As founders, we are so worried about losing control of our startups to investors that we completely overlook how we secretly lose control to everyone else.
The reality is that most founders do not lose control of their startups to investors; they lose control to their own organizations, whether or not they have investors. We do it voluntarily, in the name of progress, and we celebrate those achievements all the time, without realizing how we have let things slip through our fingers.
It is not until years later when we realize that we can no longer make key decisions independently, can no longer shape the product vision as we would like, or simply can no longer achieve anything on our own, that we realize that we have lost control on our own.
The biggest place we practically trip over ourselves into giving up control is when we recruit another co-founder. It’s not that co-founders are a negative thing; They can be excellent. But the moment we add one more person other than ourselves to the decision chain, we have cut off control of our own destiny.
The logic behind that decision always sounds reasonable: “Well, I want someone to help me balance my decisions.” Perfect, in an ideal world. But what happens when one of us wants to sell the company and the other doesn’t? Do we really want to give up the right to that decision?
The “co-founder fantasy” usually implies that we agree on the outcome, not a legal battle over disagreements. We must treat the decision to have a co-founder not only for the help it can potentially provide us, but for the permanent loss of independent control that this implies.
We often don’t think about losing control of our companies to people outside our company until we realize what control really entails: cash. And the people who really control the cash are our customers, because without them, we have no money!
I learned this lesson very early in my career when we landed a client at our agency who would pay us $10 million a month in fees. At that price level, when the customer calls, you drop everything and do whatever they ask you to do because the jobs of hundreds of people are at stake. You wake up thinking you work for yourself, but you don’t. You work for the person on the other end of that call, and they are well aware of that fact!
We cede control to our customers in many ways, but it always comes down to our need for cash. Sometimes, it forces us to keep obsolete products that we cannot get rid of. Sometimes, it forces us to do jobs we hate. Other times, it forces us to work with people we can’t stand. All of this translates into the loss of our own agency because we have become slaves to our clients’ money.
We think that when we grow and add staff, now we have all these people reporting to us and our power base grows. That’s not what’s happening. What’s really happening is that our ability to tightly control results across our organization is diluted, hire by hire, manager by manager, until what’s left is the best decision from our last hire.
Even though we are technically at the top of that organizational chart, we continue to clog ourselves with thousands of micro-decisions as they occur, which together can prevent us from substantially controlling the outcome of our company and, in the extreme, working against our objectives.
While we need to keep an eye on growth and expansion, we also need to be aware that each new hire is a division of control, not just an expansion of power. We need to leave each division with a system of checks and balances to ensure that our initial goals are maintained and that we have the mechanisms in place to do a hard reset the moment we feel our control over the future of our startup has been lost.
