You are here: Home » Beyond Business » Books
Business Standard

Entrepreneurs' guide to the startup galaxy

Dilip James 

When Business Standard requested me for this review, something about the title seemed vaguely familiar. After an initial flip-through, I recalled reading an article with the same title by the author that was published in the Harvard Business Review of February 2008. Since then and over a 12-year period, Professor Wasserman has accumulated the most prolific and comprehensive repository of information about startups, tracking the dilemmas they face and the outcomes at various phases of their evolution.

The book is divided into four parts that, in a chronological sense, cover the broad evolutionary phases for any startup. The first part covers pre-founding, the second the founding teams’ dilemmas and the third the phase beyond founding teams, including subsequent hires and investors. The fourth and last part covers the seminal dilemma core to any startup: wealth versus control.

What is chronicled over the 450-odd pages of this exhaustive work is a must-read for anyone thinking of creating a startup, who is currently involved with one or who is an investor/advisor in the startup ecosystem. The distinguishing feature of this work is the sheer empirical volume of data that the author and his collaborating team have gathered over the past 12 or 13 years covering 9,900 founders and 19,000 executives in over 3,600 startups. Hundreds of these have been further analysed through exhaustive case studies, examining, among other things, the many qualitative elements of the dilemmas.

Professor Wasserman has focused on high-potential startups; that is, startups with the potential to become large and valuable, even though their founders may subsequently make decisions limiting their growth. Hence, almost all of the data-set of companies analysed here are in the technology and science-based fields. From this, the author picks 30 case studies for discussion across the chapters of the book, weaving the journey of the entrepreneur from pre-founding to exit. This treatment makes the analyses real life and the recommendations very practical. I am not covering them specifically because they are not names that would be readily recognised in India. Nevertheless, they provide useful learnings, even from our context. The only downside to the approach is that it occasionally results in some repetition in describing these founders and their enterprises.

The core dilemmas are covered in sections dealing with when, how, with whom to cofound and when to hire. Central to them are 3Rs as the author describes them — Roles, Relationships and Rewards and their interplay. The book provides numerous illustrations and templates around these, so it can almost be used as a ready reckoner by those involved in the startup ecosystem. Interestingly, also interspersed with learnings from the startups are insights into the interpersonal dynamics and dilemmas confronting founders of two companies that we may not recognise as “startups” today: Bill Gates and Paul Allen of Microsoft and Steve Jobs and Steven Wozniack of Apple! Eventually, in both cases one of the cofounders decided to move on. The section dealing with different kinds of investors and the motivations of angel investors and venture capitalists can be particularly useful to a founder who has not dealt with them before.

Professor Wasserman acknowledges that almost all the data in his analyses pertain to American companies and the US marketplace. He raises the question of how relevant this could be in other high startup or creative environments such as China and India that are culturally different from the US given the lack of empirical data available to him. As someone involved with startups and the venture capital space in India, I can unequivocally say that the lessons in this book are in most measure applicable to our startup space as well. Confronting cofounders, equity splits or the need to recognise when to let go — these are all live issues for our nascent startup industry. Tellingly, in over 50 per cent of the startups that have been tracked in the book the founder ceases to be CEO by the time of the third round of funding! It would be interesting to watch how such dynamics play out in India where, culturally, we find these issues uncomfortable to deal with.

The venture and startup industry in India is young and The Founder’s Dilemma would be enormously beneficial to emerging entrepreneurs as well as investors — it could certainly help improve appreciation of each other’s perspectives. On a closing note, I hope Professor Wasserman will find the resources to start assembling similar data for the emerging startup industry in India.

Anticipating and avoiding the pitfalls that can sink a startup
Noam Wasserman

Princeton University Press
480 pages

First Published: Fri, May 25 2012. 00:43 IST