On multiple occasions, I have heard this phrase "Indian entrepreneurs are obsessed with control".
Am pretty sure this is true for all entrepreneurs globally though!
During conversations around Board seats, equity holding and supermajority rights negotiations - embedded in 250 page shareholder agreements - investors take pains to point out that they are not in the business of running a business. They cannot be successful unless the team succeeds. And if the team performs, there is no rational reason why they would want to rock the boat.
Clearly "if the team performs" is the key phrase - and the definitions of performance can vary based on the hat you are wearing (investor, promoter, ceo, employee, customer etc) - and based on the stage of the business (early stage, growth stage, impatient investor looking for exit stage, employees needing market salaries stage etc)
I believe the varying definition of performance over time and role is a key issue that makes entrepreneurs worry about losing control.
One other aspect that I got thinking about is the prevalence of service businesses in India - as against product/technology/IP businesses.
In a product/technology business, as the entrepreneur whose trip was to develop a new product or technology, you still retain the leverage of the R&D and new product development creation process even if you are not the CEO or control the Board directly.
So, if you are technically smart or able to come up with new products, you do not need to worry about control. The company needs you more than you need them.
But in a service business, the key leverage is the relationships that the business has with its customers, partners, vendors, employees etc. Most of these have been established by the founder/founding team. It is not possible to recreate these in another space. Each one of them has happened over years of engagement, landing up at customers' kids weddings, showing up for their functions, doing them a favor once in a while etc.
In addition, in a service business, the value is delivered by the team in the company. Not by the guy defining the service.
The entrepreneur needs control to leverage this huge set of relationships for the new ideas (product or service).
Maybe in a product business, as long as you deliver cool technology, it is fine to not be in control. But in a service business, if you do not control the "system" and its priorities, you cannot make things happen in the marketplace.
Put in all the hard work, build the relationship network and when the real leverage has kicked in, it is important to be in control.
And from an ongoing value creation and a final value capture (acquisition/IPO) perspective, this is a big issue for entrepreneurs.
Maybe the predominance of service businesses and the variation in the definition of performance is why entrepreneurs have a need for control.
Or maybe they are really paranoid! :)
Am pretty sure this is true for all entrepreneurs globally though!
During conversations around Board seats, equity holding and supermajority rights negotiations - embedded in 250 page shareholder agreements - investors take pains to point out that they are not in the business of running a business. They cannot be successful unless the team succeeds. And if the team performs, there is no rational reason why they would want to rock the boat.
Clearly "if the team performs" is the key phrase - and the definitions of performance can vary based on the hat you are wearing (investor, promoter, ceo, employee, customer etc) - and based on the stage of the business (early stage, growth stage, impatient investor looking for exit stage, employees needing market salaries stage etc)
I believe the varying definition of performance over time and role is a key issue that makes entrepreneurs worry about losing control.
One other aspect that I got thinking about is the prevalence of service businesses in India - as against product/technology/IP businesses.
In a product/technology business, as the entrepreneur whose trip was to develop a new product or technology, you still retain the leverage of the R&D and new product development creation process even if you are not the CEO or control the Board directly.
So, if you are technically smart or able to come up with new products, you do not need to worry about control. The company needs you more than you need them.
But in a service business, the key leverage is the relationships that the business has with its customers, partners, vendors, employees etc. Most of these have been established by the founder/founding team. It is not possible to recreate these in another space. Each one of them has happened over years of engagement, landing up at customers' kids weddings, showing up for their functions, doing them a favor once in a while etc.
In addition, in a service business, the value is delivered by the team in the company. Not by the guy defining the service.
The entrepreneur needs control to leverage this huge set of relationships for the new ideas (product or service).
Maybe in a product business, as long as you deliver cool technology, it is fine to not be in control. But in a service business, if you do not control the "system" and its priorities, you cannot make things happen in the marketplace.
Put in all the hard work, build the relationship network and when the real leverage has kicked in, it is important to be in control.
And from an ongoing value creation and a final value capture (acquisition/IPO) perspective, this is a big issue for entrepreneurs.
Maybe the predominance of service businesses and the variation in the definition of performance is why entrepreneurs have a need for control.
Or maybe they are really paranoid! :)
