Vijay Anand | The Startup Guy.

Who Owns Your Company?

// June 16th, 2009 // 14 Comments » // Business, Entrepreneurship, India

Once in a blue moon, this situation repeats itself. The board of a company along with the stake holders and investors are pushing the entrepreneur towards a direction and he/she is really not liking it, and tries the ownership card. “This is my company, and I do have the best in mind for it”. Nobody usually reacts to those words, but technically one could throw you out for making statements like that. I’ll start with who doesnt own a company – Its the entrepreneur.

Whoever sold you the romanticism that being an entrepreneur meant being your own boss, was clearly lying. You really never escape the chain of command and reporting structure so easily – not in a civilized society. So Its no wonder that things don’t span out as they say. As an employee you might be accountable to your boss, but as an entrepreneur you are accountable to all of your clients, stakeholders and employees. And every one of them holds you responsible to have the answers and do your best – that’s no different from being an employee times ten. Think about it.

So here’s two things you must know. It is crucial to understand this because this sets the context to understand a whole lot of things that happen through the course of the company.

1. The day you incorporate your company, you no longer own it. You want to own something, keep it a proprietory firm or under a partnership (wouldn’t recommend it, as the stats are as high as 99% of partnerships ending in breakups). It might not be a bad idea to keep it as a family business, but there as well its joint ownership.

2. The Day you agreed on a termsheet and took money from your investors, you made up your mind that you were going to sell your company for a good price someday. Investors invest looking for returns and that returns are never going to happen without an exit; And an exit means a sale. Read that line a few times, it helps to get it into your head. You have in all means sold your company when you take investment. Period.

So the obvious question arises. Why on earth would anyone want to be an entrepreneur despite all these gory truths. Well, a couple of reasons. a) You still do have the capacity and capability to build something from scratch, scale it and make money in the process – You are still one of the major stakeholders in the firm. and b) What you want to do to create this value (be it money or impact or fame) is all left to you – atleast in the beginning.

The intent for writing this article is for one thing. I see and come across enough entrepreneurs who want to own more than 50% of the company. Thats almost the sure way to kill the company and strangle some relationships, because it shows that you haven’t gotten the first thing about a corporation right – you cant own it. And the only way to scale it is to give up control, bring in the right people, and yet have enough of a leeway to make a decent exit – note how the stake you hold is towards a better return, rather than control.

And in all this does the obvious question remain. Who does own a corporate? They say it becomes an entity of its own, can own assets, can incur liabilities, can attract investments and is a being of its own shielding its board and management from most liabilities. Who then owns it? The answer to that is probably the most shocking. The Government. The Government is what owns a corporate – actually every corporate. The rules of the land, enable and provide the space for passionate, enthusiastic and enterprising individuals to spot an opportunity, exploit it, create jobs, add value, attract investment, grow the company, expand, create a board to make their own decisions and directions for the entity, make an exit, or even take it public. But at the end of the day, when and if it does shut down and incurs a loss, the losses go away with the fading memory of the company. And thats the shield that a government provides towards the entrepreneur – probably the best of freedom for an individual to create wealth and value the fast track way.

As far as the govt is concerned, creating jobs is one of its prime mandates. And corporations are instruments towards that cause.

In the light of that, look at the bailouts. You might see a slightly different picture.

Dont Confuse a Mentor with a Coach

// June 15th, 2009 // No Comments » // Uncategorized

Its rare, but now and then you do find someone who is equally passionate about that idea thats stuck in your head. You know you often struggle to comprehend, let alone verbalize and explain what you are going after, but these rare mentors do get you. Really they do. They’d pitch in when you are ideating, would love to throw in their two cents to make your idea/product better, and more than anything, they’ll spend every network and contact that they got to help you succeed.

And thats where you usually make the mistake. You take them for a friend, or even worse as a coach.

Do you know the difference between a mentor and a coach? A coach usually brings out the best in you, helps find answers within yourself and more often than not is that silent reinforcer to help you believe in yourself. If you are short on active imagination, remember every movie that you know of where the “Coach” is giving that inspirational talk before a big game as to why they can do it.

A mentor doesnt do that.

A Mentor is usually never there to guide you when you are down with your personal issues. Thats exactly where a mentor is better than a coach, because that mentor of yours in most cases is also someone who has walked the path you are walking, and knows that to become strong, you MUST fight your demons yourself. That’s the only way you’ll succeed, and can face a client, customer or worse yet, an Investor. And the mentor is not going to be there to get you on your high horse everytime you enter a board meeting saying “You can make it”.

Mentors at best are like eagles, who will sit with you, make elaborate plans, know your full potential and then once your wings are out and ready to fly, will break the nest and throw you off the cliff. if you die, you die trying, but if you would just flutter your wings, you’ll be what it takes to be.

So here’s a lesson. If you have a mentor, and I presume you had your reasons for picking that person to mentor/advise you? Well, remember those reasons over and over again. You’ll love him at first, and then will hate him and call him names. But the one that truly cares, will push you to better heights and make you the entrepreneur that the world is ready for. And the only way you’ll notice this type is when you see the quality that resonates with you. Sheer passion, and there is never a moment of indifference.

Dont make the mistake of wanting a Coach, where you actually need a mentor.