I’ve always wondered what it means to be a “founder” when it is done with everyone else’s money. Are they not just effectively employees at that point?
I fear such abuse of
such just feeds a narcissistic species that focuses mainly on executive headshots and snazzy websites.
Too many startup websites scream, “look, we have a website, $$$ millions, and an executive board — we’re all grown up now!” without actually having much clue. Medium sized business are more self confident and don’t bother.
The small business founder that starts as employee #1 and grows organically is an entirely different animal and fully deserves the title.
Having bootstrapped and also founded VC-backed companies, the VCs are effectively making you an employee. But you get to gamble some of your paycheck, so it's a bargain a lot of people are interested in. A lot of my friends who are in the VC space see "X person sold company Y for $500 million" and sort of assume that X made at least $100 million from that transaction, when they very often didn't.
The bootstrapping/small money path is so much more like actually starting a business, but it's a lot harder. On top of the investment, you get a lot of free publicity and some legitimate street cred from having gotten VC investment.
After all these years of VC funding, I can't believe there is still "street cred" attached to it. Not contradicting you, I'm just flabbergasted people haven't caught on their track record.
They are just employees on some level, but they are also typically owners with a lot of risk on the table themselves. Even if they come in with what would be “a lot” of money to most of us, it can’t compete with investment capital.
We build energy plants with investor money as an example. They don’t invest in us, but into the projects we run, so it’s a little bit different than having someone invest in us (but I’ll get to that). We don’t solely build a power plant with investor money though, we build it with a mix of investor money, loans and our own money, and that last bit just got a whole lot larger (meaning we can do much larger projects) with private equity investing into us directly. So now instead of doing a tiny mom-and-pops sort of solar plant, we can build some of the largest solar plants in the world. The payout on the other side isn’t linear either, there is much, much, more money in a single large plant than in a hundred tiny plants. Especially when you sell the product a few years after its completion.
In the current world, maybe it would’ve been better to not take private equity on board, but at the time it was done, nobody knew Putin would invade, that the global supply lines and manufacturing power would never recover from covid, or, that interest rates would go above 15% in countries where they were below 1%. Everyone knew the low interest rates wouldn’t stay, but we sure didn’t expect them to go so far above 8%.
Anyway, even if the world hadn’t gone to shit, our company would still have been 10-20 people and not in the hundreds if we hadn’t acquired the massive amount of funds. Since while our founders are rather rich, they aren’t that rich, and this would’ve limited the company growth to such a significant degree that even two years of economic turmoil has us at a level we would’ve likely never reached. It’s not all gloom and doom either, people still need power after all.
So you’re both right and wrong, founders sort of become employees, but not really. How much they lean toward the employee “title” typically depends on their deals.
I fear such abuse of such just feeds a narcissistic species that focuses mainly on executive headshots and snazzy websites.
Too many startup websites scream, “look, we have a website, $$$ millions, and an executive board — we’re all grown up now!” without actually having much clue. Medium sized business are more self confident and don’t bother.
The small business founder that starts as employee #1 and grows organically is an entirely different animal and fully deserves the title.