10 Innovation Roles – What’s your combination?

In his book “The Ten Faces of Innovation”, Tom Kelley, general manager of IDEO, describes the following roles:     

1. The Anthropologist

Anthropologists are constantly observing the world around them with a fresh eyes, and are capable of “seeing what everyone else has seen and thinking what no one has thought.” They are good at seeking inspiration from unusual sources, and reframing problems in new ways.

 

2. The Experimenter

Experimenters love to prototype and are creative gurus when it comes to using what is available to physically represent their ideas. Every stage of the ideation process can be prototyped so experimenters will usually be the first to suggest a prototype of a marketing or sales plan through acting out a storyboard or creating a short video.

 

3. The Cross-Pollinator

Cross-Pollinators draw associations between seemingly unrelated ideas, bringing in a stream of new content from other disciplines. Using a breadth of knowledge in many fields with a significant understanding in at least one field, cross-pollinators spark innovative hybrids.

 

4. The Hurdler

Hurdlers push through obstacles by viewing problems as opportunities. They take their passion for design and tie it with the passion to create things to help people so that when obstacles arise they are seen as opportunities rather than roadblocks. “The essence of a Hurdler is perseverance.”

 

5. The Collaborator

Collaborators value the team over the individual, and act as facilitators that keep a constant flow of excitement and energy through a project team, while also providing the glue to bring together people from diverse backgrounds in order to make the perfect dream teams. With a huge heart, collaborators can always be counted on “to jump in when and where they are needed most.”

 

6. The Director

Directors see the big picture and provide inspiration and empowerment to bring the best out of everyone in the organization. They keep the momentum constantly flowing by leading when it is needed and delegating when the time is right.

 

7. The Experience Architect

Experience Architects realize that there is no one method for every occasion; they are constantly designing experiences for every unique product or service. They keep their eyes open for “trigger points,” which are the aspects of a product’s design that need to be emphasized for the best possible experience.

 

8. The Set Designer

“Set Designers care about the intersection between space and human behavior.” They adapt the physical space to balance private and collaborative work opportunities and to promote a culture of creativity. A Set Designer might be the team member prepared with markers and pens to create working spaces on the go.

 

9. The Caregiver

Caregivers, with big ears and big hearts, are always champions of empathizing with others. They are constantly listening to customers and take into consideration how ideas will affect their general audience.

 

10. The Storyteller

Storytellers understand that “stories persuade in a way that facts, reports and market trends seldom do, because stories make an emotional connection.” Storytellers “capture our imagination with compelling narratives of initiative, hard work, and innovation.” They not only transmit the values and goals of the organization or team, but they also make heroes out of real people.

 

Which one of the roles above you identify the most with, either because you already fulfill that role in your organization, company or community, or because you believe you have the potential and would enjoy putting that hat on?

Startup idea valuation – How much should your idea value and will it translate into more equity?

We at Founder Solutions (www.FounderSolutions.com) were figuring out the way to compute startup idea valuation to be used by our innovative algorithm for our upcoming PieChopper tool which allows startup founders to divide equity fairly. To put a price tag for your startup idea is very difficult and probably much more difficult than putting valuation to your startup before funding round as for valuing your company, you might have knowledge of some tangibles, investments, team expertize, pilot, sales forecast etc.

So how to value your ideas in numbers? You might need to do it so that it can be taken into account as an investment or contribution in some way to your startup and possibly will want some equity incentive based on that.

Idea Valuation

Our first assumption was to give “equity premium” to the founder who came up with the original idea in agreement with the other founders. Initially, it looked justifiable as the founders will get some credit for coming up with the idea which resulted in the startup to be founded in first place and get some agreed share of equity as a result. But as we did our user tests with real world founders, it became more and more clear the premium might sound justifiable initially but won’t be fair in the long run. For example, if a founder asks 5% of the equity premium for his idea. He will be reserving 5% of the equity irrespective of other contributions by him or his other co-founders. If the idea founder invests 1000€ but his co-founders are investing 50,000€ and doing most of the work in the startup, it won’t be fair to reserve 5% equity irrespective. Needless to say that the idea initially during the founding stage would be unproven and most probably will go through multiple iterations before it gets market adoption.

The second scenario we considered was to ask founders about the tangible value of the idea based on the possible IP (Intellectual Property) it brings. But that consideration was met with our own criticism after giving some more thought as most ideas can’t be translated into IP like patents etc. Also, even if they do, it won’t be possible to accurately measure the value of the generated IP.

Idea IP value

Finally, we came up with the conclusion to solve the problem by:

• Asking the relative contribution to the idea between the founders as multiple founders could very well input to the implemented idea.
• Asking the value of the idea in monetary terms from each founder and then using the average value of the idea for equity calculations. This will allow negate the over valuation by the original idea founder and possibly result in a fair agreement with constructive discussion about the value of the idea.

Our equity-split algorithm then uses the input from above two questions to decide the idea valuation and internally uses to compute equity distribution between the founders. What do you think about the idea valuation and the idea contribution in terms of equity split?

Note: You could register to get early-access to our PieChopper tool by registering at www.FounderSolutions.com

Your big startup idea – busting the common myths!

It’s a very common misconception in entrepreneurship that all it takes is a great idea to build a billion-dollar successful company. Some entrepreneurs or “wantrepreneurs” even go as far ahead to value their idea to be as great to be worth millions of dollars in itself. However, every startup or company is built on the foundation of great idea(s) evolved over time and the idea plays a crucial part but it’s not the sole criteria for success of the startup. Here are some common myths related with the “big startup ideas” and our proposed reality check:

Myth #1: “All I need is a novel idea to create my successful startup.”

Reality check: No! Idea without execution is nothing! It’s as simple as that. To be successful, it requires impeccable and timely execution with a great team willing to modify/pivot from the original idea as needed. As Scott Belsky, CEO of Behance puts it simply:

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“It’s not about ideas. It’s about making ideas happen”

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Myth #2: “I got an original idea.”

Reality check: Chill out! Almost all the ideas are never original and somebody in this big world for sure would have thought about it. Besides it’s not even a shame to not come up with an original idea. You would be pleased to hear that big majority of successful startups are based on the ideas which were not unique. Most of the best startups are based on a pivot/modification to an existing business model rather than an unique idea. Paul Rand, one of the foremost American graphic designers of the 20th century, said it best:

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“Don’t try to be original, just try to be good.”

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Myth #3: “Somebody might steal my idea if I share.”

Reality check: Don’t worry, as mentioned in above point, almost no idea is original. The world is big enough to believe with near certainty that somebody must have thought about your idea already. Anyway, even if your idea is unique, it’s worth nothing without your ability to execute and deliver. Also, before you execute you might want to validate your idea by sharing it to others and getting the feedback e.g. about the business potential, customer segmentation, market perception, market size and so on. There might be possible modifications or tweaks needed based on the market feedback before you go full-steam with the execution. Kyle Bragger, co-founder of Forrst, puts it:

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“Get your idea out in the wild, iterate your ass off, and hopefully build something spectacular.”

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Myth #4: “I own a million-dollar idea!”

Reality check: Come on now, who are you kidding? Million-dollar ideas don’t exist! But billion-dollar companies do as a result of world-class execution! As mentioned before, it’s the execution which counts and valued, not the idea itself. According to Thomas Edison, Co-founder of General Electric:

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“The value of an idea lies in the using of it.”

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I came across the article by Derek Sivers at http://sivers.org/multiply and I totally agree with his analogy that “Ideas are just a multiplier of execution.”  Below image shows the multiplier values of ideas and execution values:

According to Sivers, the most brilliant idea, with no execution, is worth $20 and the most brilliant idea takes great execution to be worth $20,000,000.

Next time when you hear that my idea is worth X, you know what to ask! 🙂

Customer dissatisfaction cost – The cost of unhappy customers

We all have heard phrases like “Customer is King”, “Customer Delight”, “Customer Experience Management” etc. and we rightly value (paying) customers above everything else for our startup. Especially in the early stages of the startup, the “customer acquisition strategy” is one of the first things that we focus on.

While you focus on critical things like targeted customer segments and customer acquisition cost for your business plan of your beloved startup, we invite you to consider “customer dissatisfaction cost” as well. The below useful infographic from Vision Critical demonstrates the importance and impact of the cost of unhappy customers with some surprising numbers that startup teams (even big corporate firms) often overlook.

Happy reading!

 

The importance of vesting

You most likely heard about vesting. VCs often talk about it in their blog posts. Somehow startup founders still find it tricky to understand what vesting is about.

We’ll try to explain it here in the easiest way possible. It’s hard to overestimate the importance of vesting. If you are a founder you need to get used to this concept as early as possible in your entrepreneurial career.

Otherwise, you may find yourself in a situation Mark Zuckerberg talks about: He didn’t know what vesting was at the point when he started the company, and it cost him billions of dollars because of his co-founder Eduardo Severin.

The notion of vesting comes from a legal universe. Vesting is a common provision in equity schemes. Vesting means receiving the right (to the shares of equity).

To put it simply, if founders agreed to divide equity with a vesting condition, what they get at the beginning is unvested equity, which is just a promise. A promise that they will get their shares of equity as agreed only if they certain vesting conditions are met. The most common vesting condition is to stay with the company long enough for the equity to vest. Vesting conditions may include various milestones important for the company. An example would be getting 1 mln. of registered users – if this happens, founders may agree to have accelerated vesting of 25% of their shares of equity.

Vested shares are the shares the founders already earned. Founders can walk away with those shares if they decide to leave the company. That will be fair, as they received those shares for all their hard work.

Vesting is important even for teams with unequal equity splits. In fact, vesting has little to do with equal or unequal splitting. Imagine there are three of you, you split your startup equity 45%-35%-20% and get to work. In a month a founder with 35% looses interest in the project and leaves… taking 35% with him! The other two work hard, get VC money, become famous and in 6 long years launch an IPO. Of course, over those years 35% get diluted to, say, 7%, but that’s 7% of a billion dollar company – not bad for a month of work, heh?

That’s a made-up example, of course, but if there were a vesting provision in place the founder who left in a month would get no equity. And this would be fair to those who stayed and made their company a huge success.

Image courtesy of FreeDigitalPhotos.net

What it takes to build Facebook

To continue our series of weekend videos, here is a nice one from Y Combinator in which Mark Zuckerberg talks about early days in Facebook. Highly recommended to watch. For those who don’t have time for a 36-min. piece, here are our favorite lessons-to-learn from the video:

– On motivation: Stay inspired by what you are doing. There will always be skeptics saying that your thing can’t be a business. Just care about what you are doing, and that’ll drive you forward.

– On hiring great people: The only way to determine whether a person you are hiring is really good is to realize if you would want to work for that person.

– On making decisions: Out of a hundred things that you can potentially go do, pick up the one that actually matters.

– More on motivation: In the early days Facebook had a serious competitor called “College Facebook”. Every time the competitor would launch at a new school, the whole Facebook team would literally not leave the house and work until they address the problem. They still have this concept of “lock-down” at the company and many teams do it themselves.

– On founder equity (we couldn’t miss this one!): All founders must be on vesting schedule. Mark heard nothing about vesting at the time when they started the company. They just divided equity, and then his co-founder Eduardo left. “That mistake probably costed me billions of dollars” – says Mark. But even when things like this happen, it’s important to move forward.

The score is 4:1 – do you still have doubts on how to split founders equity?

You may still have doubts whether an unequal equity split between founders is worth all that fuss. Calculating founders’ input into the startup, having conversations about involvement, commitment and future expectations, making promises to each other and feeling anxious about not being able to live up to them. Wouldn’t it be easier for founders to split equity equally and get right to work, feeling mutual trust and respect?

In order to resolve this issue we decided to bring to your attention the most influential posts on dividing equity between startup founders that are out there on the web. If you are like most tech startup founders we know, you should believe in numbers. So, we decided to count voices in support of unequal equity splitting and voices in support of equal equity splitting. The results turn out to be quite convincing.

 1. A very old post by Dharmesh Shah on OnStartups.com – a blog for entrepreneurs with more than 23,000 subscribers. In spite of the date of its creation, the post hasn’t lost its relevance. It talks about different factors which lead to unequal splitting. And its definitive answer to the question “Should we divide equity in our startup equally” – is “no”.

1:0 for unequal splitting of equity

2. The most well-known advocate for equal splitting of equity is Joel Spolsky. He wrote a widely-cited post on “totally fair splitting of 1:0 for unequal splitting of equity ownership in a startup” which features an interesting method of splitting equity not just between founders, but between the whole team including employees. Joel’s website where this post was originally posted got closed, but luckily there are plenty of reposts on the web.

1:1

3. In reply to Joel Splosky’s post on fair equity splitting in a startup Dan Shapiro writes quite an expressive piece on this topic with the headline: “The only wrong answer is 50/50”. In his post Dan gives examples of what should be counted in when dividing founders equity – things like coming up with the idea, creating an early product, being a CEO, full-time commitment and cash contributions. He also gives his estimations of how valuable are these factors relative to one another.

2:1 for unequal splitting of equity

4. A great post on this topic by Mark Suster (I love his posts for always being so much to the point). Among other important things Mark talks about something nobody else mentions: that 50/50 splits between founders are in fact unstable. They create no true leader. They create a feeling of shared responsibility, which is not a good thing for startups in which one founder is always more involved and committed than the others.

3:1 for unequal splitting of equity

5. Not just entrepreneurs and VCs discuss the topic of equity splitting in startups – business professors do too. A huge supporter of unequal equity splitting is Noam Wasserman, a professor at Harvard business school, whose brilliant case study of equity splitting in two startups we discussed earlier in this post.

4:1 for unequal splitting of equity

To conclude:

The results are quite convincing: 4:1 for splitting equity unequally between founders even in spite of hard negotiations and calculations (which can be made a lot easier if you use a formula or a model like the one we created at Founder Solutions). This is not to say though that 50/50 split is always a wrong decision. In very rare cases, as one can imagine, even the most sophisticated formula might point to this result, and then you should proudly go for it. But even then a question will remain: if your team has founders who are so much alike, wouldn’t some diversity of experience and expertise add more value to your startup?

Feeling right about an unequal split

 Here founders of Zenlike are sharing their story of how they came to a decision to split unequally and why it felt as a right thing to do.

For a short resume: they agreed on a 55/45 split. Founder 1 got 55% for two reasons: first, he had been working already for 2 months on the project and secondly he had made a significant investment into the project. No premium was given for the idea. As for other factors, the two founders seemed to have a comparable level of experience, expertise and network value.

Recommended reading for those who are in the process of negotiating equity division with their co-founders. It clearly shows that in truly successful ventures even equity talks are more about fairness and cooperation than about “splitting” or getting into a more advantageous position in comparison to your co-founders.

We were also happy to see that the logic of Zenlike founders can be absolutely replicated in our FES model. While our model by default assigns some equity premium for an idea, this can be easily overridden by indicating that all founders are the “idea persons”. And FES helps founders consider even a wider range of their strengths and competencies which can be vital for the startup and which should therefore influence their equity splits.

FounderSolutions

Two real-world stories: a good and a bad decision on equity split

This video is definitely worth watching. It’s a case study of two startups and their decisions about equity splits between founders. Two real-world stories with lots of wisdom to learn from them.

In short, the first story is about a 50/50 handshake (the equal split!) the Zipcar founder Robin made with her co-founder – and how much angst and regret it caused her shortly afterwards. “It was the stupidest handshake to make” recalls Robin.

The second story is about Ockam co-founders and their decision to split unequally. The decision was very logical because, for instance, one co-founder had worked for the other one for seven years as a junior before they decided to start a company. It was clear that their contributions to the startup wouldn’t be the same. And they did a great job of evaluating different scenarios of how much they would be involved with the startup (what if one of the founders wouldn’t quit his full-time job to work for the startup and so on) and identified different equity splits for every scenario.

Here are the key lessons to be learnt from this video:

• if you don’t want equity split issues to ruin your startup deal with them early
• when you deal with them, keep in mind that a 50/50 split is almost never a good solution
• it’s better to find out early whether you are compatible with your co-founder. Equity talks are the best time to do that.
• go through several scenarios of how your startup is likely to evolve. Decide how your equity split will be changing depending on the scenario.

9 types of founder conflicts that can sink your startup

Are you working on a new business idea with a small group of friends or colleagues? Is this the first time that you start a startup? Then you absolutely need to check out this entertaining infographics below from an infinitely creative FundersandFounders team.

Do any of these issues sound familiar to you? Beware of these founder conflicts, as they can easily sink any promising venture.

And yes, we would recommend any of those solutions – except just one. When answering the question “Who gets what” you should never jump to a 50/50 equity split. This is the only wrong answer, as Dan Shapiro put it in his widely cited and much discussed blog post.

Use Founder Solutions model instead and find out immediately what’s a fair equity share for each and every member of your startup team.