In December, I shared some Long Thoughts for 2013 on what we learned last year at Pollenizer. One flearn was that agencies can’t build startups. Here’s some of what I said:
Agencies can’t build startups – the need for a ‘burning platform’
We founded Pollenizer with the goal of creating a real and practical way for new companies to begin in an ecosystem that was starved of expertise and talent required to get something built and in market. Our first model was that we provided the team at cost and the co-founder provided the capital. It is more complex now, but this is still at the core.
We have always been aware that a comfortable 9-5 life is not the place where world-beating disruptive businesses are built. They are built from the fires of fear, passion and obsession. They are built from thin-air, and become material slower than we want them to. In the first few months, they can vanish ‘with a thought’ and yet massive amounts of effort, determination and resources are needed for each drop of traction as the business takes form
This takes a ‘founder’ and not an employee.
Pollenizer, like any startup, is in a continuous learning loop. We don’t know what works until we try it. We have a hypothesis, then we validate it. This has mindset has evolved our operational model over the past 5 years from a simple ad-hoc team working for $ and sweat equity to the team configuration and process we have today.
We fix the team. We fix the capital. We fix the time. Then the task is to deliver maximum value from fixed resources. It’s the way of the entrepreneur. We imagine new ends from a given set of means.
With this model, we have achieved extraordinary capabilities in creating new businesses. But where does that last 1% of push come from to make a business out of thin air? This is not about motivating people to be more talented and work harder. We’ve maxed out on that one. We are looking for the entrepreneur inside each and every person and we don’t want to leave it to chance that it awakens.
We will succeed as a ‘company that makes companies’ only if we can unlock, systematically, the entrepreneur inside the people who work on our businesses, that we find ways of sustaining motivation and alignment for the life of the business and, hardest of all, we relinquish control and put it into the people who have the power to force a business to win with sheer willpower, passion, stubbornness…
I was thinking about myself as an entrepreneur.
- I need to know that I can change things tomorrow if I think that is best. Otherwise I am working for the man
- I like to have something at stake. Otherwise that last 1% stays in the box
- I need to know what I am doing will have impact if I nail it. The world will know I was here
- I need to be always moving forward. Because traction is the metric that matters when making something new
- I have a fanatical belief in what I am creating
Crikey. How do you systematically create that context? We are not changing anything about what the teams do each day, we are changing the context of the people that will be doing it.
So here is the new model for how we structure brand new businesses and their teams.
Structure
The teams will now work directly for the brand new company as co-founders not as Pollenizer employees. They will be supported by our infrastructure, training, tools and support services. They will be real owners of the business with real control. There will be enough capital for a 9 month, real run at traction for a team including sales, product management and engineering functions + shared resources from Pollenizer such as design and startup operations support.
Founding Equity
We will recognise the risk for the team with 50% of the founding equity allocated to them and 50% for the founding investment capital.
On first glance, investors look at this and think “Half of the company in an ESOP pool? That’s crazy!” but remember that there is nothing there except potential at this moment. Not one line of code and a business model that is not validated. The people that will make this a reality need to be aligned with the capital investors need for this to succeed. And it’s not ESOP (Employee Share Option Plan) because these are not employees. These are founders. They get founders equity.
Founders look at this and say “I need to GIVE AWAY 50% of the company?!” but there are investors and support networks backing them to the tune of hundreds of thousands of dollars and the team hasn’t started yet. There are people backing them with the riskiest money they will ever invest.
Ramen Pay
Every operational co-founder will get SOME money, but not much. Ramen money. We’ve learned over the years that it is just impossible for 90% of the talented entrepreneurs we have met to survive on $0 for a year.
Validation
The new model has been received well by investors and co-founders and we have already started a new business under it. As always, we provide a way for investors to partner with us to co-found disruptive new businesses and now we also have a model which allows a new generation of entrepreneur to participate. Everyone is aligned to make the business work over the long haul. And it is – always – a long haul.
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