The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup
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- Create Date：2021-11-21 09:53:54
- Update Date：2025-09-06
- Status：finish
- Author：Noam Wasserman
- ISBN：0691158304
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Summary
Often downplayed in the excitement of starting up a new business venture is one of the most important decisions entrepreneurs will face: should they go it alone， or bring in cofounders， hires， and investors to help build the business？ More than just financial rewards are at stake。 Friendships and relationships can suffer。 Bad decisions at the inception of a promising venture lay the foundations for its eventual ruin。 "The Founder's Dilemmas" is the first book to examine the early decisions by entrepreneurs that can make or break a startup and its team。
Drawing on a decade of research， Noam Wasserman reveals the common pitfalls founders face and how to avoid them。 He looks at whether it is a good idea to cofound with friends or relatives， how and when to split the equity within the founding team， and how to recognize when a successful founder-CEO should exit or be fired。 Wasserman explains how to anticipate， avoid， or recover from disastrous mistakes that can splinter a founding team， strip founders of control， and leave founders without a financial payoff for their hard work and innovative ideas。 He highlights the need at each step to strike a careful balance between controlling the startup and attracting the best resources to grow it， and demonstrates why the easy short-term choice is often the most perilous in the long term。
"The Founder's Dilemmas" draws on the inside stories of founders like Evan Williams of Twitter and Tim Westergren of Pandora， while mining quantitative data on almost ten thousand founders。
People problems are the leading cause of failure in startups。 This book offers solutions。
Drawing on a decade of research， Noam Wasserman reveals the common pitfalls founders face and how to avoid them。 He looks at whether it is a good idea to cofound with friends or relatives， how and when to split the equity within the founding team， and how to recognize when a successful founder-CEO should exit or be fired。 Wasserman explains how to anticipate， avoid， or recover from disastrous mistakes that can splinter a founding team， strip founders of control， and leave founders without a financial payoff for their hard work and innovative ideas。 He highlights the need at each step to strike a careful balance between controlling the startup and attracting the best resources to grow it， and demonstrates why the easy short-term choice is often the most perilous in the long term。
"The Founder's Dilemmas" draws on the inside stories of founders like Evan Williams of Twitter and Tim Westergren of Pandora， while mining quantitative data on almost ten thousand founders。
People problems are the leading cause of failure in startups。 This book offers solutions。
Reviews
Jordi Fernandez Oromi
，
It shows that there is no recipe for success， as founders have different approaches。 I found the structure of the book a bit chaotic。
Ágota Téti
，
Must read for future startup founders
Jordan Brown
，
Very， very helpful。 Meticulously researched。 I’ll be referring to this one often。
Matthias Hernandez
，
Loved listening to the thorough analysis of potential pitfalls and tradeoffs every entrepreneur would have to face。 The approach of mixing statistical analyses and anecdotal examples is very nice to make the points easy to understand。Although I really enjoyed the book for a while， it is painfully long and fairly repetitive。 I was glad to reach the end。Things to consider when embarking on an entrepreneurship journey:- What motivates you？ Most founders are driven by money or control。 Control-motiv Loved listening to the thorough analysis of potential pitfalls and tradeoffs every entrepreneur would have to face。 The approach of mixing statistical analyses and anecdotal examples is very nice to make the points easy to understand。Although I really enjoyed the book for a while， it is painfully long and fairly repetitive。 I was glad to reach the end。Things to consider when embarking on an entrepreneurship journey:- What motivates you？ Most founders are driven by money or control。 Control-motivated founders would tend to sacrifice deals and have a slower growth。- Who to co-found with？ Founding with family/friends， former colleagues or total strangers have different implications。 Are the founders’ skills complementary or redundant？ Who should be CEO？ E。g。 Although founding with family can seem like a good idea due to already strong bonds， it usually leads to putting off key uncomfortable discussions。- When to start？ Young CEOs have worse growth and more cofounders overall。 There is never a perfect time to jump in， but the market timing， and family timing should be right。 。。。more
Vlad Larin
，
Full of value， but a rather difficult read。 A bit more exciting than reading a dictionary。
Faith Akwo
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This is a must read for any one embarking on the startup journey。 A must read！
Kiara
，
Read several chapters as an assigned text for my HR Strategy for Entrepreneurial Ventures course at Wharton Business School。 Good evidence base to support the key findings and pitfalls in the chapters we were assigned to read， although I found the chapters very long and laboured the points more than I felt were needed。 I would recommend a highlights / key points and evidence read for founders - not sure the entire book is worthwhile if you're short on time or enthusiasm for reading。 Read several chapters as an assigned text for my HR Strategy for Entrepreneurial Ventures course at Wharton Business School。 Good evidence base to support the key findings and pitfalls in the chapters we were assigned to read， although I found the chapters very long and laboured the points more than I felt were needed。 I would recommend a highlights / key points and evidence read for founders - not sure the entire book is worthwhile if you're short on time or enthusiasm for reading。 。。。more
Naïma
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Excellent insight into startup founding teams。 This book is both a quantitative and qualitative study that points out how most challenges faced by startups fall into the "3 Rs": relationships， roles and rewards。 Wasserman makes some really interesting points， particularly how the two key motivations for founding a company: wealth and control are often in direct conflict with each other。 Excellent insight into startup founding teams。 This book is both a quantitative and qualitative study that points out how most challenges faced by startups fall into the "3 Rs": relationships， roles and rewards。 Wasserman makes some really interesting points， particularly how the two key motivations for founding a company: wealth and control are often in direct conflict with each other。 。。。more
Rasmus Leichter
，
Some great insights， but could've been much shorter- The 2 main and conflicting motivations of founders are wealth and control。 Wealth-oriented founders are more likely to reach a "rich outcome" whilst control-oriented founders are more likely to reach a "king outcome"。 It is very rare to simultaneously reach both （e。g。 Bill Gates）。 Founders should choose either a wealth or control strategy， and base every decision on the desired outcome。 Mixed strategies usually fail。 Example: you can raise lot Some great insights， but could've been much shorter- The 2 main and conflicting motivations of founders are wealth and control。 Wealth-oriented founders are more likely to reach a "rich outcome" whilst control-oriented founders are more likely to reach a "king outcome"。 It is very rare to simultaneously reach both （e。g。 Bill Gates）。 Founders should choose either a wealth or control strategy， and base every decision on the desired outcome。 Mixed strategies usually fail。 Example: you can raise lots of capital through a VC round， which helps you build more value to the company。 In exchange， you have to relinquish equity （i。e control）。 If you pass on the VC round， you will maintain control but will likely not end up with similar value gain to the company。- You can ask new employees whether they prefer salary-leaning or equity-leaning compensation- Liquidation preferences deserve great analysis when raising from a VC- Statistically， teams consisting of previous coworkers have proved to be the most stable。 You don't know in advance how a team of friends， family or complete strangers fares under pressure。 。。。more
Ed Eichman
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interesting ideas about both my present and past business situations。
Yevgeniy Brikman
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A nice overview of some of the key decisions that every entrepreneur has to make: decisions that are more important than most founders expect， decisions where the options available are not always obvious， and decisions where the implications can be surprising or even counter intuitive。 Getting these decisions wrong can be catastrophic: "if entrepreneurship is a battle， most casualties stem from friendly fire or self-inflicted wounds。" These decisions include whether to be a solo founder or look A nice overview of some of the key decisions that every entrepreneur has to make: decisions that are more important than most founders expect， decisions where the options available are not always obvious， and decisions where the implications can be surprising or even counter intuitive。 Getting these decisions wrong can be catastrophic: "if entrepreneurship is a battle， most casualties stem from friendly fire or self-inflicted wounds。" These decisions include whether to be a solo founder or look for co-founders， whether to work with family and friends， how to split equity， how to define roles and titles， whether to hire more experienced or more junior people， whether to raise money， the types of investors to work with， and how to handle founder-CEO succession。The book is based on quantitative data from a decade of surveys of thousands of companies， plus qualitative data from interviews with a few specific companies and founders （e。g。， Evan Williams of Blogger， Medium， and Twitter and Dick Costolo of FeedBurner）。 It's written in a dry academic / business style， and not all the content is especially helpful or actionable， but it's still a useful read for every founder to be aware of the issues that every startup runs into。A few of the key insights I got from this book:（1） One of the key trade-offs every founder will have to make is whether they want to optimize for wealth or control。 Do you want to end up "rich" or do you want to end up a "king？" It's exceptionally rare to get both; founders like Bill Gates， who ended up immensely rich and managed to retain control of Microsoft for decades， are extreme outliers （that's why you hear about them so much in the first place！）。 The vast majority of founders will need to pick one or the other。 The book contains some compelling evidence that: - Founders who optimize for wealth over control， make， on average， 50% more than those who optimize for control。 However， these founders rarely end up in control of their companies （e。g。， as the CEO）， the companies evolve differently than those founders may have wanted， and those founders often find themselves ousted entirely。- Founders who optimize for control over wealth end up with smaller， less valuable companies， but they are able to stay with those companies longer， and build companies that more closely resemble their vision。- Founders who try to optimize for both are more likely to get neither。 For example， if you mostly optimize for wealth， but toss in a few items here and there to retain control， the typical result is that， on average， you slightly decrease the odds of a rich outcome， slightly increase the odds of a king outcome， and significantly increase the odds of failing to achieve either one。（2） To optimize for control， you might make the following decisions: be a solo founder or only work with "weaker" co-founders; keep as much equity for yourself as possible; hire solely from your personal network; hire primarily junior employees; structure the organization so that all important decisions go through you; hold on to the role of CEO as long as possible; avoid raising money if possible; if you do raise money， prefer raising from friends and family， angel investors， and other funding sources （e。g。， debt） over venture capitalists， and minimize investor control （e。g。， minimize equity， voting rights， board seats， etc）。 （3） To optimize for wealth， you might make the following decisions: build a founding team with the strongest co-founders you can find; share equity to attract co-founders and employees; hire from as broad of a network as you can and minimize hiring of family and friends; hire senior， experienced employees; delegate decision making to appropriate experts; be open to giving up the CEO role and other high-level roles to the best candidate; raise money primarily from venture capitalists and be open to investory-friendly terms to attract the best investors （e。g。， more equity， voting rights， control over the board， etc）。 （4） According to the data in this book， entrepreneurs make 35% less， on average， than people who get jobs。 This doesn't surprise me too much， as founders often have to take no or low salaries when first starting a company， and many startups go out of business， so that probably brings the average down considerably。 I'd love to see the variance on this data， as I bet founders have both the worst outcomes （no salary followed by bankruptcy） and the best outcomes （making millions from a huge exit）， whereas employees probably land mostly in the middle （reasonable salary）。（5） Working with friends or family is usually a bad idea， as you'll be making decisions according to what's best for these personal relationships， rather than what's best for the business。 If you do work with friends， and especially family， it's critical to set up "firewalls" in advance （a bit like a prenup for a marriage）。 That is， before starting to work together， come up with a written plan for how to handle conflicts or issues; if possible， try to have the family and friends report to someone else on your team; etc。（6） When a founding team is deciding on an equity split， keep in mind that the vast majority of the work of a startup is in the future。 Most teams decide on an equity split after working together for days or weeks， but it can take many years， even decades， to build a company， so don't overweight the early work！ E。g。， If one founder has spent 3 months work on something， and another founder joins， it might make sense for the first founder to get a bit more equity， but don't overdo it， for if the company is successful， it'll likely take ~10 years， making those first 3 months only a tiny part of the overall success。（7） Some of the key factors to consider when allocating equity to each founder:- IP: Is this founder contributing IP they already have？ How much of the IP of this company will this founder create in the future？ - Time: How much time has this founder already invested into the startup？ How much time will they spend going forward （e。g。， part time vs full time）？- Skills: What skills does this founder bring to the team？ Are these skills unique amongst the team？ How critical are these skills to the success of the startup？ Is there any other way to get these skills （e。g。， outsourcing）？- Networks: What sort of network does this founder bring to the startup？ Could they bring in a ton of great employees？ Investors？ Customers？- Cash: Will this founder be funding this company？ （8） Consider using dynamic equity splits rather than static ones。 At the very least， every founder should be subject to a vesting schedule。 However， you may want other dynamic terms based on specific situations: e。g。， what happens to the equity if a founder gets sick; earning more equity based on achieving certain milestones; etc。（9） Be thoughtful with titles:- Typically， you want to pick a single CEO， and do so early on。 It's an awkward conversation to have amongst co-founders， but if you struggle with this conversation， you'll struggle even more with all the other important decisions， so do it early。 - Be wary of handing too many C titles （e。g。， CTO， COO， etc） out too early （e。g。， just to attract great hires）。 If that person turns out not to be a good fit for that role when the company grows （e。g。， they are a good CTO when the company has 3 engineers， but they don't know how to handle a 300 person org）， you won't be able to place anyone above them （the C titles are always the highest in a company）， so you'll have to change their title or even fire them， which can be a very unpleasant situation。 。。。more
Alan
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It's very dry。 It's like eating those dried leaves you can find under the early snow in the month of November。 It's terribly boring。 My friend， whom I went to the college with， used to learn for an exam we had and fall asleep after reading every 2 pages。 Wake up， read more and fall asleep again。 because the material was so dry and boring。 This is how dry and boring this book is。 There's no humour， no fun， just plain old facts。 I can safely say that had I not listened to this and actually read it It's very dry。 It's like eating those dried leaves you can find under the early snow in the month of November。 It's terribly boring。 My friend， whom I went to the college with， used to learn for an exam we had and fall asleep after reading every 2 pages。 Wake up， read more and fall asleep again。 because the material was so dry and boring。 This is how dry and boring this book is。 There's no humour， no fun， just plain old facts。 I can safely say that had I not listened to this and actually read it， I might not have been able to finish it。 I'm still rating this book 4 stars though because the information was and is very good。 So If you want to read through this - skip it。 Go for a walk instead and listen to this。 Then you'll actually be able to finish it and perhaps even absorb the information it contains。 。。。more
Stefan
，
This book contains a lot of useful information。 It explains the dilemmas using examples。 There are no one solution fits all problem statements in this book， it rather makes you think your decisions through and highlights potential pitfalls。It is pretty long and is repeating itself on several occasions。 That being said， I’ll probably go back to sections of the book when I have to make similar decisions in the future。
Seann
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A bit too obsessed with measurement， which isn't always possible or effective， and assumes people are only wealth or control motivated， but lots of good info that will save a lot of us from having to learn the hard way。。。 A bit too obsessed with measurement， which isn't always possible or effective， and assumes people are only wealth or control motivated， but lots of good info that will save a lot of us from having to learn the hard way。。。 。。。more
Cory Fisher
，
Very dry。 Like I didn't read the last half of the book dry。 I would suggest reaching the audience better through storytelling。 There are plenty of good lessons there but they lack memorability for this reason。 Very dry。 Like I didn't read the last half of the book dry。 I would suggest reaching the audience better through storytelling。 There are plenty of good lessons there but they lack memorability for this reason。 。。。more
amal
，
Good read for a founder or those thinking about taking on VC and wondering what that looks like。
Damian Balan
，
Very boring in my opinion， ive expected more。 Its a basic read nothing new to me（im not experienced in business domain） but ive read some books。Lots of basic advices。 It says few things in many words
Muromets
，
Elementary reading for anyone thinking of starting a business or just useful insight into the minds of entrepreneurs。 If you've been on the startup journey already， you'll find yourself nodding along throughout。 Yep， maybe don't start your business with family members or your spouse。 Yep， it's a good idea to negotiate equity split。 Yeah， maybe you're not the best person to be CEO。 Lots of good research-anchored insights that ideally would make you stop and evaluate， stop all together， or at leas Elementary reading for anyone thinking of starting a business or just useful insight into the minds of entrepreneurs。 If you've been on the startup journey already， you'll find yourself nodding along throughout。 Yep， maybe don't start your business with family members or your spouse。 Yep， it's a good idea to negotiate equity split。 Yeah， maybe you're not the best person to be CEO。 Lots of good research-anchored insights that ideally would make you stop and evaluate， stop all together， or at least provide a caveat emptor to moving forward。I'd recommend this as reading not only for those contemplating turning their idea into a reality， but also anyone considering working for a startup。 。。。more
Nikhilesh
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Never launch a startup alone， an entrepreneurs journey is too lonely！You should go alone， the risks of founding with someone is too high。Raise money because a small portion of a large pie is better than large portion of a small pie。Don't give away the control of your company now matter what。 Have faith in your vision。If like me you find the advice from veteran entrepreneurs contradictory and wished there was smart entrepreneurship coach who could help you with scientific advice， you have to read Never launch a startup alone， an entrepreneurs journey is too lonely！You should go alone， the risks of founding with someone is too high。Raise money because a small portion of a large pie is better than large portion of a small pie。Don't give away the control of your company now matter what。 Have faith in your vision。If like me you find the advice from veteran entrepreneurs contradictory and wished there was smart entrepreneurship coach who could help you with scientific advice， you have to read The Founder's Dilemma。The author systematically studies the effects of different decisions on a startup。 And as suspected， there are no silver bullets。 This book lays out the pros and cons of each decision so that entrepreneurs can make an informed decision。 If you are just starting on the entrepreneurship journey or thinking about taking the plunge then you have to read this book to get a lay of the land。This is one book that every entrepreneur regardless of industry， age， geography or experience， must read。 It will save you many sleepless nights。 。。。more
Hubert Baryła
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A very valuable position for wannabe founders。 Maybe a little too long due to a lot of summaries and revisiting considerations from previous chapters。
Johanna Elsener
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Interesting read。
Terence
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Every new or prospective founder should read this。 The data is invaluable。 I would recommend reading versus listening to it。 It is very data rich which can be boring on audible。
Ademola John
，
Amazing book。 The writer identifies some of the common potential pitfalls that startup founders face when deciding to launch their startups。 He talks about the conundrum that comes with analyzing the perfect time to launch a startup （with insightful case studies）， choosing co-founders， dealing with investors and equity allocation within the founding team/early-stage hires。 He also highlights the pros and cons of founder's choices in choosing to launch solo or with co- founders。 The part I found Amazing book。 The writer identifies some of the common potential pitfalls that startup founders face when deciding to launch their startups。 He talks about the conundrum that comes with analyzing the perfect time to launch a startup （with insightful case studies）， choosing co-founders， dealing with investors and equity allocation within the founding team/early-stage hires。 He also highlights the pros and cons of founder's choices in choosing to launch solo or with co- founders。 The part I found most interesting are the practical case studies of founders like Evan Williams（Blogger/Odeo）， Tim Westergren（Pandora Radio） and Genevieve Thiers（Sittercity）。 All in all， I'll recommend it a must read for anyone looking to launch a Tech startup。 。。。more
Elizabeth
，
Wasserman does an awesome job diving into all the potential pitfalls and roadblocks entrepreneurs encounter as they build their companies。 He delineates between control and wealth-motivated founders， and makes the case that it's critical to be aligned across a founding team （and even in some cases investors） on what your core motives are。 Many of his points are backed up with clear statistics on startups that were founded around the time he wrote the book。 It's of course a bit of a dry read give Wasserman does an awesome job diving into all the potential pitfalls and roadblocks entrepreneurs encounter as they build their companies。 He delineates between control and wealth-motivated founders， and makes the case that it's critical to be aligned across a founding team （and even in some cases investors） on what your core motives are。 Many of his points are backed up with clear statistics on startups that were founded around the time he wrote the book。 It's of course a bit of a dry read given the nature of the topic， but I feel so much more confident about going into entrepreneurship after reading this book！ 。。。more
Lukasz Nalepa
，
It seems that this bookis a must read for anyone who has a romantic on creating and running a startup。 For me it was eye-openinig in many cases， and at least I have a better view where dillemmas exists and what severity certain decisions have。 The book is backed up by extensive research along with vivid and well-known examples of first-time and serial enterprenuers， so it’s a great use case study， to undrstand how things are intervowen together， when one siezes the opportunity :）
Fernando Rodriguez-Villa
，
Published in 2012 and it shows。 One of the core message of the book is that founders make a series of choices that guide towards either a "king" （high-control） outcome or a "rich" （large-scale or big payout） outcome。 It also paints that successful founders are inevitably replaced by professional CEOs。 The last 8 years have demonstrated not just that the very best / biggest entrepreneurial results have kept founder-CEOs in supreme positions of control， but that the investment community has recogn Published in 2012 and it shows。 One of the core message of the book is that founders make a series of choices that guide towards either a "king" （high-control） outcome or a "rich" （large-scale or big payout） outcome。 It also paints that successful founders are inevitably replaced by professional CEOs。 The last 8 years have demonstrated not just that the very best / biggest entrepreneurial results have kept founder-CEOs in supreme positions of control， but that the investment community has recognized this and mostly support founders to realize a "king" AND "rich" outcome。It was hard not to think about this anachronism while reading it。 Otherwise， the book did provide some helpful frameworks about the nuts and bolts of very early founding decisions。 。。。more
Adrian Green
，
This is the one of the most relevant books to early stage entrepreneurship I have encountered。 However I felt that the book reused case studies to its detriment。Key points:- wealth based vs control based foundersWealth based founders prioritize financial gains which are inline with investor incentives and may lead to better outcomes and relationships with investors。 An example is Evan Williams at Odeo initially。 Control based founders prioritize maintaining control which may increase probability This is the one of the most relevant books to early stage entrepreneurship I have encountered。 However I felt that the book reused case studies to its detriment。Key points:- wealth based vs control based foundersWealth based founders prioritize financial gains which are inline with investor incentives and may lead to better outcomes and relationships with investors。 An example is Evan Williams at Odeo initially。 Control based founders prioritize maintaining control which may increase probability of getting unwillingly replaced as CEO by the board。- Dangers of founding with friends and family and different funding sources Statistically speaking former coworkers make the best founders。 There are many downsides to founding with friends and family。 Especially family。 Several examples where founding with a romantic partner led to bad situations。 Covers case studies of CEO founder succession。 Entrepreneurs should hedge their bets and watch out for gotchas like liquidation preferences。 They are prone to over confidence。 。。。more
Mark Barnes
，
Some solid information and interesting anecdotes， but it’s a bit too stat heavy for me。
Rasheed Abu-Eideh
，
I wish I had this book 10 years ago。
Mustafa Salamov
，