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How "People-Problems" Can Confound Early Stage Ventures

Wendy Torrance

Wendy TorranceSome of the very first decisions founders must make early on in their ventures are crucially important to the future of the business. Many of these decisions concern the ubiquitous "people problems" that challenge even experienced entrepreneurs. When should I found? Should I co-found with someone? With whom? How should we split the equity? Bad or ill-informed choices at critical junctures could have significant consequences for startups. In fact, research has suggested that 65 percent of new firm failures were related to problems within the management team.

It was this striking figure that led our subject matter expert, Noam Wasserman, an associate professor at Harvard Business School, to study more than 10,000 firms in an attempt to understand, in detail, these challenges in early stage ventures. Wasserman's work, presented in his book Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls that Can Sink a Startup makes an unparalleled and original contribution to our understanding of startup companies and the factors that can make (or break) their path to success. 

These important early choices can often be (wrongly) informed by idiosyncratic lessons from a small number of stories about successful or unsuccessful ventures.  For example, an admired and successful entrepreneur founds a company with his brother, and their company succeeds by leaps and bounds. This can give the impression that founding with family members is always an easy road.  Or, consider the tale of a pair of co-founders who split the equity in their company 50/50 and are both as pleased as can be that they overcame that hurdle in a fair and uncomplicated way.  In Wasserman’s series with Founders School you’ll learn why these exemplary stories might hide snares and pitfalls that could endanger a new startup.

In his series, Wasserman speaks to the decision to found, and explores principles for building a founding team. He tackles the tough question of relationships between founding team members and explores the often difficult, and touchy, subject of equity division.  He encourages founders to consider their goals for their company along with the goals of co-founders and investors, in order to understand what the path to growth might look like.

I have seen, first hand, the transformative effect of Wasserman’s lectures in practice.  Several entrepreneurs I’ve met with have told me that Wasserman’s lessons will fundamentally change the way they approach team building, with one adding, “his insights are second to none.”  His work in the classroom has been recognized by students at Harvard Business School and the Academy of Management. 

We invited you to explore our series on Founder’s Dilemmas.  Watch Wasserman’s informative lectures.  Learn how you can shape early team and people-related decisions in your company.  Learn to avoid the pitfalls.  Hear from entrepreneurs about how they have managed the challenges, and map your own plan to avoid team-related complications.  Finally, ask yourself the pivotal impact question:  How can what I’ve learned today change what I do tomorrow?

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