Bootstrapped Entrepreneur – Not Good For The Venture
I have been an early stage investor for quite some time, and have the pleasure of working with and investing in several on an ongoing basis in my business.
One of the things I value in the CEO of an early-stage company is their good stewardship of the funds with which their investors entrust them. An entrepreneur who manages expenses, does not let cost run away from them, is one who understands that there must always be a strong obligation to use invested funds to get the business to that next milestone.
Often, the executive has put everything they have into their venture. In addition sacrifices, to a significant level, they forsake their own income to assure that maximum funds are allocated to the business.
At the outset, such action by the entrepreneur is very appropriate. Early stage investors are investing in an idea, or at best in a most viable product where monetization and customer acquisition has yet to be proven.
However, as the business grows, and the venture moves beyond A-round of investment into more substantial rounds to scale proven models, I would argue that the income-selflessness of the entrepreneur can actually be detrimental – substantial time of minimal income has now passed for the entrepreneur, and the stress of no time off, constant pressure of the business and deep personal sacrifices, starts to take a toll.
Not good. This phase in an early stage company requires a balanced, forward thinking leader who takes risks and action of scale, of import. Bigger money is now being invested, investors are more astute and demanding, and the business levers are significant. At such a time, financial pressures on the entrepreneur risk comfort of shorter term-decision making (consciously or sub-consciously). Just at the time when staying power and steadiness of purpose are required, we do not want any financial concerns plaguing the entrepreneur.
As such, I am very much in favor of later investment rounds allowing the entrepreneur (and some other executives as required) to release some of their equity – to participate in the success of the venture to-date. Providing some surety to their personal situation, allows the entrepreneur to take the correct view of the business. Clearly, the entrepreneur and their team must continue to be adequately vested, but there is an opportunity to reap a little to provide needed peace of mind and personal staying power!
One of the things I value in the CEO of an early-stage company is their good stewardship of the funds with which their investors entrust them. An entrepreneur who manages expenses, does not let cost run away from them, is one who understands that there must always be a strong obligation to use invested funds to get the business to that next milestone.
Often, the executive has put everything they have into their venture. In addition sacrifices, to a significant level, they forsake their own income to assure that maximum funds are allocated to the business.
At the outset, such action by the entrepreneur is very appropriate. Early stage investors are investing in an idea, or at best in a most viable product where monetization and customer acquisition has yet to be proven.
However, as the business grows, and the venture moves beyond A-round of investment into more substantial rounds to scale proven models, I would argue that the income-selflessness of the entrepreneur can actually be detrimental – substantial time of minimal income has now passed for the entrepreneur, and the stress of no time off, constant pressure of the business and deep personal sacrifices, starts to take a toll.
Not good. This phase in an early stage company requires a balanced, forward thinking leader who takes risks and action of scale, of import. Bigger money is now being invested, investors are more astute and demanding, and the business levers are significant. At such a time, financial pressures on the entrepreneur risk comfort of shorter term-decision making (consciously or sub-consciously). Just at the time when staying power and steadiness of purpose are required, we do not want any financial concerns plaguing the entrepreneur.
As such, I am very much in favor of later investment rounds allowing the entrepreneur (and some other executives as required) to release some of their equity – to participate in the success of the venture to-date. Providing some surety to their personal situation, allows the entrepreneur to take the correct view of the business. Clearly, the entrepreneur and their team must continue to be adequately vested, but there is an opportunity to reap a little to provide needed peace of mind and personal staying power!
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