How We Secretly Lose Control of Our Startups

As Founders, we're so worried about losing control of our startups to investors that we completely overlook how we secretly lose control to everyone else.

The fact is, most Founders don't lose control of their startups to investors; they lose control of their startups to their own organizations, whether or not they even have investors. We do it willingly, in the name of progress, and we celebrate those milestones the entire time, all the while being totally unaware of how we've let things slip.

It's not until years later when we realize we can't make key decisions independently, we can no longer shape the product vision how we'd like, or we simply can't get anything done anymore, that we realize we've lost control through our own doing.

Co-Founder Complexity

The most significant place that we practically stumble over ourselves to give away control is when we recruit another Co-Founder. That's not to say Co-Founders are a bad thing, they can be great! But the moment we add one more person who's not us to the decision tree, we've severed control of our destiny.

The logic going into that decision always sounds reasonable: "Well, I want someone to help me balance out my decisions." Right. In an ideal world, that sounds perfect. But what about when one of us wants to sell the company and the other doesn't? Do we want to give up the right to that decision?

The "Co-Founder Fantasy" usually involves us agreeing on the outcome, not being locked in a legal battle over disagreements. We need to treat a Co-Founder decision not just for the upside of the help it can potentially provide, but for the permanent loss of independent control that we will be giving up.

Customers Control Cash

We often don't think about losing control of our companies to people outside of our actual company until we realize what control really comes down to—cash. And the people who really control the cash are our customers because without them, we have no cash!

I learned this lesson very early in my career when we landed a client at our agency that would go on to pay us $10 million per month in fees. At that price point, when the client calls, you drop everything and do whatever the hell they want because hundreds of people's jobs are on the line. You wake up thinking you work for yourself, but you don't. You work for the person on the other end of that phone call, and they are very, very well aware of that fact!

We cede control to our customers in so many forms, but it always comes back to our need for cash. Sometimes it forces us to support legacy products we can't break from. Sometimes it forces us to do work we hate. Sometimes it forces us to work with people we can't stand. All of that maps back to the loss of our own agency because we've become a slave to our customer's cash.

Staff Growth Shrinks Control

We think when we grow and add staff that we now have all of these people reporting to us and our power base grows. That's not what's happening. What's happening is that our ability to tightly control the outcomes throughout our organization is getting diluted, hire by hire, manager by manager, until what's left is the best decision of our last hire.

Even though we may technically be at the top of that org chart, we are still fundamentally obfuscating ourselves from thousands of micro decisions as they happen, which taken as a whole, can prevent us from substantially controlling the outcome of our company, and in the extreme, work against our goals.

While we need to keep an eye on growth and expansion, we need to be equally mindful that every new hire is a division of control, not just an expansion of power. We need to leave each division with a check and balance to ensure that our initial goals are constantly maintained and that we have the mechanisms in place to do a hard reset the moment we feel that our overall grip on the future of our startup is lost.

In Case You Missed It

Beware the "Superstar Advisor" Sham (podcast) Many Startup companies invest in an advisor to tap into connections that can possibly help raise additional capital. Yet, this investment does not promise successful returns because some introductions don’t end with the results founders are hoping for.

Focus On What You Don’t Want To Do What happens when instead of worrying about the things we want to do, we focus on the things we never, ever want to do again? How can we start to take huge steps in reducing our overall stress?

Growth Isn’t Always Good In many cases, our focus on growth runs counter to what our goals really should be: becoming a better startup — not just a bigger one.

Wil Schroter

Wil Schroter is the?Founder + CEO @ Startups.com , a startup platform that includes Bizplan , Clarity , Fundable , Launchrock , and Zirtual . He started his first company at age 19 which grew to over $700 million in billings within 5 years?(despite his involvement).?After that he launched 8 more companies, the last 3 venture-backed, to refine his learning of what not to do. He's?a seasoned expert at starting companies and a total amateur at everything else.