Travis Kalanick, CEO of Uber recently announced that one of their key goals it to be cheaper for their customers than owning a car. Forty years ago music lovers would have record collections worth thousands of dollars yet now music is streamed on demand and shared by the masses. Rent the Runway makes it possible for people to wear dresses to events they could only dream of owning. The trend in society is for less ownership, less fixed investment and more choice in consumption.
The same principal is definitely the case for all startup companies, which by definition need to be able to adapt and pivot at any given time in their early stages. It is tempting for the founding member or members to fill out their teams early with a marketing, finance, social media or web design expert to help them get initial traction. It is often the case that equity is even offered from the start and they could even be friends of the founder. This can be a fundamental mistake to commit this early for the following reasons:
Workload - It is highly unlikely for a startup with just an MVP in place would require a nominated CFO or other specialist, there is simply not the workload in place to keep the person occupied.
Decision making – As the various appointed founder members all joust for attention to get their ideas across, in turn it makes the decision making difficult. Or the reverse happens and due to the other new founder members just being friends with the original founder, honesty can be foregone as they tend to agree to ensure they remain part of the project and keep friendship.
Investors – It is well known that investors do not like a situation where they are coming to the table and there are already too many parties with a stake in the business. It is usually as stumbling point on shark tank when founders grilled about ownership structure, it can really put them off when dealing with large ownership groups.
The solution is to keep your founding group as small as possible and hire genuine experts in each space. They can deliver quality results, have market experience, often know what investors desire and will provide you genuine feedback and ideas as they are genuinely independent.
Founders - Stay lean and focused on your key competence and leave the rest to the experts. It will be worth the initial bootstrapped investment to get you to the next level.
