Common Mistakes Founders Make with Fred Wilson

Speaker 1: Welcome to the Daily Bolster. Each day we welcome transformational executives to share their real world experiences and practical advice about scaling yourself, your team, and your business.

Matt Blumberg: Welcome to The Daily Bolster. I'm Matt Blumberg. I'm the founder and CEO of Bolster, and I'm here today with Fred Wilson. Fred is the founder and a partner at Union Square Ventures. He's the author of the avc. com blog. Fred has been on the board of both of my last company and my current company over 20 years now. So Fred, welcome to The Daily Bolster.

Fred Wilson: Oh, it's so exciting. I love the idea of a daily bolster. It's going to be a lot of fun. I'm going to be a big consumer of the Daily Bolster.

Matt Blumberg: Excellent. Well, so here's the topic for today. I don't know if you remember this, this may be a standard for you or it may not be, but the first time you invested in Return Path in 2001, you and I met afterwards or we were on the phone or something around the closing, and you said to me, " Don't F it up."

Fred Wilson: Oh God, I hope I've got a little better. That's venture capital malpractice right there.

Matt Blumberg: So I love that. I brought that back to the team. I was like, " Guys, Fred says we can't F it up." And so you'll be happy to know our team uses that language quite a bit around things like that. So I thought a good question for you today would be, what are a few things that you have seen founders mess up early in the life of the company that makes it harder for them to be successful down the road? It doesn't preclude them, it doesn't kill the company, but what are a few things that you've seen founders mess up early that makes it difficult to be successful later?

Fred Wilson: So I'm going to give you two things that are sort of team related, and one thing that's going to be funding related. So on team, I think one of the most problematic things is co- founders and I think that founders should not have co- founders. They should be the only founder, and that they should have a founding team who gets special equity and special status, but not have a co- founder. Because the problem with co- founders is then it's not really clear who's in charge. Because even if you have a founding CEO, if they have co- founders, those co- founders kind of feel like they share the vision and control over the vision. And I think somebody needs to own that. So, number one is when you start a company, you're the founder, the only founder, you have a founding team, but you don't have co- founders. So that's thing one. Thing two was kind of related but different, which is, and Matt, you've taught me this, you have to have an org structure for today. And then you also need to have an idea of what your org structure's going to look like a year from now, two years now, three years from now, four years from now. And as you hire, you need to hire with a view that org structure's going to evolve. And what we all know is that some of the people you hire will continue to be in that org structure and some won't. And so I think it's very important when you hire people, particularly if they're going to report to you, whether it's day one or year one or whatever, you need to set the expectation that they may not always report to you, and also that they may eventually have a boss. And you need to do that day one when you hire them. And you need to say to them that at this company, our culture is that we're all going to do what's in the best interest of the company, and we're not going to put what is in our interests in front of the company's interests. And that needs to be said day one. Because if you don't set that expectation day one, then when you do layer them or something else, there's going to be all this drama. And it's just better to tell them it's going to happen day one.

Matt Blumberg: That is a big one to mess up. You promise them or you leave it silent.

Fred Wilson: Right.

Matt Blumberg: Yeah. Okay. That's two good ones.

Fred Wilson: And then the third one, this will sound self- serving and it maybe is self- serving, but it's also true. Is I think founders often optimize for valuation when they finance the company and they don't optimize for the right financial partner. And it's just, there are so many examples of founders getting misaligned with their investors, and it's because they picked the wrong investor for the companies. An investor didn't share their vision, or an investor who didn't care enough about the company or whatever, and they just get sideways. And it's better to take a lower price from somebody who you're confident is going to be a great partner. And I think that works out better in the long run.

Matt Blumberg: I love that. And since I opened this with a quote from you, I'm going to close this with a quote from you, which is one of my favorite learnings from you, which is directly related to your third point. Which is, " Anytime both parties of the deal are a little bit unhappy, it means it's the right deal."

Fred Wilson: Yeah, that's true. As you got to give a little bit.

Matt Blumberg: All right, Fred, thank you for joining Daily Bolster.

Fred Wilson: Yeah. I can't wait to listen to it. I hope it came out well.