Every great company is unique, but there are a few things that every business must get right at the beginning. According to Peter Thiel: “A startup messed up at its foundation cannot be fixed.” Let us explore what are those key elements that lay the foundation of a great company.
1. Foundation Matrimony
When you start something the first and most crucial decision you must make is whom to start it with. Choosing a co-founder is like getting married, and founder conflicts are just as ugly as divorce. Optimism abounds at the start of every relation. It is unromantic to think soberly about what could go wrong, so people don’t. But if founders develop irreconcilable differences, the company becomes the victim.
2. Ownership, Possession & Control
It’s not just founders that need to get along. Everyone in your company needs to work well together. A Silicon Valley anarchist might say you could achieve perfect alignment as long as you hire just the right people, who will flourish peacefully without any guiding structure. To anticipate likely sources of misalignment in any company, it’s useful to distinguish between three concepts:
1. Ownership: Who legally owns a company’s equity.
2. Possession: Who actually runs the company on a day-to-day basis?
3. Control: Who formally governs the company affairs?
In theory, this division works smoothly & in practice, it makes sense to distribute these functions among different people.
3. On the bus or Off the bus?
A general rule, everyone you involve with your company should be involvedsometimes you’ll have to break this rule; it usually makes sense to hire an outside lawyer and accountants for example. However, anyone who doesn’t draw a regular salary from your company is misaligned. In short, if you’re hiring someone, it’s a binary decision. Either they are on the bus or off the bus