You may recall old TV show called “6 million dollar man.” This is like a half human and half robot being that does incredible stuffs whenever there is a trouble.
But, guess what? there is one dollar man in the corporate world who is so entrepreneurial and withholds immediate personal interests for a while until he proves himself. Steve Jobs has got his fame taking very nominal salary (like $1) and also Kim Jung-Tae who led Kookmin Bank, the largest bank conglomerates in Korea out of trouble also collected zero paycheck for his incredibly challenging mission. Though, what made them to be really paid off at the end for their hard work were their stock-options or existing shares. In that case, their interests were totally aligned with other shareholders. If these entrepreneurial CEOs were really turning around the company, then they can be rewarded with roaring stock prices and they can eventually cash out.
This “one dollar man mind-set” maybe something we often expect from venture founders. Especially, when there are unproductive valuation or compensation battle between founders and institutional investors, we always hope that founders minimize or put off their expectation for immediate personal gain (like sales of founder shares or lucrative compensation package) for a while.
I saw two different cases. One of co-founders wanted to cut her paycheck at $350K while she was ok with her share position to be low. Initial funding wasn’t that great, but the board approved her package because she was a so called “high flier” who had great track-record.
The other case was that a founder already made some fortune from his previous venture. He was willing to cut a nominal salary like $1 for him to act as an entrepreneurial CEO until company hit certain milestone. It took longer than expected but he was totally fine with the fact that he was not rewarded immediately. He thought that other investors were also taking enormous risks, too. So, he thought that it was a good gesture and motivational factor for him to focus more on earliest moment of his new venture and to have a more efficient P&L until it started generating sufficient profit to create huge upside.
We definitely had more successful result from the second case. Though, in reality, we don’t see too many brave one dollar men. As investors, we also suggest more balanced approach. Though, we still try to disregard extremely personal-gain-oriented founders who have very lavish life style. We’d better working with someone who is humble and caring. As an investor, we don’t want to distress hard-working venture management team. However, we always hope that founders can really have forward-looking thoughts that they know what they are getting into and allocate resource to the most needed place.
What’s your business that makes you feel brave enough to take a short-term risk but yield huge outcome at the end of day?
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