What motivates an Entrepreneur?

•  Profit •  Drive to control

Types of entrepreneurs !  “Opportunistic entrepreneurs” are motivated by

financial gains.

!  “Craftsman entrepreneurs” (classic) are driven by the need for autonomy.

Aspects to consider !  Lack of resources is the main factor leading to

failure in new ventures.

!  The idea of giving away control can conflict with the motivation of entrepreneurs.

Managing control PROS CONS

Giving away control •  They get the resources to help build the company.

•  They give up equity and decision making control.

Maintaining control •  Retain equity and ability to manage company.

•  Deemed not as a valuable company.

•  Have greater risk of early failure.

Incorporating outside resources and giving away control

Rate of Growth

Value of the company

Risk of Failure

Uncertainty

Some examples of outside resources

!  Investors

!  Co-founders

!  Non-founding executives

!  Think CRAZY QUILT

!  Can you think of other Frameworks that are connected to this scenario?

Entrepreneurs retaining control of their company

Risk of Failure

Uncertainty

Rate of Growth

Potential value of the company

Hypotheses 1.  If the entrepreneur holds the CEO position, the value of the entrepreneur’s

equity stake will be lower.

2.  If the entrepreneur controls the board of directors, the value of the entrepreneur’s equity stake will be lower.

3.  Entrepreneurs who had general management experience before founding the venture will have more valuable equity stakes in their venture.

4.  If the entrepreneur has been replaced as CEO or if outsiders control the board of directors, the company’s valuation will be higher.

The Rich vs. King Trade-off

Some examples FLOP KING RICH RICH & REGAL

Failed Shark-Tank contestant

Small family business

Jay-Z (part owner of Brooklyn Nets Basketball Team)

Richard Branson

•  Can you think of some more?

The Rich vs. King Graph