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Founder Fridays No. 39
Helping founders scale smarter.
Happy Friday. This week we’re focusing on management.
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On Luck and Genius
This TED talk looks at the lessons learned from an English football club, Newcastle, that shot to the top of the league one season and was nearly relegated the next season. Newcastle was blinded by one of the most common management delusions, what psychologists call outcome bias — the assumption that good results are always the consequence of good decisions and superior performance. Or, let’s put it in another way: Success turns luck into genius. Successful organizations should think more like a good gambler, who has trained his brain to resist the human tendency to assume that good outcomes always mean that someone acted brilliantly. A good gambler treats success with the same skepticism as he treats failure. This is what successful organizations should do too if they want to stay relevant: Ask themselves the questions of a gambler. Why were we actually successful? How do we separate luck from skill? Is it possible that our league table sometimes lied too? TED (15 minutes)
Noam Wasserman, the author of The Founder’s Dilemma, found that 65% of startups fail because of interpersonal tension within the founding team. Why do so many co-founders develop strained relationships? It’s not necessarily the stress of the startup environment, misaligned visions or incompatible communication styles. It’s a failure to understand the nuanced dynamics of partnership in the first place. The truth is that how we work together is about so much more than work. Someone’s professional resume—whether it features five Webby awards or a nine-figure exit—tells you next to nothing about what it will be like to work with them every day. Here are some questions to actually get to know a potential co-founder beyond the resume: 1) What is the hardest thing you've ever had to ask for? 2) How do you deal with surprises? 3) In times of abundance, what do you do with your resources? 4) What about in times of scarcity? 5) Tell me about the last time you said “no.” 6) What do you need more: security or adventure? Human Ventures (9 minutes)
Startup Compensation Data
Lightspeed’s annual HR and Recruiting Trends Report surveyed how 190 startups are preparing for economic uncertainty in 2023 and beyond. Here are some key findings: 1) Inflation is not driving salary increases. In the face of 8% inflation, 59% of companies are unlikely or undecided on raising salaries to match. 2) Equity approaches remain unchanged despite market instability. Companies do not plan to offset lower 409a valuations by changing their equity strategy. More than half (64%) are unlikely to reprice options, and 69% are unlikely to give additional grants to account for a lower valuation. 3) Companies are not cutting back on benefits. Many companies are finding that even in this volatile economic environment, they must provide compelling benefits even at increased cost. Most (94%) are keeping or expanding their benefits regardless of year-over-year cost increase. Lightspeed (5 minutes)
Founder FAQ: What do I tell my friends and family that want to invest in my startup?
While accepting investments from family members may seem like an easy way to secure funding, it can also come with significant risks. 1) Personal relationships can be affected. For example, if your startup encounters financial difficulties or is unable to provide a return on investment in a timely manner, it could strain your relationship with the investor. 2) There are legal and financial risks. One specific issue is whether the investor meets the definition of an accredited investor. In general, an individual needs to be an accredited investor in order to invest in startups. 3) Set boundaries. It’s often difficult to just spend time together without it turning into a business meeting. Do you really want to be talking shop at Thanksgiving dinner? Westaway (6 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Move Fast. Don’t Break Things.
Hi! I’m Kyle. This newsletter is my passion project. When I’m not writing, I run a law firm that helps startups move fast without breaking things. Most founders want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a flat, monthly fee so you can control your costs and focus on scaling your business. If you’re interested, let’s jump on a call to see if you’re a good fit for the firm. Click here to schedule a 1-on-1 call with me.