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> Giving more stake to someone who has higher skin in the game inevitably leads to better results for everyone who owns a stake in co. You don't think investor

> Giving more stake to someone who has higher skin in the game inevitably leads to better results for everyone who owns a stake in co. You don't think investors have skin in the game? The investors take on the risk of losing 100% of their investment if the company doesn't succeed. And it's a real risk: the vast majority of all startups fail. What comparable risk do the founders and employees take? If the company fails, they've been paid a salary for their work and can go find another job. Do you expect the investors to just give you millions of dollars without any say in how it's spent? Even if you had a track record of having founded several successful companies in the past (which most startup founders don't), an investor wouldn't give you millions of dollars to play with without having some control over the risk. If you want absolute control over how the money is spent, finance the company out of your own savings, not with other people's money. Lots of companies are bootstrapped from their founders' assets, and these founders completely own and control their companies. But you can't have it both ways. If you take money from investors, you need to give up some ownership and control.

rahulchhabra07 8y ago
- One of the core assumptions is that founders and early employees have more context than investors by orders of magnitude. This implies that decisions taken by founders would be more correct than by someone who has seen cos just from the outside. Which means if an investor exercises control over the direction of the company, it would probably lead to incorrect decisions. - If a co grows and exits, an investor gets a proportional return. Sometimes, the money helps that growth possible and sometimes it makes that faster. Hence, there exists a win-win already for both parties. The board seat just complicates everything. - I don't deny investors have skin in the game. I just claim founders have a higher sense of it. The stress, effort, and risk that founders take are nowhere close to the low compensation they decide to take for themselves.
- ohashi 8y ago
  Or founders are blinded by being too close and need outside help, people with more experience and connections. You seem to be stuck on founders being better in every way for... no real reason. Some founders might be smarter at some things, some investors will be smarter. You should be finding an investor who adds to the founding team and will help guide and grow the company. Thinking they are just stupid money makes you look naive.
ian0 8y ago
It's not that cut and dry. - Most professional investors aren't investing their own money and understand a majority of their portfolio will fail. Even if the fund performs poorly it will take years to find out and they are paid relatively well during that time. A founder runs a gauntlet of practical risks (career, depression, monetary, reputational). - Most professional investors do not have the experience necessary for running a company. Though obviously they can provide helicopter view support and leverage knowledge from their portfolio. At the end of the day even co-founders diverge in terms of motivations and end-goals. Obviously investors VS founders will too. If you'r taking on investment its obviously critical that you are aligned from the outset. And if its a VC, then you are aware of how the VC business operates, what their goals are and how that will impact your company in different circumstance (liquidation etc) Finally, if you are really aligned, it's likely you will welcome their view on how the business is run and being transparent as to strategy & finances wont be an issue.

rahulchhabra07 8y ago

- One of the core assumptions is that founders and early employees have more context than investors by orders of magnitude. This implies that decisions taken by founders would be more correct than by someone who has seen cos just from the outside. Which means if an investor exercises control over the direction of the company, it would probably lead to incorrect decisions. - If a co grows and exits, an investor gets a proportional return. Sometimes, the money helps that growth possible and sometimes it makes that faster. Hence, there exists a win-win already for both parties. The board seat just complicates everything. - I don't deny investors have skin in the game. I just claim founders have a higher sense of it. The stress, effort, and risk that founders take are nowhere close to the low compensation they decide to take for themselves.

ohashi 8y ago
Or founders are blinded by being too close and need outside help, people with more experience and connections. You seem to be stuck on founders being better in every way for... no real reason. Some founders might be smarter at some things, some investors will be smarter. You should be finding an investor who adds to the founding team and will help guide and grow the company. Thinking they are just stupid money makes you look naive.

ian0 8y ago

It's not that cut and dry. - Most professional investors aren't investing their own money and understand a majority of their portfolio will fail. Even if the fund performs poorly it will take years to find out and they are paid relatively well during that time. A founder runs a gauntlet of practical risks (career, depression, monetary, reputational). - Most professional investors do not have the experience necessary for running a company. Though obviously they can provide helicopter view support and leverage knowledge from their portfolio. At the end of the day even co-founders diverge in terms of motivations and end-goals. Obviously investors VS founders will too. If you'r taking on investment its obviously critical that you are aligned from the outset. And if its a VC, then you are aware of how the VC business operates, what their goals are and how that will impact your company in different circumstance (liquidation etc) Finally, if you are really aligned, it's likely you will welcome their view on how the business is run and being transparent as to strategy & finances wont be an issue.