What motivates an

Entrepreneur?
Profit
Drive to control

Types of entrepreneurs
! Opportunistic entrepreneurs are motivated by
financial gains.

! Craftsman entrepreneurs (classic) are driven by

the need for autonomy.

Aspects to consider
! Lack of resources is the main factor leading to
failure in new ventures.

! The idea of giving away control can conflict with

the motivation of entrepreneurs.

Managing control
PROS

CONS

Giving away control

They get the

resources to help
build the company.

They give up equity

and decision
making control.

Maintaining control

Retain equity and

ability to manage
company.

Deemed not as a
valuable company.
Have greater risk of
early failure.

Incorporating outside resources

and giving away control
Rate of Growth

Risk of Failure

Value of the
company

Uncertainty

Some examples of outside

resources
! Investors
! Co-founders
! Non-founding executives
! Think CRAZY QUILT
! Can you think of other Frameworks that are
connected to this scenario?

Entrepreneurs retaining control

of their company
Risk of Failure
Uncertainty

Rate of
Growth
Potential
value of the
company

Hypotheses
1.

If the entrepreneur holds the CEO position, the value of the entrepreneurs
equity stake will be lower.

2.

If the entrepreneur controls the board of directors, the value of the

entrepreneurs equity stake will be lower.

3.

Entrepreneurs who had general management experience before founding

the venture will have more valuable equity stakes in their venture.

4.

If the entrepreneur has been replaced as CEO or if outsiders control the

board of directors, the companys valuation will be higher.

The Rich vs. King Trade-off

Some examples
FLOP

KING

RICH

RICH & REGAL

Failed SharkTank contestant

Small family
business

Jay-Z (part
owner of
Brooklyn Nets
Basketball
Team)

Richard Branson

Can you think of some more?

The Rich vs. King Graph