RICH VERSUS KING: THE ENTREPRENEUR'S DILEMMA.

Abstract

The two major motivations to start a new venture are the profit motive and the control motive. This paper examines how entrepreneurs' choices that increase their potential financial gains (i.e., achieve the profit motive) should conflict with their ability to achieve the control motive. In particular, it focuses on how attracting the external resources required to build value can conflict with entrepreneurs' abilities to keep control of their ventures at the CEO and board levels. It explores whether this tension exists both at the level of the individual entrepreneur's financial gains and at the level of the overall venture's value, and also whether entrepreneurs can avoid the tradeoff by building more human capital before founding the venture and by retaining more co-founders as the venture grows. It tests its hypotheses on a unique dataset of 457 private technology ventures, and finds strong support for each of its core propositions. Implications include the need for entrepreneurs to understand the small probability of achieving both the profit and control motives, and to examine their core motivation and proactively plan their strategic choices to achieve that motivation.