Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.
In 2011 serial entrepreneur Matt Weeks described what he calls the “startup social contract”. In it he talks about the tradeoff of salary for equity and that the basic premise is that the employees have the company’s back, the company has theirs and what happens if it is violated.
If the workers and/or the exec team come to disrespect, disbelieve or ignore this social contract, the company is lost.
Zach Ware, managing partner of VTF Capital, adds another dimension to what it means to have your people’s back and it’s crucial information as funding tightens.
“There is absolutely no reason for a company to shut down overnight. That’s a result of a selfish set of decisions a founder made.”
Ware spells it out by comparing what he did in his own startup, Shift vs. what Maren Kate Donovan, when she shut down Zirtual and laid off 400 people by email.
To start with, Donavon claimed her CFO gave her incorrect numbers (he denies it) and that she was pitching to the last minute.
“The reason we couldn’t give more notice was that up until the 11th hour, I did everything I could to raise more money and right the ship.”
In actuality she bet 400 other people’s lives on a roll of the funding dice and then took the coward’s way out using email.
Ware finds her reasoning specious.
“Every founder should have a real-time understanding of their business. It doesn’t matter who does it. You have to know it. You have to know your horizons,”
Choosing to not only be a founder, but also CEO, means that, when all is said and done, the buck stops with you. Period.
No reasons, no excuses.
Image credit: HikingArtist