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.