
Ask HN: I want to start a new company, but I'm CEO at a funded startup - foundersdilemma
I&#x27;m in a pickle. I have a funded enterprise B2B startup that seems to be going well, but it&#x27;s clear that the industry is highly competitive, but we are growing quickly. I recently stumbled upon an entirely unrelated business idea, simply because of long conversations with customers in a particular vertical and it&#x27;s very clear that there&#x27;s a huge opportunity there (possibly bigger than what we are doing now). How should I handle this? I feel a responsibility to run the current company to the current investors hence I wouldn&#x27;t want to be distracted, but at the same time, this opportunity is bigger and requires more capital than the current company can finance. I have verbal validation &quot;if you do x, we will partner with you&quot; and I&#x27;d like to experiment. There are several concerns: 
i) How to handle the current team and investors, it can&#x27;t seem like I&#x27;ve given up on the current business; it still has a lot of potential
ii) the reality is that if I run it under the current umbrella we will all be diluted significantly
iii) I&#x27;m thinking of having a separate c-corp below the current one wholly owned, how do you present this to the board without seeming to be fully distracted?<p>Any ideas would be very welcome
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jacquesm
(1) the grass is always greener on the other side

(2) serial entrepreneurs are more common than parallel ones

(3) don't you have a performance requirement with your investors?

(4) does your shareholder agreement allow any of this?

(5) have you talked this over with your investors?

(6) it all depends on the cap table

(7) you could always sell your stake in the current company or engineer an MBO

(8) doing another company underneath the current one will still require buy-in
of shareholders

(9) you already seem distracted

(10) a word of advice: finish what you start

Best of luck!

~~~
foundersdilemma
Thanks for the feedback, I'll answer this by providing some more context.

a) I've done well when you consider revenue/global brand reach/spread

b) I've spoken _informally_ to trusted board members nobody seems to have
clarity on the best way forward

c) Option 7 seems to be the best way out

d) on point number 9, yes I'm distracted, but I've understated how much
thought has gone into the second idea; it's something that's constantly come
up when I'm with my customers with whom I have a remarkably intimate
relationship with. I live for them and this one issue keeps coming up. I have
toyed with the idea of getting someone else to build it, but it requires some
industry good will, customers willing to pilot it etc and so far that rests
with me. I meet with my customers on a fairly frequent basis to figure out
where their general pain points are, what their industry vertical trends are
and what other issues I can solve for them (typically this involves an
introduction to one industry vendor/company or another). In the course of
these conversations you can unearth a lot.

To use a theoretical example. I will use Square. If in the the process of
meetings with customers in say retail figures out that nobody has built for
purposes of this conversation a CRM that addresses their needs and it's a pain
point that keeps coming up in every single conversation with retail customers
what would you do? Over several conversations you have industry members
nagging you for a solution because over time you have become their trusted
advisor.

~~~
jacquesm
One thing you will have to recognize is that this will happen over and over
again. So you are not going to find 'The Product' because there will always be
other products that you could make and chase. And new development is so much
more fun than maintenance, the same goes for new companies.

In your shoes I would analyze myself first before making a decision: are you
just good as a starter or are you able to go the distance? And then to
recognize that most of the value creation happens early on in the life cycle
of a company but most of the value capture happens later on. So if you exit
early you will financially hurt yourself.

------
falcolas
Seems, to my completely inexperienced point of view, like its time to hire
your replacement. Establish a board with yourself on it (probably alongside
investors), hire your replacement, and let them run your first company. Use
your position on the board to keep in touch with and help direct the running
of the company, while freeing up time to work on a second venture.

~~~
nosrednAhsoJ
Agree with this. If you are great at starting things, stick with that. Do what
you love. Hire a proven CEO with a track record of taking something from $X
million to $XX million. Build a solid transition plan and go be happy.

------
robfitz
IMO your only real options are to (a) quit to do the other thing or (b) not
quit and forget about the other thing.

If you're funded, you can't do both. But there's some nuance in how one can
quit, which depends largely on how far along your current business is.

If you have multiple cofounders and a solid team in place, you can just leave
yourself. You talk to the investors first, and give them some sort of perk,
such as a right of first refusal, or even spin it out of the current company
(which means they get a small equity stake since your current company owns
some of the new one). This is all fine, but only works if your current
business is strong enough to run completely without you.

If the current business isn't to that point yet, then leaving it will kill it,
and dividing your attention is as good as leaving it. Not fair to the
investors, not fair to the employees. So you sort of just grin and bear it.
That's the hidden cost of taking funding and asking people (both investors and
employees) to believe in you. But such is life.

------
ericabiz
> I have verbal validation "if you do x, we will partner with you"

As the CEO of a funded company, you should know that the "we will partner with
you" line is handwavy BS 99.9% of the time.

This statement is not a measure of potential money coming in the door. Rather,
it's usually code for "we would like you to pay us to build your
website/social presence" (if said by an agency owner) or "we would like to do
some sort of advertising joint venture" (if said by a content marketing-driven
company.)

Have you gotten anyone to actually toss a credit card at you across the table
for this idea? If not, you have no customers and no proof this idea will work.

P.S. I would be less blunt if talking to a new founder. Often they get really
excited about these garbage "partnership opportunities." But you, as the CEO
of a funded startup, should know better.

~~~
foundersdilemma
I commented above that I greatly understated this. I've been explicitly asked
to build it with fiscal commitment should I choose to say yes.

------
screwgauge1
If you chase two rabbits at once, both will escape \-- ancient chinese proverb

Ask everyone who is fighting every day in the companies they started 3/4/5
years ago - they all wish they were doing deep learning or blockchain!

Some days, it is normal to wake up and think that this other idea you have is
far more promising and has far more potential than the one you are working on.
Just stay focussed and finish what you embarked on. Startups are about
execution. Ideas are only 1%. Soon the novelty of the idea wears off and it is
what you do day to day that distinguishes your company from others.

------
projectramo
We know who you are, Elon.

Please finish what you started with SpaceX and Tesla before you take on The
Boring Company. Yes, it is a great idea, but you really have to get through
ramping up manufacturing first.

Also, focus on energy storage after you get through manufacturing.

------
romaster
The 'unrelated' business idea being the result of the inroads made by you
being at current company CEO role and having those customer conversations
might be a potential fiduciary issue.

You need to pick someone on the board you can have a candidate initial
discussion with and take it from there.

The last thing you want is to start a second co, having thought you figured
out the first co, and possibly one day having a disgruntled investor from Co1
come after you claiming you should have invested resourcing from within Co1
towards the idea that you got wind of from Co1 customers... From the trust you
built with those customers selling them Co1 solutions.

No I'm not a lawyer. So this is far from legal advice. Just a fellow founder
who would be concerned if in this situation.

------
todd3834
Ideas always look best when they are new. After a while the new idea might not
look so attractive and that’s where execution and focus come in. It is true
that there are examples of people who run multiple companies but I don’t think
we know a lot about the details on how they are pulling this off. These people
are probably extremely passionate about both of these ideas. It doesn’t sound
like your situation.

This reminds me of a quote from Jesus in Matthew 6:24 "No one can serve two
masters. Either you will hate the one and love the other, or you will be
devoted to the one and despise the other.”

------
wbharding
After 10 years being CEO for online marketplace, I found us in the position
where our profits from the existing business (which support a team of 50) were
not best allocated to the product we spent the last 10 years building. After
reading Warren Buffetts “The Snowball,” I became convinced that we were best
off channeling our profit into the highest ROI opps, regardless of whether
they were directly relevant to our marketplace.

Judging by the other responses here, I’m in a distinct minority to claim that
you could consider building both businesses.

The jury is still out on whether this will prove to be a sound idea, we
started building two separate projects last year and only one has been soft
launched thus far (StaticObject.com).

That said, a couple relevant takeaways from our work to date:

1\. The only way a multi product company can possibly work is if you’ve
accumulated an inner circle that can stand in for you. You’re not going to do
a great job building two things at the same time. You’ll need to find others
who can pick up your slack 2\. Our arrangement was pursued in part cuz we’re
almost entirely self-funded, which means less VCs to encourage/force us to
follow the path more traveled 3\. A single, great developer can get as much
done on a project as a team of 5 developers by virtue of reduced communication
cost, and (hopefully) less tech debt. There is meaningful leverage available
by splitting great devs onto separate projects.

~~~
iandanforth
Aside: StaticObject.com has the creepiest robot picture. I'm pretty sure that
guys nipples are in danger.

~~~
gwbas1c
And that analog meter between the hands makes the robot look like a very
excited man!

------
thieving_magpie
"Never half-ass two things. Whole-ass one thing."

------
StriverGuy
Find someone competent to execute your other business plan and provide them a
seed investment and take a percentage. Join the board and get involved if your
current venture fails/exits.

------
watertom
I've been at 4 startups, ground floor at 2, executive level at 3.

You know the answer to this, talk to your most friendly board member/investor.
If he's not receptive to trying an experiment, it's doubtful anyone else will,
at that point you either decide to stick with the current business, or leave
and start the other business. Just because he doesn't like the experiment idea
doesn't mean he may not stake you in the new venture. Also if you were not
hand picked as the CEO, you might find that leaving is met with happiness.
Just like you the board/investor always think there is something better to be
had, so they might be happy to get an upgrade at CEO, or think they can get an
upgrade.

------
modi15
Having being a CEO for around 10 years singly mindedly focussed on a single
company, I am coming around to the view that maybe running multiple companies
is better.

Though most people here would disgaree with me, and even me myself 5 years ago
would have vehemently disagree with my current self, I am of the view that you
should consider running both businesses.

The critical insight that fosters this view is that after a certain amount of
time being a CEO you realize that the growth of the company is not entirely in
your hands. Market forces play an indeterminate but critical role in the
growth of a company. Consequently, it maybe the case that your current
business might actually benefit from you stepping away and letting it mature
by itself.

After having run a particular genre of company for a bit, you start getting a
feel of what will move the needle and what will not. If there is incremental
growth to be had and little scope of exponential rampup, you might be better
off baking something else. There is a chance that this business will turn
around by itself over time or maybe by focussing on something else, you get a
better perspective on your existing business to take it to the next level.

I am currently ramping up on a business that I started on the side 5 years
ago. It wasnt really a business, it was an experiment. But it took a life of
its own. A couple of months back, I realized it had the potential to be a big
business and I was well placed to capitalize on it. Now I am ramping up that
'experiment' so that it employs a handful of people. The 'experiment' will pay
for these people and I will again let this idea bake for another year and
focus on something else.

I am coming around to the view that this is best way to work for 'serial'
entrepreneurs. Most people who arent serial entrepreneurs, that includes
almost everyone who have been a founder for less than 10 years wont see the
wisdom in this. Unfortunately, this will include your investors and other
employees. The only way to get them to fall in line is if you can get them to
fall in line without requiring them to see the wisdom of your action. It might
be impossible in your current setup, in which case you need to restructure so
that you can operate optimally.

~~~
bobosha
What you have described is the serial entrepreneur model i.e. someone who
founds companies, runs it past seed stage and leaves it to a professional CEO
at the growth stage. I wouldn't call it "parallel".

------
codingdave
Don't ask us - ask your board. Clearly they already have confidence in you,
this opportunity came from your current work, and you would need capital
anyway. So see if they will fund/find investors for it, whether they agree it
should be separate, and see which effort they want you to lead. Maybe they
will surprise you and let you run with the new thing, and bring someone new up
to your current CEO role.

------
gwbas1c
In my experience: I worked for a business unit where the "CEO" became
distracted with pursuing other opportunities unrelated to our core business.
It didn't pan out very well for him. He got canned, all of the people he
brought in to chase these ideas lost their jobs, ect.

One thing you didn't really describe is how long you've been in your company,
and what you accomplished. Are you a founder? Were you hired as a CEO? How
long were you in your position, ect?

If you're a founder, at some point it's expected that you'll leave to start
another company. If you replaced the founder, it's expected that you'll drive
growth in a defined marketplace.

I think you need to find out what the board expects you to do with the current
company, and see if it's a good time to transition your interests.

~~~
foundersdilemma
I'm the founder, the company has done well. We are serving customers in four
continents now. W

------
akrymski
A lot depends on what stage you are at - Series A/B/C? Do you have VCs or
angels?

But the worst thing you can do is to come across as unreliable or a cheat, so
if you are having doubts - talk them over with your investors. After all they
are your partners, and are equally interested in seeing your company succeed.
If you screw them over chances are you will be banned from the VC community
for good, which ruins any chances a new startup would have. Talk the idea
through with them, they will have insights that will prove useful. If they get
equally excited you will find a way out together that makes all parties happy.
If they don’t - perhaps the opportunity isn’t as great as you think, otherwise
they’d want to be a part of it too. Treat them like you would want to be
treated yourself.

------
pgroves
I don't see why your investors wouldn't be interested in pivoting the current
company to a bigger opportunity with less competition. What are the objections
going to be? They are not going to get mad at you for finding a bigger
opportunity when you were out talking to customers.

------
whistlerbrk
Find someone who can chase the idea and you'd trust and fund them.

------
lmeyerov
Most b2bs take 7-10 years to see through, with derisking inflection points at
say 100k, 1m-3m, and 10m arr. So much matters in terms of valuation, kiss of
death, etc, around those that generic advice seems unlikely.

It does sound like your heart isn't in it either way + it's early, so I worry
for your team both if you stay OR leave. They are your bigger responsibility,
so a transition discussion w cofounders seems like the real thing. But
again... Vague. Good luck!

------
z3t4
If the new idea is sound and you've got others that believe in it, then go for
it! Don't waste any time following a path, when you rather want to go another.
Talk with the board and say you want to pivot, if they don't like it, then
consider starting a new company, take the loyal people with you and offer them
some equity.

------
richardweddle
Do both. Life is short. This is YOUR life not others. And there are examples.
Jack Dorsey Twitter and Square Carlos Ghosn, Renault and Nissan Elon Musk,
Tesla and SpaceX Warren Buffett, Berkshire Hathaway and Salomon Brothers Steve
Jobs, Apple and Pixar Deion Sanders, National Football League and Major League
Baseball Bo Jackson - same

~~~
pikma
I can't find evidence online that Salomon Brothers was founded by Buffet, our
that Nissan was founded by Ghosn. Were they?

------
sunir
Do NOT mix the companies up. Corporations were invented specifically to
separate unrelated concerns.

You are not enslaved. You can move on. It will just look irresponsible.

Just be responsible.

Also startups and marriage are the same in so many ways. If one is having a
seven year itch the reason is not the spouse but a fear of commitment.

Dance with the one that brung ya.

------
mindhash
Have you considered getting someone you trust (co founder) to try out or
validate the new concept.

You would hold board position to start with.

Meanwhile look for your replacement Or Merge entities at a later date.

------
imnotadoctor999
Even as CEO, accepting outside capital makes you an employee of the investors.
If your new idea requires even more capital than your current, couldn't you
end up in a similar situation, with even more strings attached?

------
patrickxie
Do you mind putting your contact info in your profile. I know someone who is
your exact situation, I'd like to forward the outcomes of your decision to
that person.

------
alexgvozden
check your contract and see if there is any legal issues with leaving the
company, usually there is and it's significant

after that you will be able to think more rationally but honestly, if you have
drive to do something else then leave transition period for leaving the
company and in no way tell investors your idea is to start a new company, they
will claim this came in the time of working there thus IP for new product
should stay in the company

------
dk8996
One idea, I haven't seen mentioned, have you thought about selling the
company? This will give you a win and freedom to start you new project.

------
tim333
People like Branson and Bezos have done well allowing managers under them to
act as CEOs of new ventures under the umbrella.

------
justinzollars
How different is the business opportunity? You could create a new division and
devote a few engineers to it.

------
fuzzfactor
I imagine that Elon Musk might have been in a similar position in the past,
maybe more than once.

~~~
jacquesm
If a plan has 'but it worked for Elon Musk' as one of the important
underpinnings that will almost certainly work against you. (Unless, of course,
if you're Elon Musk.)

~~~
karimdag
How so ?

~~~
aaavl2821
For one, he invested tens of millions of his personal assets into his
companies, so having tens of millions to put into a startup is one
prerequisite

~~~
sah2ed
So, step 0 would be having real-world experience building a viable business,
which Musk gained from Zip2 and PayPal.

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npezolano
Why not just incubate the new product idea your under current well funded
company?

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headgasket
Post your idea here, with an honor-based ask for a seat at the table/retainer
in exchange for contacts to get it off the ground once you've vetted that you
are not dealing with clowns. You could be nicely surprised. True innovators
are in this together. Cheers.

------
kentf
Sounds like a pencil problem.

------
richardweddle
Ask no one but you. My 2 cents, do it. This is you, not other people. And
there are examples. Every CEO of GE or other is running 20 firms. Plus...

Jack Dorsey Twitter and Square Carlos Ghosn, Renault and Nissan Elon Musk,
Tesla and SpaceX Warren Buffett, Berkshire Hathaway and Salomon Brothers Steve
Jobs, Apple and Pixar Deion Sanders, National Football League and Major League
Baseball Bo Jackson - same

~~~
angersock
This is terrible advice. Those examples are all very established.

