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@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The Founder’s Dilemmas 
Bruno Lowagie 
iTextGroup
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Who is Bruno Lowagie? 
•Original developer of iText®, an open source PDF library 
•Author of “iText in Action” books published by Manning 
•Founder / CEO of the iText Group 
•iText Group NV (Belgium) 
•iText Software BVBA (Belgium) 
•iText Software Corp (USA) 
•Awards 
•Deloitte’s Technology Fast 50 
•2013: 3rd in Belgium, 53rdin EMEA 
•2014: Winner (Belgium) 
•BelChamEntrepreneurship Awards 
•Winner “Most Promising Company of the Year 2014”
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Control versus Wealth decisions
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
IT’SUNFORTUNATEBUTTRUE: IFENTREPRENEURSHIPISABATTLE, most casualties stem from friendly fire or self-inflicted wounds.
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Entrepreneur = Wealth
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Entrepreneur = Wealth 
p15-18: If many founders really believe this, it appears they are largely wrong. Entrepreneurs earned 35% less over a 10 year period then they could have earned in a paid job (Hamilton, 2000). 
Entrepreneurs as a class make only as much money as they could have if they had been employees. In fact, entrepreneurs make less, if you account for the higher risk (American Economic Review, 2002).
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Entrepreneur = Control 
•Entrepreneur: 
•Power & Influence 
•Autonomy 
•Managing people 
•Employee: 
•Security 
•Recognition 
•Affiliation
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Entrepreneur = Control 
When I analyzed 212 American start-ups that sprang up in the late 1990s and early 2000s, I discovered that most founders surrendered management control long before their companies went public. By the time the ventures were three years old, 50% of founders were no longer the CEO.
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Scientific Approach 
Noam Wasserman: “In my experience, foundersoften make decisions that conflict with the wealth-maximization principle. I noticed that some options had the potential for generating higher financial gains but others, which founders often chose, conflicted with the desire for money.” 
RESEARCH NEEDED: 
10,000 companies 
between 2000 and 2009
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Decisions 
•Cofounders (chapters 3-7) 
•Solo vs. Team 
•Relationships 
•Roles 
•Rewards 
•Hires (chapter 8) 
•Relationships 
•Roles 
•Rewards 
•Investors (chapter 9) 
•Self-fund vs. Outside capital 
•Sources of capital 
•Terms 
•Board of Directors 
•Successors (chapter 10) 
•Trigger of succession 
•Openess to succession 
•Desired role after succession 
•Other factors 
•Preferred rate of startup 
•Capital intensity 
•Core founder’s capitals
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Pick your Quadrant 
Complete control 
< $$$ 
Little control 
> $$$
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Control Decisions 
•Cofounders (chapters 3-7) 
•Solo (or weak cofounders) 
•From immediate circle 
•Be the CEO 
•Maintain most equity 
•Hires (chapter 8) 
•Close personal network 
•Keep control of key decisions 
•Hire less expensive juniors 
•Investors (chapter 9) 
•Self-fund; “bootstrap” 
•Friends, fools, family 
•Resist investor-friendly terms 
•Avoid official board 
•Successors (chapter 10) 
•Avoid until forced 
•Resist giving up CEO position 
•Prefer to leave 
•Other factors 
•Gradual to moderate growth 
•Low capital intensity 
•Can build startup without help 
Most likely outcome: 
•Maintain control 
•Build less value 
“KING”
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The “King” quadrant 
Complete control 
< $$$ 
Little control 
> $$$ 
KING
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Wealth Decisions 
•Cofounders (chapters 3-7) 
•Build team 
•Find the best founders 
•Delegate decision-making 
•Share equity 
•Hires (chapter 8) 
•Hire experienced employees 
•Delegate decision-making 
•Incent with cash or equity 
•Investors (chapter 9) 
•Take outside capital 
•Target angels or VCs 
•Be open to terms 
•Be open to losing control 
•Successors (chapter 10) 
•Initiate succession “in time” 
•Be open to giving up the CEO role 
•Remain executive (expertise) 
•Other factors 
•Fast to explosive growth 
•High capital intensity 
•Fill gaps by involving others 
Most likely outcome: 
•Build financial value 
•Imperil control 
“RICH”
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The “Rich” quadrant 
Complete control 
< $$$ 
Little control 
> $$$ 
KING 
RICH
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Chances at succes 
•If you go for being King: 
Maintain control: 80% x 80% x 80% = 51% probability 
Build fullest value: 20% x 20% x 20% = 1% probability 
•If you go for being Rich: 
Maintain control: 20% x 20% x 20% = 1% probability 
Build fullest value: 80% x 80% x 80% = 51% probability 
•If you go for something in-between: 
Maintain control: 80% x 80% x 20% = 13% probability 
Build fullest value: 20% x 20% x 80% = 3% probability
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The “Exception” quadrant 
Complete control 
< $$$ 
Little control 
> $$$ 
KING 
RICH 
EXCEPTION
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The “Failure” quadrant 
Complete control 
< $$$ 
Little control 
> $$$ 
KING 
RICH 
EXCEPTION 
FAILURE
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Pick your Quadrant!
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The pie seen from your side 
$1,000,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
The pie(s) seen from a VC’s side 
$1,000,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS 
$1,000 
YOU 
INVESTORS
@bruno1970 @iText 
#DV14 #FoundersDilemmas 
Q & A
Devoxx 2014: The Founder's Dilemmas

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Devoxx 2014: The Founder's Dilemmas

  • 1. @bruno1970 @iText #DV14 #FoundersDilemmas The Founder’s Dilemmas Bruno Lowagie iTextGroup
  • 2. @bruno1970 @iText #DV14 #FoundersDilemmas Who is Bruno Lowagie? •Original developer of iText®, an open source PDF library •Author of “iText in Action” books published by Manning •Founder / CEO of the iText Group •iText Group NV (Belgium) •iText Software BVBA (Belgium) •iText Software Corp (USA) •Awards •Deloitte’s Technology Fast 50 •2013: 3rd in Belgium, 53rdin EMEA •2014: Winner (Belgium) •BelChamEntrepreneurship Awards •Winner “Most Promising Company of the Year 2014”
  • 3. @bruno1970 @iText #DV14 #FoundersDilemmas Control versus Wealth decisions
  • 4. @bruno1970 @iText #DV14 #FoundersDilemmas IT’SUNFORTUNATEBUTTRUE: IFENTREPRENEURSHIPISABATTLE, most casualties stem from friendly fire or self-inflicted wounds.
  • 5. @bruno1970 @iText #DV14 #FoundersDilemmas Entrepreneur = Wealth
  • 6. @bruno1970 @iText #DV14 #FoundersDilemmas Entrepreneur = Wealth p15-18: If many founders really believe this, it appears they are largely wrong. Entrepreneurs earned 35% less over a 10 year period then they could have earned in a paid job (Hamilton, 2000). Entrepreneurs as a class make only as much money as they could have if they had been employees. In fact, entrepreneurs make less, if you account for the higher risk (American Economic Review, 2002).
  • 7. @bruno1970 @iText #DV14 #FoundersDilemmas Entrepreneur = Control •Entrepreneur: •Power & Influence •Autonomy •Managing people •Employee: •Security •Recognition •Affiliation
  • 8. @bruno1970 @iText #DV14 #FoundersDilemmas Entrepreneur = Control When I analyzed 212 American start-ups that sprang up in the late 1990s and early 2000s, I discovered that most founders surrendered management control long before their companies went public. By the time the ventures were three years old, 50% of founders were no longer the CEO.
  • 9. @bruno1970 @iText #DV14 #FoundersDilemmas Scientific Approach Noam Wasserman: “In my experience, foundersoften make decisions that conflict with the wealth-maximization principle. I noticed that some options had the potential for generating higher financial gains but others, which founders often chose, conflicted with the desire for money.” RESEARCH NEEDED: 10,000 companies between 2000 and 2009
  • 10. @bruno1970 @iText #DV14 #FoundersDilemmas Decisions •Cofounders (chapters 3-7) •Solo vs. Team •Relationships •Roles •Rewards •Hires (chapter 8) •Relationships •Roles •Rewards •Investors (chapter 9) •Self-fund vs. Outside capital •Sources of capital •Terms •Board of Directors •Successors (chapter 10) •Trigger of succession •Openess to succession •Desired role after succession •Other factors •Preferred rate of startup •Capital intensity •Core founder’s capitals
  • 11. @bruno1970 @iText #DV14 #FoundersDilemmas Pick your Quadrant Complete control < $$$ Little control > $$$
  • 12. @bruno1970 @iText #DV14 #FoundersDilemmas Control Decisions •Cofounders (chapters 3-7) •Solo (or weak cofounders) •From immediate circle •Be the CEO •Maintain most equity •Hires (chapter 8) •Close personal network •Keep control of key decisions •Hire less expensive juniors •Investors (chapter 9) •Self-fund; “bootstrap” •Friends, fools, family •Resist investor-friendly terms •Avoid official board •Successors (chapter 10) •Avoid until forced •Resist giving up CEO position •Prefer to leave •Other factors •Gradual to moderate growth •Low capital intensity •Can build startup without help Most likely outcome: •Maintain control •Build less value “KING”
  • 13. @bruno1970 @iText #DV14 #FoundersDilemmas The “King” quadrant Complete control < $$$ Little control > $$$ KING
  • 14. @bruno1970 @iText #DV14 #FoundersDilemmas Wealth Decisions •Cofounders (chapters 3-7) •Build team •Find the best founders •Delegate decision-making •Share equity •Hires (chapter 8) •Hire experienced employees •Delegate decision-making •Incent with cash or equity •Investors (chapter 9) •Take outside capital •Target angels or VCs •Be open to terms •Be open to losing control •Successors (chapter 10) •Initiate succession “in time” •Be open to giving up the CEO role •Remain executive (expertise) •Other factors •Fast to explosive growth •High capital intensity •Fill gaps by involving others Most likely outcome: •Build financial value •Imperil control “RICH”
  • 15. @bruno1970 @iText #DV14 #FoundersDilemmas The “Rich” quadrant Complete control < $$$ Little control > $$$ KING RICH
  • 16. @bruno1970 @iText #DV14 #FoundersDilemmas Chances at succes •If you go for being King: Maintain control: 80% x 80% x 80% = 51% probability Build fullest value: 20% x 20% x 20% = 1% probability •If you go for being Rich: Maintain control: 20% x 20% x 20% = 1% probability Build fullest value: 80% x 80% x 80% = 51% probability •If you go for something in-between: Maintain control: 80% x 80% x 20% = 13% probability Build fullest value: 20% x 20% x 80% = 3% probability
  • 17. @bruno1970 @iText #DV14 #FoundersDilemmas The “Exception” quadrant Complete control < $$$ Little control > $$$ KING RICH EXCEPTION
  • 18. @bruno1970 @iText #DV14 #FoundersDilemmas The “Failure” quadrant Complete control < $$$ Little control > $$$ KING RICH EXCEPTION FAILURE
  • 19. @bruno1970 @iText #DV14 #FoundersDilemmas Pick your Quadrant!
  • 20. @bruno1970 @iText #DV14 #FoundersDilemmas The pie seen from your side $1,000,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS
  • 21. @bruno1970 @iText #DV14 #FoundersDilemmas The pie(s) seen from a VC’s side $1,000,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS $1,000 YOU INVESTORS
  • 22. @bruno1970 @iText #DV14 #FoundersDilemmas Q & A