Ask HN: I want to start a new company, but I'm CEO at a funded startup
I'm in a pickle. I have a funded enterprise B2B startup that seems to be going well, but it'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's very clear that there'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'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 "if you do x, we will partner with you" and I'd like to experiment. There are several concerns:
i) How to handle the current team and investors, it can't seem like I'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'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?
Any ideas would be very welcome
68 comments
[ 3.1 ms ] story [ 118 ms ] thread(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!
(2) serial entrepreneurs are _more successful_ than parallel ones for the most part.
beware
This fellow is running a successful business with investors backing it, and yet rather than stay to make it bigger and better he’s ready to throw it all away based off a couple passing conversations he had with some customers. There may have been a time where he felt just as strongly about this business as he does for his new idea.
If his new venture doesn’t take off he’ll be another one of the ambitious failures that litter Silicon Valley looking for the “next opportunity”.
If it does take off, there is still no guarantee he won’t jump ship to some new idea later, especially now that he has done it successfully at least once.
If he stays at his company, he can consistently work to improve it everyday, until it becomes something that can’t be built overnight by some entrepreneur flying by the seat of his pants.
The choice is his.
Oh! I get it now, thanks. Also, this reminds me of a FS article I read: https://www.fs.blog/2018/03/speed-velocity/
Note: FS is an excellent blog!
Well Twitter can't ship product, and many people within Twitter blame @jack. See for eg that article about the woman who setup their original abuse proceedures. Plenty of quotes in that which show how he stops anything getting fixed.
Maybe Musk might be a better example.
Musk took over Tesla in 2008, which was two years later than Twitter was founded.
In that time Twitter has:
I'm no Musk apostle, but it seems to me he's done a bit more than that.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.
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.
You're right that POS is the #1 pain point retailers have, even though you used it only as an example.
I bring this up because the problem is not what you'd think it is.
You can't just "build another one and they will come", because each different business who might be a customer has slightly different needs and wishes to implement the software in a different manner.
For clarity's sake, we run 8 retail stores, and since I have a background in software my partner wanted me to build a POS, since none of them on the market met our needs. I know enough to stay far away from that gig, though, because it's a rabbit hole of custom engineering.
I don't know what your business is or what people have asked you to build, but if it's anything like what I described above, you'd essentially be downgrading yourself from "funded software company CEO" to "paid consultant."
And even if you think you can sell it with minimal modifications to other customers, you better be 101% sure of that before jumping off this cliff.
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
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.
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.
If you switch to this new business idea, and you find another better idea again, how do you deal with that?
Big or smaller opportunities? How do you justify that?
Also, how long did you involve in the funded business?
Being like Musk is not the norm. In fact, he has publicly admitted in an interview he did with Bill Gates about China, that combining two CEO roles makes for a terrible work-life balance -- he wouldn't wish it on anyone.
https://en.wikipedia.org/wiki/Tesla,_Inc.#Roadster_and_priva...
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!
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.
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.
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.
I'm not saying don't try- but your reason is stupid.
Just because those people did it DOES NOT mean you can do it too.
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
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.
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.
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.”