Incentives shape behaviour – a statement to live by. One which gives more guidance to corporate and gubernatorial behaviour than anything else. It’s the reason why the disrupted, got disrupted, and why most governments in developed economies favour industrial protection over reinvention. Whenever we think about how anyone, or any organisation might behave, the best course of action we can take is to stop, and imagine what their incentives might be.
A favoured form of reinvention for companies facing a technological disruption is the birth of the corporate accelerator program. Or smaller efforts of finding and funding internal ‘entrepreneurial’ activity – the startup inside. The concept is valid, but so often the execution fails. Over the years I’ve been involved with a number of multinational corporations who’ve sponsored such activity to try and build out internal startup firms. They rarely work for one simple reason – misaligned incentives.
If you’re really an entrepreneur, the first things you want are ownership and independence. But all too often these accelerators have majority equity stakes, or expect their newly minted internal entrepreneurs to magically stop behaving like employees. They expect an entire new perspective on risk taking inside their culture. When the mindset and rewards are so often about protection and risk mitigation.
The simplest and best way to ensure anyone truly cares about anything is via ownership. People need to have ‘skin in the game’ and own the outcome. It’s only when we wear the cost of failure and benefit directly from any success that the true entrepreneurial spirit can ever be found.
Ten years ago I used to get offered equity to work for free, now I get offered tokens in upcoming ICO’s. I used to say yes to many equity offers if:
(A) I liked the project
(B) I liked the people
As you can imagine most of these projects never went anywhere. I’ve now got many 1% shares in imaginary companies that no longer exist. I’d hazard to guess many ICOs are also going to end up as Imaginary Cash Only. So should you accept such an offer from some cool people? Well, it really depends on why you’re doing the work. If it’s for experience, then why not? Think of it as part of your ‘free education’ in industry XYZ. Many of the most valuable things I’ve done in my career started out in the free zone.
My approach today however, is a little different. Here’s how a decide whether or not to work for non cash payment:
If I wouldn’t invest my own money in that startup or activity, then I wont accept non-cash payments. Why – because they are essentially the same thing. We are handing over money to the project or company.
Another thing worth considering is why the person on the other side of the equation would give away equity for labour. If they truly believe in their project, why are they so eager to give up equity? It’s certainly worth asking them that question.
In my experience smart entrepreneurs ask for money, not free labour. Especially when money follows good ideas, strong teams, and that managing free labour adds friction and complexity to the project or startup itself.
Your work is worth more than you think, Steve.
Yesterday I got an email from Sam Birmingham from Pollenizer, and it’s message was so compelling, I had to share it here:
It is something we hear all too often… “I was wondering if you could help me find an investor?”
You don’t need an investor. You need customers.
You don’t need an investor. You need to prove that you are developing a sustainable business model.
You don’t need an investor. You need to focus on learning as much as you can with the finite resources at your disposal.
Sometimes having limited time / money / people can be an advantage. Do the best you can with what you’ve got. Stop making and start answering the most important question in entrepreneurship – what comes next?
For more startup goodness be sure to check out the Pollenizer blog.
New Book – The Great Fragmentation – out now.
Sometimes it seems like it’s web bubble time all over again…. or is it just me…. or is it just Aziz?
In any case this made me laugh, and I hope it brings a smile to your face too. A big HT goes out to Mr Brim.
Due to overwhelming demand. I’ve decided to post the Project Prospectus here:
The Super Awesome Micro Project Prospectus
The thing I really dig is brands that are honest. No point being uptight. Pringle Scotland does a good job of this. Hat tip to Big Red of Haul.
Sometimes a startup just make sense. Logical in hindsight to the point where it feels like we should have done it.
Vitamints is one such startup. It is what it says – Vitamins which are also mints.
This Australian startup has taken some really clever insights to form the basis of the product format and it goes a little deeper than vitamins that taste nice. They found that houses were graveyards for half used vitamin bottles (I know mine is!!). The basic idea was to get vitamins out of the kitchen cupboard and into peoples pockets, like gum. So why not package it like gum? Why not make it taste nice? Why not distribute it in more convenient locations?
And aside from the fact that mints in convenience stores are almost the fastest growing impulse purchase, Vitamints taps beautifully into the mobile society we now live in. Your vitamins now live in your pocket people. Sounds a bit like a classic web mashup business, but in an old tired category. Once again industry incumbents need to take a lesson from an innovative new business – maybe that’s why I like it so much.
I can’t wait to read about them getting bought out by a multinational pharmaceutical company in 10 years time.