What Happens If A Startup Founder Gets Hit By A Bus?

from the perhaps-not-much dept

Wed, May 21st 2008 4:46pm — Mike Masnick

The importance of a founder working at a company is a question that gets a lot of attention for various reasons. Most startup founders certainly want to stick around and see their "baby" through, obviously. However, once investors get involved, the role of founders gets trickier. Investors often ask the key question: "what happens if a key founder gets hit by a bus?" That's the point at which a founder needs to convince the investor that the structure of the company itself is so well established that it can live on without the founder. Of course, if they're too convincing, it can backfire when the investors look to replace the founder (as they very often do), noting that the founder made a convincing enough argument as to why they're not needed.

Of course, until now, all of the stories on this were anecdotal. But, Paul Kedrosky points us to new research that was done on what happens if a founder dies early on in the life of a company, in an attempt to determine just how important it is for founders to stick around. It may surprise many (as it surprised me) to discover that, apparently, there isn't much of an impact if the founder passes on. The only real impact is a brief hit to profitability -- but it doesn't seem to have much long term impact. In other words, it really does take a team of folks to successfully implement an idea and bring it to market. While that doesn't necessarily mean founders are "expendable," it does highlight the importance of a strong overall team, rather than reliance on a single "visionary" expected to guide all aspects of the company. It doesn't mean founders shouldn't watch out for speeding buses, however.

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Filed Under: founders, startups

8 Comments

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Chunky Vomit, 21 May 2008 @ 6:40pm

So.... Mike.... looking to take your company public?
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Peter Crowl, 21 May 2008 @ 6:59pm

Hit by a bus - no...totaled his Ferrari
I was around for this when it happened...

http://en.wikipedia.org/wiki/Eagle_Computer
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erica, 21 May 2008 @ 8:32pm

What if......
"... Whatif green hair grows on my chest?..."
Everything seems swell, and then . . .
The nighttime Whatifs strike again!

-What If by Shel Silverstein
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Gary, 21 May 2008 @ 8:33pm

Key person
This amateur friend in the business word is a simple solution. If they founder is vital at least for say a period of time that would effect the investors or profits we buy key person insurance. Just like we insurance a vital pice of equipment. If the person is uninsurable that would be a red flag that there is an increased risk to your capital and you then need to decide what the down time might me. As most start ups have some young hot shot under say 50ish term insurance is so dam cheep you got to be some kind of moron not to buy it or force them to buy it.
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Ethan Bauley, 22 May 2008 @ 2:12am

Desiging business
I am biased in this situation, but there's no doubt that some individual founders combine a unique experience and insight into the business design (i.e. pain point + revenue model + market niche) that is so strong that any team that takes it on, and works hard, can create real value.
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Jonathan Hartley, 22 May 2008 @ 2:48am

founders unique contribution is...
Isn't a founder's unique contribution the 'decision to execute'? Once that decision is made, and followed up on by cajolling investors and recruiting implementers, then it doesn't really matter what the founding idea was (since any startup needs to be nimble enough to pursue whatever good opportunities they discover along the way). The founder may well be the brightest and/or most industrious of the people present, but his *most* unique contribution has already been made by that point.
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Anonymous Coward, 22 May 2008 @ 10:31am

Getting hit by a bus
www.ihatetrimet.com

Just sayin.
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Lawrence D'Oliveiro, 22 May 2008 @ 7:15pm

Why bus?
Why do buses always get such a bad rep, when we should be encouraging people to use public transport?

In future, don't say "get hit by a bus". Instead, say "get hit by an SUV driven by some idiot too busy talking on his cellphone". OK, if that's too long, then just "get hit by an SUV". SUV drivers tend to be prats anyway. 'Nuff said!
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