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In the beginning of a startup, especially one that has multiple co-Founders of equal stature, the command structure is exactly that of a hunting party. That is, members of the party do not have rigid roles although they each have distinct skills. Their lives center around well-defined hunting events, the success of each is important for their subsequent survival.

The decision making process tends to be ad hoc and each person can take on multiple and often overlapping roles which can change from event to event, depending on the need of the team and also their ability to perform that same role in a previous event. In other words, the command structure is very flat and communication between each member is direct and unambiguous. Most importantly, consensus is a requirement since everyone is equal and while there might be a leader, there cannot be a dictator. It is a democracy as well as a meritocracy.

An operating company is like a village which is led by a single leader who is not popularly elected but appointed by a group of elders, and has dictatorial power over the villagers. There is usually unspoken but well understood rules on what is proper conduct for each member of the village include the leader, the elders who are the ones that bestow the authority, the captains, the foot solders and all the other supporting personnel including the children that make the village livable and sustainable.

The command structure of the village is no longer flat. Decisions that are made at the top need to be propagated as well as diffused into the individuals. Consensus is less important and is replaced by consultation. Decisions are made by mandates and not through bartering among equals. In order to function, there has to be both punishment and rewards. Punishment of the non-performers is actually an important form of rewards for the performers. Most importantly, unlike a hunting party, the roles are much more well-defined and much more rigid.

It is very difficult for a hunting party to naturally evolve into a village. The requirement is for some of original hunters to give up their executive power to become non-executive elders and to elect a single leader to become an authoritative figure who can make unpopular decision for everyone to follow.

It is almost impossible for a startup with multiple equal co-Founders to grow beyond the original flat command structure because it is unnatural for anyone to give up power (or influence), especially if they were the ones who made the company successfully in the first place.

The hunters are individual contributors who at best can evolve into middle managers. But middle managers who are also major shareholders would have a hard time separating their ownership interest from their fiduciary responsibility.

It is a very interesting problem to solve.

--Denny--

Denny K Miu

http://www.startupforless.com




Thank you for the very thorough explanation. It does bring up some more questions in my mind, however:

Even in hunting parties, aren't there leaders who need to resolve disputes or ultimately take on the responsibility to make tough decisions? Isn't the most experienced or best hunter the one in this role? I'm not sure how this maps exactly to a cofounder situation (unless, of course, there happens to be a parallel in the startup in question), but wouldn't it make sense for this hunting leader to become the elder?

Is it not possible for the single leader situation to be replaced by a ruling group? As long as these members continue to do some of the other work involved in the village/startup, it does not seem like it would become a situation where there are too many leaders and not enough workers. Of course, this assumes that the group can continue to reach decisions in a reasonable manner.

I'm not saying these situations could occur easily or frequently, but they seemed to fall outside the realm of your explanation while remaining hypothetically reasonable and workable.

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The problem is not one of skills and affinity but one of command structure.

A startup with multiple equal co-Founders is a partnership. No one in a partnership bears fiduciary responsibility. Each partner is responsible for their own interest and that of their family and no one else. So for partners to make decision, they barter. They each decide what they want from each other and out of necessity, they come to a common ground.

At the beginning of a startup, this is not a problem because like a hunting party, they are consumed by their own survival and their common ground is the only ground. The hunters are both owners and executives but there is no conflict.

But as the startup grows and becomes successful, the partners (i.e., co-Founders with more or less equal stature) will have a problem finding common ground.

On the other hand, a company is not a partnership. Company is owned by shareholders, whose interests are represented by the Board of Directors. The Board members (i.e., village elders) are not the executives but instead they appoint an executive (village chief) to run the company (village) on their behalf. The chief executive is given a mandate by the elders and he/she surrounds himself/herself with fellow executives, who together share the fiduciary responsibility.

So for a hunting party to evolve into a village (or a startup to evolve into an operating company), the original co-Founders will have to evolve from a co-owner to co-executive, replacing their ownership interest by fiduciary responsibility, and learn to change their decision making process from one of bartering to one based on mandate.

This sounds easy but almost never done properly.

--Denny--

Denny K Miu

http://www.startupforless.com

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