secondly, before you added a co founder, did you stop and say, Hey, What do I want to control? And will this, you know, prevent me from, from maintaining that control. Now, to be fair, for most of us, that ship is sail, right? So who cares how I got there, but I got there, but I like opening with that one, when we have this discussion about how we secretly lose control, because for most folks, the ship has sailed and it makes them start to open their eyes.
Wow. I really did give away control without realizing it. Part of this kind of catharsis is, if you will, in this journey is starting to realize that control isn't something that you're able to hold on with this like iron grip and never let go of. It's something that is a natural thing that you do let go of over time.
Right. Whether you try to hold on to it or not, in fact, it is almost like a natural order [00:13:00] of something that you naturally let go of over time, as much as you try to hold on to it. And part of it is just kind of the natural evolution of a business. Sure. But it happens in ways you kind of don't expect.
Speaker: Yeah.
Speaker 2: Which brings us to point number two.
Speaker: Customers. So wait, customers, those things that I've been pining for since the day I got my co founder.
Speaker 2: Yeah. So in the same way, investors exert control because they're connected to cash, which is our lifeblood, which is how we keep our lights on and keep ourselves fed.
Customers are the same proxy. Only investors are a temporary bridge to this money and customers ideally are the permanent bridge to that money. Yeah. And customers ultimately control the cash. And as the saying goes, the golden rule, she with the gold rules. And sometimes that's investors. Sometimes that's customers.
And I'll never forget how I [00:14:00] learned this rule as it relates to customers. In the early, early days of my first startup, uh, running an agency, I had this one client, a tiny client,
Speaker: uh, in retrospect, by the way, we'll, I will say there is no better place to learn this particular lesson. Then in an agency, right?
Because, because of that direct relationship, because of the amount of power, because of the amount of collaboration it takes and the amount of sharing control, right? Like it's what it comes down to.
Speaker 2: Yeah. Also because your money is looking at you directly in the eye, right? Yep. Your money, your money is talking to you, the scowl on their face, their, their dissatisfaction with you.
Everything is so emotionally communicated to you, right? We
Speaker: see that same scene. It's from planes, trains and automobiles. And it's where, it's where Steve Martin is trying to, to leave on time to make, like to get his taxi, to get to his train, to get to his, his airplane, whatever. And you've got that, the somebody's [00:15:00] reviewing the creative up behind that big desk.
And he just keeps looking down. He looks up and he starts to open his mouth. And then he doesn't say, and it looks back down the crib, like I'd lived through that so many times and it's just like, it's just, it's so painful. But to your point of like seeing those emotions, just literally seeing your money staring you in the face.
Painful,
Speaker 2: you know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done a thousand times before you, which means the answer already exists. You may just not know it, but that's okay. That's kind of what we're here to do.
We talk about this stuff on the show, but we actually solve these problems all day long at groups. startups. com. So if. Any of this sounds familiar, stop guessing about what to do. Let us just give you the answers to the test and be done with it. So I had two clients on two ends of the spectrum. And for anybody that's listening, that's in the client business, you will, you will appreciate this at so many levels.
The first client early on in my career. It [00:16:00] was my first like big client, big to me, but I was, I was an agency of one at the time and whatever money they were paying me was literally the money I was going to eat with that week. I mean, and, and I'm not exaggerating. I mean, it was, I was going to take that money.
I was going to go to the grocery store, buy food and eat that night. Right. It was that specific.
Speaker: Well, you and I also both have a story where, where we independently of each other at the time worked for food. Literally. I also built websites, websites with food.
Speaker 2: Yes,
Speaker: it was so excited about it. Oh, man, it was great.
Honestly, it was it that that cash went further than most of the cash. There was only one place to spend it and it was very necessary. It was
Speaker 2: higher margin business. It
Speaker: was happy about it. And
Speaker 2: so, um, uh, but like that level of control. That a client exerted that was like, Hey, if the work isn't done, you are not going to eat.
I don't, I don't know what gets more right. Like [00:17:00] dominant than that level of control, right? Yes, exactly. Right.
Speaker: Literally
Speaker 2: my, my existence. Right. And. And I remember thinking like how beholden I was to this client and how much their whim controlled my company, my destiny, et cetera. I'm not overstating this either.
I mean, it really was that specific. Okay. Yeah. Immediately someone's going to say, yeah, that's because you're small and you know, that is your client. Okay. Now fast forward. Okay. Not that long. Three years later. Okay. Things have changed a bit. Okay. We've had some, you know, some significant wins. Okay. We now have a different client.
They're now paying us 10 million a month. I can eat a lot more ramen now. Okay. Things have changed a bit, right? And now I have hundreds and hundreds and hundreds of people on staff, right? Client calls different client [00:18:00] client calls as an issue. If I don't do whatever that client says, hundreds of people.
Won't eat their kids. Won't go to college. Mortgages won't get paid. Right? I am still high royally screwed. I like, I don't have a rich uncle that I can call and say, Hey, can't make payroll this month. Can you wire me 10 mil? Right? Like I have no way out of this, right? I am screwed. Like it's nobody's business.
Lots more zeros behind that problem. Same goddamn problem, right? Client owns me in both cases. The customers control the cash. The customers control me. In both cases, I put myself in that situation. I, I put myself in the situation in the first, uh, instance because I created a business model where I didn't make enough cash that I had any leverage over any one client.
In the second case, I, you know, was part of a situation where I signed a client that was so big that [00:19:00] they owned us, you know, they owned us, uh, they were paid us a quarter billion dollars a year. And that was it. That's the paycheck.
Speaker: That's where the money comes from. That's, that's, that, yeah, you bow to that to some degree.
Speaker 2: And so my, my, my point is, in both cases, you give up control in this mechanism you don't see coming. You know, in the co founder case, you're high fiving everybody that you landed this co founder. You know, you're, you're going out for drinks, celebrating the fact that, that you've, you've done something together.
And you don't realize you just gave up more control than you've ever given up in your life. Same thing as customer, you have this huge customer win and you don't realize that you just created this level of indentured servitude you've never had before.
Speaker: Yep. Right. And the costs don't just end there, like with, with customers, let's, let's talk about a couple others.
So there's, there's two others that I have seen play out multiple times and it's painful. One is things like we start taking customer feedback and we start building and we start, we start essentially. Answering to the customers. Sometimes this is great. Sometimes this leads to things like [00:20:00] scope creep. We start building every single feature.
We believe that because the customer brings that cash, and so it all does map back to the cash, but because of that, we start to allow them to influence us, control our product direction, control the type of team that we build. Which brings me to the other one. And this one is I think one of the most painful and I'm sure you've suffered through this as well.
Well, where a client will start to change company culture for the worst, right? You get a bad client and, or, or a challenging client, all of a sudden this starts to create dissension amongst the ranks and, and, you know, this can happen, big company, small company. I'd say in a small company, it tends to be more cataclysmic, more obvious.
Like you feel the pain, you see it. But in a big company can be even more dangerous because it just starts to erode things and you start to get, you know, kind of, uh, rot, if you will, from within and, and the organization can start to fall apart as a result of that. And that can be driven by, you know, the clients, particular types of client work, or even just a single singular client can do that.
It was, again, it's just all [00:21:00] these really crazy little hidden costs where, where we're giving up control of something we otherwise would have done very differently. Now, by virtue of the client, it's happening the way they're dictating or the way we're allowing them to dictate.
Speaker 2: Yeah. And it starts to take us in other directions as well.
In some cases we hate the work. But we have to do the work that's control. Yeah, that's control, right? I'm at some point, like, uh, as our agency grew, this was, you know, uh, we were an interactive agency, but we also did, um, uh, traditional work as well. It, we call it traditional work now or then, but like, that's like, um, I think like billboards, journal ads, stuff like that.
I hated that work. Like I was all about building websites and interactive stuff. Right. I hated doing that work, but it paid so much money.
Speaker: Yeah.
Speaker 2: Right. But that's my point. Right? Like, we were doing stuff I hated doing, but I mean, kind of needed the money, right? And so all of a sudden we're doing that stuff,
Speaker: right?
But it's also how you win the other business that you do like. Yeah. In that case, it's [00:22:00] like sometimes you're taking on essentially a portfolio of work. You're, you're, you're, you're eating from the buffet. Um, but you have to eat it all. Right. You don't get to say like, well, we'll just do this for you. And they go, no, we'll get another vendor that does all of it.
But take that a step further. Cause now you look at a lot
Speaker 2: of companies that have these products, right. Where they get paid. To do this legacy stuff, think like the equivalent of back in the day, CompuServe, Blockbuster, all these companies, AOL, that rode to the bottom of the ocean on customers that they couldn't unpack from, that just sat and watched their competition run circles around them.
It's essentially what's happening at Google right now with AI, right? They're well aware. Right. That AI is eating their lunch and what is going to become the next version of search. And they're trying to dig out of it. They're trying to build their own version, right? They're trying to do what open AI or chat GPT is doing right as a product.
Right. And they can't write, they're watching it happen [00:23:00] because they can't kill the search business.
Speaker: Yeah,
Speaker 2: exactly. But that's my point. Like their product, their customer, their AdWords business, right, is that level of control. It is controlling their ability to be able to go do something else. And that's what I'm talking about.
It's like this secret control that prevents us. From doing the things we want to do, it's real. And even at that level for a company that innovative, that's smart, that God damn rich.
Speaker: Yeah, that's it too. Right? Like you talk about like with all those resources, this can still happen to them. All right. So when we, when we boil this back down to, to the vast majority of folks who are listening to this particular podcast at typically a significantly earlier stage of, of, of their, their, their startup.
Imagine what that looks like there, right? Imagine how, how heavy that burden is. And when you don't have those resources, and even if you have those resources, like you just said, you still can't escape it. You bet. So it's a, it's a massive issue. It really does. It comes down to all of a sudden, whereas, you [00:24:00] know, before you've given up any of this control at the very early stages, you know, when it's an idea, still imagine, just take it all the way from the imagination state when it's an idea, You have all the control.
You can literally imagine it to be whatever you want. The minute it starts to become real, all of a sudden now, things like, I don't know, physics are limitations right now. It's like, well, well, yeah, I was going to build the, uh, the flying laptop, but it turns out, uh, you can't do that because of physics. And so all of a sudden you start to have these constraints and the further and further you go with that, what was a pure free form thing, Gets put more and more on rails or, or has constraints and lanes around it that have to be adhered to.
Right. And, and they come in so many damn forms.
Speaker 2: Okay. So here's where it gets interesting. Um, you know, we're talking about at which point we we've got the kind of these, these legacy institutions where, where, you know, where we're kind of baked into things.
Speaker: Yeah.
Speaker 2: Part of that is our own damn staff. Yes. Right.
Which brings us to number [00:25:00] three, giving up control. To our own staff. Now, let me explain what that looks like. And, and this is one of those things, once again, we're celebrating every time. I just hired the EVP, the C level, the whatever. Yeah. Okay. You just gave up some control. No, I didn't. I empowered, right?
I just
Speaker: delegated to someone else. No, you didn't. You just gave up control. It's funny, but it's the same. It's the same ironic logic that's applied at the co founder level, which is like, look, I don't want to do all these things by myself. I don't want to be responsible for these decisions. I'll take on a co founder.
You're giving up control. Well, no, I'm not. Well, if you didn't give up any control, then you're still the one making the decisions. You're still the one who's beholden. Then what did you do? Same thing. When we start to bring people on, you're like, well, I want somebody else to manage this, you know, I don't want to have to handle the day to day of that.
So you're giving up the control of the day to day. Well, uh, it's not how I would put it, but well, that's what it is, right? That is literally what you're doing. You are giving up control. It's necessary, right? Again, like
Speaker 2: 100%. It's [00:26:00] necessary, but it's also giving up control. So you can't have the both ways, right?
Speaker: Look, we're not saying don't do it. We're not saying don't do it. Absolutely. And I think one of the things we haven't introduced into this conversation at all is that. Why we feel the need to have control over everything. Right. And, and what aspects of control are absolutely valuable to give up at least partially, right.
Where maybe we still have some say in something, but like, again, we're not doing the day to day. So yes, this is all positive stuff. Well, can be, uh, but let's be very careful about it. The recognition of the fact that there is control being seated.
Speaker 2: Right. And so, so let's back this up before we get into the third leg of this.
We're not saying don't have co founders, customers, or employees.
That would be, yeah, that right. Well, I can
Speaker: guarantee your outcome.
Speaker 2: What we're saying is, at which point you're saying, I don't want to give up control. You're literally saying, I don't want co founders. What we're saying is you're [00:27:00] going to give up control. Here's where it's all going to go. And if, if what we're saying is, yeah, but I technically control all of those things, Matt, no, no, you don't.
Right. And as much as you want to pretend you do, pretending you do is actually the big mistake. Yeah. Recognizing and being highly cognizant of what those deliberate decisions are in saying, Hey, I'm taking on co founder. Black and white. Here's what I'm giving up. I am very, very cogently giving up these control points, okay?
And I'm deciding that I'm going to give up these control points. It's kind of like when you get married and you say, I am giving up. 50 percent of my wealth, so to speak, right. You know, I'm giving up these decisions that were mine and now there are joint decisions. You can't say I'm getting married and I'm not giving up any of those things.
That's literally not how it works. I didn't say that. You could say, yeah, yeah. I don't know how it works. Right. [00:28:00] And so with that, with that, what we're saying is just the very nature of this process of building a startup, of going into business in, in adding these components. Is a division of control and that's fine.
Speaker: Well, it's, it's a division of, well, look, let me, let me, we put this in a really simple way, like I see this in a very basic term, control is the currency that we spend for growth. Yes. That's a great way to put it. Well, that's, that is to me, that's, that's the essence of this entire discussion, which is like, if you want to grow necessitously, whether it's, it's headcount growth, whether that's doubling the number of leadership with a co founder, whether that's taking on an investor to have cash, you are Spending control.
Like I think a lot of times we equate equity as like this, one of these currencies for growth and it is, but with equity, it is sort of a proxy for control. It isn't necessarily, uh, control is control. Like you can have it with or without the equity. Yeah. But to me, I think that's what it comes down to.
What we're doing here is we're saying I am willing or I, whether I'm willing or not, I am doing this. Uh, I am going to [00:29:00] spend some of my control in order to gain some growth. You bet. You bet. And look, when we bring
Speaker 2: on stats. Right. At every level, you know, whether it's in the C suite or whether it's on the front lines, right, we are ceding control of those day to day decisions to that person.
That's it. And as we subdivide that control to more and more of those people, That becomes spread across all of those people where it was just us and everything from a frontline customer support decision to finance to everything was a hundred percent in our domain. It was our decision, not filtered in any way by anyone.
It's now essentially their decision that somehow gets overridden if it ever somehow gets back to us And our fantasy looks like this no, but it's really my decision because it's gonna come back to me Perfectly filtered in exactly real time and I will be [00:30:00] presented with the correct information so that I can make that decision
Speaker: Bullshit.
Yeah, exactly
Speaker 2: Try doing that at any level You know,
Speaker: and look, never going to happen. The responsibility does maybe end there and rest there. Right? Like the buck stops here. Yes. But the buck that arrived before it stopped there was not necessarily of your doing, right? It's someone else's buck. You just have to catch it now.
Right? Yeah.
Speaker 2: Yeah. Yeah. Earlier, right. I told you the story of, uh, me sitting down with a guy named Brian Markison. Uh, Brian was the, uh, CEO of Bristol Myers Squibb pharmaceutical company, uh, in the nineties. And I remember sitting across from Brian, uh, and I was pitching him on the idea of having BMS do, uh, detail aids, which this is like in the 1990s where the sales reps would go out and they would use a portable laptop, which is hilarious because like, A portable laptop, like a, uh, this is before tablets existed back then, I think weighs on it pounds.
It's like, it's like a backpack anyway, anyway, and, and he loved the idea. This is [00:31:00] like the late nineties and he wanted to do it. What was the alternative at that point? Like it was a, it was a flip chart, right? Like it was, yeah, it was paper. Oh yeah. Yeah, yeah. Uh, and this was way ahead of its time. And, um, anyway, he loved the idea.
And I was like, let's do it. And he said, I can't. And I was like, what do you mean? You're the CEO of the company. It was so funny. I remember like pushing back on him in like, who the fuck was I? Right. I was like a 27 year old kid. Right. Like, like in retrospect, I just didn't know any better. Like the audacity.
Of what I was saying at the time. And I look back now thinking like, he should have just got up and smacked me if I'm being right.
Speaker: You were still carrying your first driver's license at that. I know that's how old you were.
Speaker 2: I was still servicing pimples from high school. And so anyway, but he was, I mean, he was fairly cool about it anyway.
Um, but here's what he said. I remember that I'll never forget this. He was like, I don't think you understand of an organization, this size, how hard it is to get something done.
Speaker: Yeah.
Speaker 2: And I didn't, I mean, I had no, I know. Why would you? [00:32:00] Why, why would I? And, and, but essentially what he said was like, yes, I can say yes to this.
Mm-Hmm , but to all the people in the chain that would have to make this happen, you know, from from it to marketing to, you know, Salesforce initiatives, et cetera. It would never happen. It would never make it through all the political chains. The
Speaker: number of ways that that decision can die before it actually comes to fruition is insane in an organization that size.
The
Speaker 2: difference between strategy and implementation is massive, right? Yeah. And then all, and all the consultants in between, right? And I remember how dumbfounded I was. I just assumed that CEO says yes, and it just magically happens.
Speaker: Yeah. And you know, there's so many ways that happens to examine it. Some of it is some of it's like direct control.
Like some of it is like, I say, yes, CEO says yes. And then it goes down the Hill. And then at some point somebody says no, for some reason. Right. And sometimes that's where it breaks down. Sometimes it's just a matter of like capability or competency where like you said, yes, and then it gets pushed [00:33:00] down and deployed and deployed and deployed.
And then we're working to get it out in the market or whatever, whatever's going to happen. Yeah. And they just don't do it right. That is also a loss of control. Like the, the, the difference between, I think it's so hard for founders because at the early stages, they're like, I'm, I'm going to, I decided I'm going to change the problem statement on the pitch deck.
So I changed the problem statement, the pitch deck, the, the, the gap, the Delta between deciding to do something and it happening is often so short that like it's inconceivable to us that, and, and even as it slowly creeps to the point where it's like, I am going to change the problem statement on our pitch deck.
Right. Which then goes over to the copywriter, which then goes over to, uh, the, the compliance team, which then goes to design, which then gets shipped to the junior designer, which then gets right. And then all of a sudden, like just lost in translation, lost the competency, whatever. That's a loss of control as well, because the minute where like, maybe it's not as much of a loss of control.
In that case is a loss of fidelity, but at the end of the day, the outcome is exactly the same, where [00:34:00] you didn't have the control of being able to say, I want this to change. And then it just does.
Speaker 2: And I think collectively every bit of how that control starts to go away. You look at founders that once used to have full command of their company when it was small.
And as they get removed, right, even a Steve jobs over time in early apple, as he kind of got pushed out, learn that less than the first time, didn't make that mistake the second time when he came back, started to understand that you can't make that mistake of division that every time you hire somebody else, like a Scully, right?
Like all of a sudden those people. Start to divide you out. You lose that control. Those hires aren't incidental. And people that have been around long enough start to understand that. Folks that are listening right now, some of them have that issue right now. They're like, I didn't get it, but I got a couple people in the organization I hired that kinda aren't friendly, so to speak.
Right. That have actually created a division for me. They didn't add to my, my, my power base, so to speak. They actually divided by power base.
Speaker: So [00:35:00] it's interesting because you just, you said something that brought in an entirely new dynamic into this for me, which is that in the beginning with the startup.
Control is almost a burden, right? It's like control just means you have to do everything. You have to decide everything. You have to think everything. You have to be everything. Yeah. At some point control becomes a different kind of currency where there, there are different incentives where all of a sudden, like you end up with people, the orders, you can, you want it, you're there's power grabbing, right?
We see it with things like equity. Right. That that's an easy one. Like, Oh, my co founder wants an extra 10%. Uh, the investor wants, uh, you know, a different preference, whatever. But there's a lot of that, like just even in the internal politicking where all of a sudden it's, it's not even just about the amount of control that we give up.
It's that all of a sudden there are people willfully trying to take it away. And that's, that's an entirely different, uh, kind of vector in the dynamic that I hadn't even been thinking about up until now. And it becomes exponential. It
Speaker 2: sure does. You got a lot more people firing at you. So, so here's what [00:36:00] I would say.
If you're thinking about what it's going to mean to give up control, the first thing you have to think about is what. Do you care about, think about yourself? What am I not going to give up control over, right? Like, what are the things that I will not under any circumstance,
Speaker: give up when you're in a position where you start to think about the types of control that you are willing to give up, or you're not willing to give up.
This becomes an important piece of the calculus. This is the very Genesis point where we begin to say, here are some things that for me, control of this type is non negotiable. Here are some places where I am willing to give up control. That becomes a very easy bifurcation of like the, the, the easy yeses, the easy nos, well, maybe they're not easy, nothing easy and start a plan, but we have some rubric, some control over where we're going to give up control.
The second one that I would say, and this one to me is probably just as important is go back to what I said before about thinking, this is a bit of a transaction as a cost for growth. And just ask yourself, am I willing to pay the price of the [00:37:00] control that I will give up for what I will get back in return in terms of growth?
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