Sometimes it’s good to be a sellout

February 25, 2011, 7:23 PM UTC

Sometimes it’s not. How to know when to be true to your vision, and when to grow your company at any cost.

Company founders fall into two categories, according to Noam Wasserman, an associate professor at Harvard Business School. The “king” wants to build an empire and change the world, while a “rich” founder is motivated by financial gains and unleashing a company’s growth potential.

Many entrepreneurs look at company founders like Apple’s (AAPL) Steve Jobs — who managed to grow his company into a behemoth while also maintaining control — and assume it’s possible to be both a king and rich. In reality, “99% of those founders are going to be facing, at some point, a choice between one and the other,” Wasserman says. “Hopefully they’re picking the fork in the road that is much more consistent with what their goals and aspirations are.”

It’s important to understand what type you identify with most to navigate the key decisions that will arise during any entrepreneurial venture, Wasserman says. King founders find it difficult to share control and can be very stubborn when facts on the ground challenge their vision. Rich founders are motivated by the practical rewards of entrepreneurship, whether it’s money or freedom, and are more likely to share control as their venture grows and changes.

In fact, Apple co-founder Steve Wozniak is a better example than Jobs of a king, motivated by a dream of bringing computing power to the masses. When Apple was about to go public, he sold his own shares below-market to the key early employees he thought should be rewarded financially, Wasserman says.

“Every entrepreneur thinks they’re unique and idiosyncratic,” he says. “Those very diverse people are consistently facing the same issues and same potential missteps.”

Segway founder Dean Kamen and Nike (NKE) founder Phil Knight are other examples of kings, so intent on maintaining control of the company that they missed out on growth opportunities or access to capital. Kamen’s conviction that the Segway would revolutionize the transportation industry made him fanatical about secrecy, limiting his staff’s ability to test market the device before its release. Knight scoffed at the 1980s aerobics trend and kept Nike focused on designing for elite athletes, only to see Reebok overtake his company by selling sneakers to women.

By contrast, Farbood Nivi, founder of educational social network Grockit, agreed to step aside as CEO and recruit an executive who could take the company to the next level. “The only way to get someone of high enough caliber was to give away the CEO job,” Nivi says. “If you’re not set up to think that your company is going to be so successful that it’s going to outperform you, you’ve got your sights set the wrong way.”

Neither the king nor rich model is best, Wasserman says. Entrepreneurs should act consistently with their motivations. King entrepreneurs, for instance, would likely be less satisfied with the outcome if they gave up control and saw the company become a multi-billion dollar success story without them — and without fulfilling their vision.

In 1992 when Kelly Campbell started Interface Technologies Inc., a software development company in Raleigh, North Carolina, his dream was to change the world with beautifully designed technology. Since then, he’s come to see that sharing control is essential for a company in such a creative industry.

“That’s been a shift for me over the years, that you don’t have to have control over everything, that you can involve people internally and customers,” Campbell says. “It’s not so much about the technology or our ability to do things with technology that really matters. It’s about how you can apply it to solving a specific problem and getting things done for people. That’s sort of a shift into a less controlling position.”

During the Internet boom, Campbell’s contemporaries launched businesses and sold them for multi-million dollar paychecks; he was content to build an enterprise that would thrive during the boom and busts to come. “In the late 90’s I got laughed at for being a lifestyle business,” he says. “A couple of years later, it wasn’t so funny.”

David Vivero isn’t sure whether he falls into the king or rich model, which he studied in Wasserman’s class. He launched RentJuice in 2009 to fulfill his vision of efficiently connecting real estate brokers and property management professionals.

“There’s an emotional attachment and connection to my business. I would never sell it at this point,” Vivero says. Still, he sought venture capital financing to have enough resources to execute his vision, and he welcomes the experience and input of his investors.

When pushed, he says that he likely falls into the king model. “I probably sold the product on my own too long instead of thinking of myself as this single cell organization that needs to split,” Vivero says. “I needed to change my position to being a hirer and mentor and compensator. That was a big transition for me. We probably would’ve had a faster growing enterprise if I had done that sooner.”

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