In this talk, scheduled for May 28th, Bruno Lowagie, the CEO of the iText Software Group, will talk about the book "The Founder's Dilemmas" by Noam Wasserman, explain the different Control vs. Wealth decisions discussed in this book, and apply what is said in the book to his own business.

1. Control
vs.
Wealth
decisions
BizCamp #8: May 28, 2013 @ Buda Kortrijk
Bruno Lowagie, CEO iText Software

2. Bruno Lowagie, CEO iText Software
IT’S UNFORTUNATE BUT TRUE:
IF ENTREPRENEURSHIP IS A
BATTLE, most casualties
stem from friendly fire or
self-inflicted wounds.

3. Bruno Lowagie, CEO iText Software

4. Bruno Lowagie, CEO iText Software
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).

5. Bruno Lowagie, CEO iText Software
Entrepreneur:
Power & Influence
Autonomy
Managing People
Employee:
Security
Recognition
Affiliation

6. Bruno Lowagie, CEO iText Software
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.

7. Bruno Lowagie, CEO iText Software
In my experience, founders often 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

8. Bruno Lowagie, CEO iText Software
• 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
Decisions

9. Bruno Lowagie, CEO iText Software
Complete control
< $$$
Little control
> $$$

10. Bruno Lowagie, CEO iText Software
• 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
Control decisions
Most likely outcome:
• Maintain control
• Build less value
“KING”

11. Bruno Lowagie, CEO iText Software
Complete control
< $$$
Little control
> $$$
KING

12. Bruno Lowagie, CEO iText Software
• 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 CEO role
• Remain executive (expertise)
• Other factors
• Fast to explosive growth
• High capital intensity
• Fill gaps by involving others
Wealth decisions
Most likely outcome:
• Build financial value
• Imperil control
“RICH”

13. Bruno Lowagie, CEO iText Software
Complete control
< $$$
Little control
> $$$
KING
RICH

14. Bruno Lowagie, CEO iText Software
Chances at success:
Maintain control: 80% x 80% x 80% = 51% probability
Build fullest value: 20% x 20% x 20% = 1% probability
Maintain control: 20% x 20% x 20% = 1% probability
Build fullest value: 80% x 80% x 80% = 51% probability
If you go for being King:
If you go for being Rich:
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
Maintain control: 20% x 80% x 20% = 3% probability
Build fullest value: 80% x 20% x 80% = 13% probability

15. Bruno Lowagie, CEO iText Software
Complete control
< $$$
Little control
> $$$
KING
RICH
EXCEPTION

16. Bruno Lowagie, CEO iText Software
Complete control
< $$$
Little control
> $$$
KING
RICH
EXCEPTION
FAILURE

17. Bruno Lowagie, CEO iText Software
• Cofounders (chapters 3-7)
• Solo (2000)
• “Couple-preneur” (2008)
• We are the CEO, CTO, CFO
• We have 100% ownership
• Hires (chapter 8)
• Own network; first hire in 2011
• No C-level hires, no real VPs
• Experimented with juniors
• Investors (chapter 9)
• Bootstrap
• No external money
• No angels, no VCs
• No boards
• Successors (chapter 10)
• Adapted to new tasks
• Being CEO = I “underperform”
• Should I become chairman?
• Other factors
• Slow (00-09) to explosive (10-...)
• Zero to substantial
• New challenges require new skills
iText decisions
2009 2010 2011 2012
GM EBITDA
2010 72% 5%
2011 70% 35%
2012 78% 46%

18. Bruno Lowagie, CEO iText Software
Thank you for brainstorming with me
about switching from
control to wealth decisions at iText