Startup Lifestyle

Take Care of Others

Startups provide great opportunities to grow. Startups are hard work, but they are fun, challenging and rewarding. And should your startup result in an exit, you can live comfortably, enjoying many of life’s good things. In the midst of your success, my encouragement to you is to share in some way with others. Besides just being the right thing to do, it keeps you connected with people and can ward off some unexpected maladies (like affluenza).

Financial security is a blessing, but it can also bring some hidden curses. We can easily fall into living an insulated life, leading to a privileged attitude. This becomes most apparent in your children. As parents, we want our children to have the best life has to offer. But as life enables you to have many things, children can develop an expectation of always getting their way. Kids can whine and insist on having the latest iPhone even though they just received a new phone last year. This happens when they haven’t learned the hard work needed in order to enjoy good things. You worked hard for your wealth, but your kids didn’t.

Warren Buffett’s Wisdom

While it’s not realistic to expect your younger children to earn a salary to pay for life’s expenses, it is reasonable to help them learn the value of hard work and stay connected with others who are less fortunate. One of my favorite stories is one where Warren Buffett was approached by one of his adult children for a $41,000 loan to remodel her kitchen. His response was epic: “You can go to the bank [to get a loan] like everyone else.” If you know anything of his life, you know that this response was not rooted in a selfish hoarding of his wealth, but in a desire to teach his family a set of values.

It Starts With You

Staying well-rooted starts with you. A parent who doesn’t set an example for their kids will wonder in frustration why their kids haven’t adopted their words of wisdom. Giving back to others is an important way to stay grounded. You don’t have to have the wealth of Bill Gates or Mark Zuckerberg to be able to share. If you’ve enjoyed an exit, you probably have more than enough to live comfortably.

Kishore is a friend of mine that sold his startup and subsequently started a charitable foundation to give back. His foundation drove an innovative, self-funding clean water project in India. In addition, Kishore heard of a young child that needed a costly surgical procedure that her parents could not afford, so he paid for it. Similarly, my own family is the beneficiary of someone else’s generosity. My youngest daughter is adopted from China. As an infant, she was left in the cardiac ward of a hospital because she needed open heart surgery to correct her VSD and ASD (two holes in her heart). She almost died several times, but a local businessman heard of her plight and donated the equivalent of seven years’ of a factory worker’s wages to pay for the surgical procedure. I do not know the man who paid for the surgery — I don’t even know his name — but my daughter is alive and thriving today because of his kind and generous gift.

Practical Paths

If you’ve decided to share, it’s important to plan. If you’ve received a windfall, make sure you consult a financial planner with many startup founders among their clientele. One benefit of being charitable is the opportunity to soften the tax burden in your years where your income will be abnormally high. Set up a charitable fund. Both Schwab and Fidelity have simple, low-maintenance charitable funds that you can participate in without being a billionaire. If you are fortunate to be in the multi-, mutli-million dollar territory, consult your financial planner about the benefits of setting up a charitable foundation.  (If you need a referral to a financial planner, I’ve had good relationship with Larry Steckler at Capital Financial.)

In addition to being generous with your money, remember to be generous with your time. Sometimes, it’s too easy to write a check and stay disconnected from true human need. Volunteer your time. When you volunteer, look for opportunities to talk to people you are helping. Listen to their stories. Connect with their difficulties. Involve your family — your kids might not be able to make substantive financial contributions to pay bills or fund a charitable cause, but they can still make a difference in someone else’s life by giving of their time and heart.

One of the things I’m most proud of is how my children give to support kids with special needs. My son just graduated from high school and has volunteered almost every week for over six years as a coach for e-soccer — a full-inclusion program for both typical kids and kids with special needs. He currently works a summer job helping children from low income families. He has developed an empathy and compassion for others far beyond the typical high schooler.

Startup life is amazing. There are great rewards professionally and personally. Should you be fortunate enough to enjoy an exit, remember to give back. When you give back, do so in a personal way that involves your family. You may just find that the rewards from doing so far exceed the benefits from your startup’s exit.


Startup Lifestyle

Take Care of Your Offensive Line

NFL quarterbacks are key to their teams’ success. And key to the quarterbacks’ success is the offensive line. The offensive line protects the quarterback in the passing game, while opening up running lanes to establish the ground game. The success of ground game activates the passing game by keeping the defense from just pinning their ears back and using the quarterback for target practice. A smart quarterback maintains a great relationship with his offensive line. Quarterbacks often treat their front line to fine dinners each week. Stories also abound of quarterbacks that present their blockers with expensive gifts such as Rolex watches, paid from their own pocketbook.

In the same way, a founder is key to the startup’s success. The founder manages the game, calls an audible at the line based on the defensive set, makes split second decisions, and delivers the ball where only the receiver can catch it. A seasoned founder also knows that his (or her) success is dependent on the surrounding team. Founders who take care of their people end up building strong, loyal teams. Should the startup enjoy an exit, the founders are in a position to ensure that everyone feels victorious.

During the negotiations with a potential investor or acquirer, founders should be careful to evaluate the impact of the terms of the transaction on the team in general. Even though these negotiations are fast-paced and stressful, founders need to make sure to run scenarios on how the transaction will impact the compensation of the employees. I’ve seen transactions go down where the executives preserve a reasonable equity position for themselves, but the rank and file employees get the short end of the stick. Put yourself in the shoes of your team. Would you, as a non-founder, be happy with the outcome of the transaction? Negotiate not just for yourself, but for your team. Where the numbers make it difficult and the broader employee base might get squeezed, can the founders carve out a portion of their own equity to make the employees whole?

In most exit scenarios, founders should have some room to share. Founders have much more equity than the average employee and can afford to be generous. There’s nothing wrong with founders earning a payout that is many times larger than the average employee. There’s nothing wrong with a quarterback getting paid many times more than a special teams player. The roles they play are dramatically different. Founders take the risk, flirt with failure, lead into uncharted territory, and shoulder the burden of making some of the most difficult decisions in the company. But in the same way that NFL quarterbacks take care of their offensive line, founders should remember the players that make success possible and be generous with their team. If you’ve done a good job as a founder, you’ll do just fine financially with the exit. Generosity results in the founders enjoying not just financial wealth, but also great friendships. Your team will appreciate the money, but will remember the loyalty. And as any older, wiser person will tell you, close relationships are more valuable than the size of your bank account, so do good and share.