The 2 Steves of Apple

Solo or Team
In recent Harvard dataset, only 16.1% of technology- and
science-based ventures were solo founded.
People Choose to go solo when they already have many of
the required resources
May want to keep all the equity and control
May Be tempted to keep things simple in the early stages

Requirements
Human capital encompasses the knowledge and skills derived from
team members formal education and prior experience;
Social capital reflects the connectionsalong with the credibility and
legitimacythat team members bring to the venture through their
interpersonal networks;
Financial capital refers to money or similar tangible resources that can
be used in the founding process.

A solo founder rarely has all the human, social, and

financial capitals needed.

3

Solo or Team
The vast majority of high potential startups have
more than one founder.
Chosen well, co-founders and early hires increase a
companys access to human, social, and/or
financial capital.
How do you choose?
4

Team--Downside
Each individual added to a founding team increases

coordination costs, which may increase the startups risk.

The larger the team, the higher the risk that roles will
overlap and cause conflict within the team. Further, each
new person adds more nodes to the firms internal
communication network, slowing things down and
potentially weakening accountability.
5

 A relational startup team(friends and/or family)

common because: easy to form and level of trust.

At the other end is a startup team comprised of

strangers or acquaintances. Drawbacksto build trust

and knowledge of working together.
Options in the middle of the spectrumin particular, a

startup team comprised of past coworkerscan address

some of the drawbacks mentioned above while maintaining
many of the advantages.
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 Starting a venture with close friends,

however, is

playing with fire.

With Apple, we see two very good

friends who end up not
understanding each other at all, not
valuing the contributions of the
other, and personally clashing.
7

If Wozniak had had a discussion with Jobs about the

equity split (both with Break-Out and at Apple) and their
roles, they may have arrived at a more realistic
arrangement, and avoided some of the damage done to
their relationship.

Ironically, it was that very relationship that made it hard to

have the conversation in the first place (the tendency to
avoid the elephants in the room.)
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The Danger of Founding with Family and

Friends: The Playing with Fire Gap
Family
Best Friends

Acquaintances

Past co-weorkers

Damage if
relationship
blows up

GAP
Likelihood of
discussing
Elephant
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Causes of Failure in VC-backed

Ventures
Product
development
, functional
managemen
t, market
problems,
etc

35%

35%
65%

Senior
manageme
nt team
65%
10

Question - 3
Does Apple Computer have a good
founding team?

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o Skills and Characteristics: Jobs vision and drive

balanced almost perfectly with Wozniaks
technical capability. Jobs was the (hot-headed)
passionate visionary, while Wozniak was the
(more measured and level-headed) analyzer.
o Network : Jobs was able to build a large network.
Wozniak had contacts at HP and Homebrew.
o Goals : Both wanted to make a large impact on
society with the personal computer.
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o Funding: Neither Jobs nor Wozniak had great

personal wealth or direct access to funding; Mike

Markkula was able to provide this piece.

o Values: Wozniak placed on honesty, fair play and

friendship with Jobs, who acted as if money power

were more important. Jobs unhappiness with his
employee number and Lisa Computer Wozniak
values the past and remains loyal to friends, Jobs
focuses on the future

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Attributes

Wozniak

Complimentary
Skills

Technical

Network

Low

Goals

Invent a personal
computer, impact
mankind for the better

Concurring
Values

Jobs
Visionary. Salesmanship,
driving force, making
connection
High
Make money, gain control,
make a dent in the
universe

Wayne
Legal, business

High
Make money (?) Keep a
high quality of life, stay
healthy

Honest/fair play,
friendship, the past

Winning, the future

Health, peace of mind

Money as
motivator

Low

High

Low

Styles

Level-headed, honest

Hot-headed, passionate
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Team
The tangible reasons for making a team include the
human, social, and financial capital that can be
brought to the venture by the right cofounder
The intangible reasons for adding cofounders
include task preferences, collaborative

style, support and validation

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Founders, when trying to fill holes in a founding team, often look for
people with complementary skills, .but neglect to consider and

value
system, motivations, and personal styles
and goals.
discuss all of the potential partners other attributes, such as

Some factors should be differing and complementary, but for others, the
team must be on the same page, or it will face major conflicts.

Even team with a perfect mix of skills can blow up if they neglect these
other differences.
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Question - 4

Who were the founders of Apple

Computer?
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 Founders can contribute to a

venture in very different ways:
Sometimes as early hires,
sometimes as active investors and
other roles. Even if you may not be
going to start a company, you can
also pay a major, formative role in
building something important, as
did Markkula for Apple.
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What defines a Founder?

Contribution
IDEA
Technical idea
Business idea
Straight vision
EXECUTION
Build product
Hire employees
Sell product
Raise Money
Lead Company

Woz
Jobs
Markkula

Woz
Jobs, Markkula
Jobs
Markkula
Scott
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Power dynamics, roles, and relationships

changes as the venture

evolves. All roles can build value, if not
at the beginning of a venture, then at
some point in its lifecycle.

What is the value of the idea versus the

execution? is a timeless question an the
subject of ongoing debates in
entrepreneurial management.

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Question - 5
Assess the founding team in terms
of its relationships, roles, and
reward systems.

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Three Characteristics of Startup

Teams

Relationships: Whom should founders try to attract as startup

team members: Friends? Family? Acquaintances? Strangers?
Prior coworkers?

Roles: How should the founders allocate roles amongst

themselves and other senior team members? Who should be
involved in making different types of decisions?

Rewards: When and how should the founders divide equity among
the startup team?
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Relationships, the best-friend relationship

between Jobs and Wozniak affected both their
roles and rewards. They were unable to have a
confrontation, the equity was simply divided
equally.

Markkulas status as an equal equity partner

forced both Wozniak and Jobs to admit him into
their inner circle.
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Roles Originally, Jobs role was sales/marketing, Wozniaks was

technology/product development, and Waynes role was
business/legal. Wayne and later Markkula also functioned as a tie
breaker between the two original founders.

The equal equity split gave Jobs considerable autonomy and

power at Apple; this caused conflict between Jobs and Wozniak,
Markkula, and particularly Scott, whom Jobs challenged on a
number of operational and management issues.

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Rewards reflect the premium teams place on

various contributions of each founding member.
For the founding teams of many high-potential
ventures, the primary rewards of interest are the
shares of the ventures equity. The equal split
between Jobs and Wozniak also could have been
the result of their inability to agree to an
alternative, since each thought their own
contributions were more important.
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The decisions founders make about whom

to bring on the founding team the
relationship part of the triangle affect how
they split equity and what roles each partner
fills.
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 The founders relationships determine how easy or

difficult it will be to have a conversation about roles
and rewards.
If founders decide to split everything down the
middle and share every role, it may be because
they are avoiding this discussion. Avoiding it,
however, may only allow conflicts to fester until they
become destructive.
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The Three Rs and Team Tensions:

Elephants in the Room
Relationships
Found with friends?
With strangers? Co-workers/
family?

Team
Tensions
Roles
Division of labor, positions,
skills
Decision making

Rewards
Splitting the pie
Compensation

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When one partner fails to live up to the

expectations of another partner, close personal
relationships can exacerbate the conflict within
the team. The relationship may be too important
to risk, and thus the venture will suffer.

The closer the relationship, the greater the risk to

the venture if conflicts arises.
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Conversely, if founders choose the ventures

interests over the relationship, the relationship
itself can disintegrate. This has dire
consequences for friends, family members, and
spouses who plan to go into business together.

For these reasons, founding a venture

with friends and family members can be
akin to playing with fire.
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Decision Making

A startup team also requires a decision-making process. The

design of this process must balance trade-offsaround speed,
efficiency, accountability, and buy-inby choosing a point on a
spectrum with two ends: 1) egalitarian (or consensus) decisionmaking, and 2) hierarchical (or autocratic) decision-making.

With an egalitarian process, members make decisions collectively,

seeking consensus through majority rule or unanimity.
A hierarchical process formally designates a single person who is
responsible for final decisions of a given type.
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 The Neverland decision-making structure, while

promoting a creative environment in the very early
stages of a new venture, can hinder the venture
from progressing to the next stage of growth.
When this is combined with an equal equity split,
great ambiguity about who is in charge of the
venture can result.
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The Equity Split

The most important rewardand the one with the
most potential pitfallsis the equity split. Firsttime founders sometimes underestimate how
powerful a motivator equity can be for themselves
as well as for attracting, motivating, and retaining
talented cofounders and early employees. (Equity
also is the main attraction for both angel and
venture capital investors.)
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The Equity Split

A natural inclination is to take the easiest route and
split the equity equally to avoid conflict. Founders
should resist this urge, which is fraught with longerterm peril, because it is rare that all individuals
contributed or will contribute equally to the ventures
success.
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When to conduct this

negotiation
Splitting equity too early is a recipe for continual
renegotiation; founders should wait until there is adequate
definition around the business model and each individuals
past and expected future contributions.
Founders should resist the urge to postpone what will likely
be an emotional, complicated, and tension-filled discussion
that often gets more challenging the longer it is delayed.
35

Facing Forks in the Road with Friends Every

company faces seminal forks in the road: decision
points that affect the future of the venture. Prior,
close social relationship prevent the founders from
productively resolving their conflicts. Research
shows that these soft issues or people problems
are responsible for 65% of new venture failures.

36

 Balancing the Founding Team Challenge is to

differ on what each member brings to the table, but
also to be in agreement on other dimensions. A
successful founding team needs differing
complementary skills, networks, and sometimes
personal goals. Conversely, the team should share
similar value systems, motivations, and goals for
the company.
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FOUNDING TEAM
Even with strong, complementary, and effective
founding teams, problems will arise as the venture
grows and changes. Founders must continually
reevaluate what is working and what is not working
on a founding team and within a new venture.

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Friends as Founders
Even if you *think* you know them, you
must recognise that friends change over
time.
One person gets more risk averse, the
other has more risk appetite. One person
gets married or has kids and starts to deprioritize the business. One person loses
the passion for what you do. Or you have
disagreements about strategy, recruiting,
funding, etc.
It is best to consider these eventualities

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Friends as Founders
Make sure you have founder vesting for all
of you.
Make sure you have a very clearly
established governance structure. Have a
clear path to resolving conflicts if they
arise.
Discuss topics such as funding, risk
orientation, how long each of you wants to
be doing this business, what happens
when one partner wants to leave or one
isnt performing?
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Many founders believe that the struggle to

build a successful team ends with the
formation of the founding group.
Actually choosing whom to hire requires the
same level of careful analysis as does the
choice of co-founders.

41

HR RESOURCES
Assembling strategic human resources at three
levels of the organization:
within the founding team,
within the board of directors,
and regarding the operating/technology team.
42

Stage 1: Start-up
Employees hired at the start-up stage are
jack-all-trades;
Are young and inexperienced, and need a
high level of training and supervision.
They tend to be flexible, comfortable with
taking risks, enthusiastic,
May have limited alternative employment
options.
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Stage 2: Transition
The advent of External funding/VC funding brings
pressure to professionalize the venture.
The movement from product development to
marketing changes the ventures focus
- from the technical expertise of the
founders/founding team
-toward the need for more professional sales and
marketing employees..

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Stage 2: Transition
The size of the company is also a
factor.
As it grows there is a need for
more middle level managers,
more formal processes,
and less centralized consensusdriven decision making
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Stage 3: Maturing
Decision making is decentralized across
functions and hierarchical.
The key employees hired at this stage are
usually specialists and experienced A-players.
CEOs often resort to executive search firms and
referrals from VCs to obtain these employees.
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Founders tend to hire employees to fulfill the

needs of the moment. The companys
needs, however, do not stay static.
A jack-of-all-trades or best athlete may fit
perfectly in the earlier stages of a venture,
but will flounder when the company
develops a formal structure.
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A-playersmature experienced people with

impressive resumesbring much to a
company, including leadership skills, a
strong network of business contacts, and a
deep understanding of their industry.
However, they do not have the flexibility of
an all-around best athlete

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The downside to hiring A-players is

that they are not used to a fluid,
developing product and company,
and need the structure, strong culture,
and support of a long-standing
company.
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 Scaling up
Seven Important People Practices of Successful
Organizations
Employment security
Information sharing

Selective hiring

Limited
differences
in Status

Compensation
linked to
organizational
performance

People
practices of
successful
organizations
decentralized
decision
making

Regular Training

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