Thoughts From a Founder on What Motivates Founders (& What This May Mean in a “No Exit” Paradigm)

What follows is an excerpt from mail I received last night from the co-founder of a Web 2.0+ company (client), commenting on my prior "What, No Exit" post. With his permission, I’ve edited his mail slightly and am posting it, because he drills right down to the question of what motivates a person to start a company, and asks an important question of how or whether founders and investors might align interests in the new landscape. 

"We talked about this on Sunday, and it's gnawing at me, this question of how business models and the balance of power between entrepreneurs and investors are fundamentally changing in this new-new (Web 3.0?) economy."

"Here's the thing I wonder about founders:  are they typically in it for the exit, or even for the possibility of long-term operation of a going concern? Or are they in it to make their mark, to say, I had an idea that mattered – and, oh yeah, I needed some money along the way to realize my vision?"

"I might go so far as to suggest that many founders are intrinsically more motivated by delivering value to customers than return to investors. (A wise startup veteran once told me that getting funding doesn't change the business model, it just delays the ultimate reckoning.) It seems to me that the predominant model of the past couple decades has served to smooth out these discontinuities in interests by saying, in effect, 'play along and everyone will get rich.'"

"I guess what I'm asking is to what degree, in the absence of liquidity events or exits with enough to go around, entrepreneurs' and investors' interests are truly aligned. And if they aren't, what will the new models look like?"

Comments

[Brad Hefta-Gaub]

As an entrepreneur, I can honestly say I am very excited about the new new world order. Why? Because I am motivated by the same ideas expressed by your client. I am motivated by creating value for people/the world (my customers). I am motivated by having an idea that matters as measured "in the long run"... and to achieve that goal it means building a long term sustainable business.

I guess I'd like to say I'm from the Warren Buffett school of thought, I want to be part of value creation, as that will in the long run create the biggest benefits for myself and my partners (employees, investors, customers, etc.).

I believe the new world order will shake out those "investors" motivated purely by flipping and "get rich quick schemes".

[William Carleton]

Brad, thank you for your comment. It will be fascinating to see what new investment models emerge from the re-thinking all of us are doing.

[Mike Roberts '97]

I agree as well.. as an entrepreneur in sports and entertainment, value and solutions are as important as ever being that the industries can no longer breeze to riches with mediocre products and services. I do find it difficult however to raise capital for our models and concepts because they are new and few people truly understand the economics of sports and entertainment (primarily music).