Ask HN: I want to start a new company, but I'm CEO at a funded startup

(1) the grass is always greener on the other side

(2) serial entrepreneurs are more common than parallel ones

(3) don't you have a performance requirement with your investors?

(4) does your shareholder agreement allow any of this?

(5) have you talked this over with your investors?

(6) it all depends on the cap table

(7) you could always sell your stake in the current company or engineer an MBO

(8) doing another company underneath the current one will still require buy-in of shareholders

(9) you already seem distracted

(10) a word of advice: finish what you start

Best of luck!

Well phrased. Will just add at (2)...

(2) serial entrepreneurs are _more successful_ than parallel ones for the most part.

(11) Ambition is the enemy of consistency

beware

Why ?

Because to do something consistently over a long period of time requires letting go of opportunities that most ambitious people cannot resist.

This fellow is running a successful business with investors backing it, and yet rather than stay to make it bigger and better he’s ready to throw it all away based off a couple passing conversations he had with some customers. There may have been a time where he felt just as strongly about this business as he does for his new idea.

If his new venture doesn’t take off he’ll be another one of the ambitious failures that litter Silicon Valley looking for the “next opportunity”.

If it does take off, there is still no guarantee he won’t jump ship to some new idea later, especially now that he has done it successfully at least once.

If he stays at his company, he can consistently work to improve it everyday, until it becomes something that can’t be built overnight by some entrepreneur flying by the seat of his pants.

The choice is his.

> Because to do something consistently over a long period of time requires letting go of opportunities that most ambitious people cannot resist.

Oh! I get it now, thanks. Also, this reminds me of a FS article I read: https://www.fs.blog/2018/03/speed-velocity/

Note: FS is an excellent blog!

I had the misfortune to work with a CEO who not only started a second company but used the VC's from his first company to start the second. His first was in a similar state (making money, but not out of the woods). didn't end well for either startup A or B. Focus is critical, unless you are Jack Dorsey I guess.

> unless you are Jack Dorsey I guess

Well Twitter can't ship product, and many people within Twitter blame @jack. See for eg that article about the woman who setup their original abuse proceedures. Plenty of quotes in that which show how he stops anything getting fixed.

Maybe Musk might be a better example.

Musk is not a good example. Tesla is in flames and there is worry it could affect SpaceX which is the more important company. The Boring Company also seems like a pivotal waste.

The Boring Company went from digging tunnels for under ground roads for lorries to flame throwers.

What flames? You cookin'? Last I read tesla is up for the quarter and the shorts are being squeezed.

I think Tesla is a big, risky bet. But he has delivered a lot more than Dorsey has.

Musk took over Tesla in 2008, which was two years later than Twitter was founded.

In that time Twitter has:

  Stopped crashing all the time

  Increased the Tweet size from 140 characters to 280 characters.

I'm no Musk apostle, but it seems to me he's done a bit more than that.

Thanks for the feedback, I'll answer this by providing some more context.

a) I've done well when you consider revenue/global brand reach/spread

b) I've spoken informally to trusted board members nobody seems to have clarity on the best way forward

c) Option 7 seems to be the best way out

d) on point number 9, yes I'm distracted, but I've understated how much thought has gone into the second idea; it's something that's constantly come up when I'm with my customers with whom I have a remarkably intimate relationship with. I live for them and this one issue keeps coming up. I have toyed with the idea of getting someone else to build it, but it requires some industry good will, customers willing to pilot it etc and so far that rests with me. I meet with my customers on a fairly frequent basis to figure out where their general pain points are, what their industry vertical trends are and what other issues I can solve for them (typically this involves an introduction to one industry vendor/company or another). In the course of these conversations you can unearth a lot.

To use a theoretical example. I will use Square. If in the the process of meetings with customers in say retail figures out that nobody has built for purposes of this conversation a CRM that addresses their needs and it's a pain point that keeps coming up in every single conversation with retail customers what would you do? Over several conversations you have industry members nagging you for a solution because over time you have become their trusted advisor.

One thing you will have to recognize is that this will happen over and over again. So you are not going to find 'The Product' because there will always be other products that you could make and chase. And new development is so much more fun than maintenance, the same goes for new companies.

In your shoes I would analyze myself first before making a decision: are you just good as a starter or are you able to go the distance? And then to recognize that most of the value creation happens early on in the life cycle of a company but most of the value capture happens later on. So if you exit early you will financially hurt yourself.

Interesting example with retail and CRM (called "point-of-sale" in retail, but I understand this is not your real product.)

You're right that POS is the #1 pain point retailers have, even though you used it only as an example.

I bring this up because the problem is not what you'd think it is.

You can't just "build another one and they will come", because each different business who might be a customer has slightly different needs and wishes to implement the software in a different manner.

For clarity's sake, we run 8 retail stores, and since I have a background in software my partner wanted me to build a POS, since none of them on the market met our needs. I know enough to stay far away from that gig, though, because it's a rabbit hole of custom engineering.

I don't know what your business is or what people have asked you to build, but if it's anything like what I described above, you'd essentially be downgrading yourself from "funded software company CEO" to "paid consultant."

And even if you think you can sell it with minimal modifications to other customers, you better be 101% sure of that before jumping off this cliff.

Seems, to my completely inexperienced point of view, like its time to hire your replacement. Establish a board with yourself on it (probably alongside investors), hire your replacement, and let them run your first company. Use your position on the board to keep in touch with and help direct the running of the company, while freeing up time to work on a second venture.

Agree with this. If you are great at starting things, stick with that. Do what you love. Hire a proven CEO with a track record of taking something from $X million to $XX million. Build a solid transition plan and go be happy.

this.

IMO your only real options are to (a) quit to do the other thing or (b) not quit and forget about the other thing.

If you're funded, you can't do both. But there's some nuance in how one can quit, which depends largely on how far along your current business is.

If you have multiple cofounders and a solid team in place, you can just leave yourself. You talk to the investors first, and give them some sort of perk, such as a right of first refusal, or even spin it out of the current company (which means they get a small equity stake since your current company owns some of the new one). This is all fine, but only works if your current business is strong enough to run completely without you.

If the current business isn't to that point yet, then leaving it will kill it, and dividing your attention is as good as leaving it. Not fair to the investors, not fair to the employees. So you sort of just grin and bear it. That's the hidden cost of taking funding and asking people (both investors and employees) to believe in you. But such is life.

> I have verbal validation "if you do x, we will partner with you"

As the CEO of a funded company, you should know that the "we will partner with you" line is handwavy BS 99.9% of the time.

This statement is not a measure of potential money coming in the door. Rather, it's usually code for "we would like you to pay us to build your website/social presence" (if said by an agency owner) or "we would like to do some sort of advertising joint venture" (if said by a content marketing-driven company.)

Have you gotten anyone to actually toss a credit card at you across the table for this idea? If not, you have no customers and no proof this idea will work.

P.S. I would be less blunt if talking to a new founder. Often they get really excited about these garbage "partnership opportunities." But you, as the CEO of a funded startup, should know better.

I commented above that I greatly understated this. I've been explicitly asked to build it with fiscal commitment should I choose to say yes.

If you chase two rabbits at once, both will escape -- ancient chinese proverb

Ask everyone who is fighting every day in the companies they started 3/4/5 years ago - they all wish they were doing deep learning or blockchain!

Some days, it is normal to wake up and think that this other idea you have is far more promising and has far more potential than the one you are working on. Just stay focussed and finish what you embarked on. Startups are about execution. Ideas are only 1%. Soon the novelty of the idea wears off and it is what you do day to day that distinguishes your company from others.

We know who you are, Elon.

Please finish what you started with SpaceX and Tesla before you take on The Boring Company. Yes, it is a great idea, but you really have to get through ramping up manufacturing first.

Also, focus on energy storage after you get through manufacturing.

The 'unrelated' business idea being the result of the inroads made by you being at current company CEO role and having those customer conversations might be a potential fiduciary issue.

You need to pick someone on the board you can have a candidate initial discussion with and take it from there.

The last thing you want is to start a second co, having thought you figured out the first co, and possibly one day having a disgruntled investor from Co1 come after you claiming you should have invested resourcing from within Co1 towards the idea that you got wind of from Co1 customers... From the trust you built with those customers selling them Co1 solutions.

No I'm not a lawyer. So this is far from legal advice. Just a fellow founder who would be concerned if in this situation.

Ideas always look best when they are new. After a while the new idea might not look so attractive and that’s where execution and focus come in. It is true that there are examples of people who run multiple companies but I don’t think we know a lot about the details on how they are pulling this off. These people are probably extremely passionate about both of these ideas. It doesn’t sound like your situation.

This reminds me of a quote from Jesus in Matthew 6:24 "No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other.”

After 10 years being CEO for online marketplace, I found us in the position where our profits from the existing business (which support a team of 50) were not best allocated to the product we spent the last 10 years building. After reading Warren Buffetts “The Snowball,” I became convinced that we were best off channeling our profit into the highest ROI opps, regardless of whether they were directly relevant to our marketplace.

Judging by the other responses here, I’m in a distinct minority to claim that you could consider building both businesses.

The jury is still out on whether this will prove to be a sound idea, we started building two separate projects last year and only one has been soft launched thus far (StaticObject.com).

That said, a couple relevant takeaways from our work to date:

1. The only way a multi product company can possibly work is if you’ve accumulated an inner circle that can stand in for you. You’re not going to do a great job building two things at the same time. You’ll need to find others who can pick up your slack 2. Our arrangement was pursued in part cuz we’re almost entirely self-funded, which means less VCs to encourage/force us to follow the path more traveled 3. A single, great developer can get as much done on a project as a team of 5 developers by virtue of reduced communication cost, and (hopefully) less tech debt. There is meaningful leverage available by splitting great devs onto separate projects.

Aside: StaticObject.com has the creepiest robot picture. I'm pretty sure that guys nipples are in danger.

And that analog meter between the hands makes the robot look like a very excited man!

Thank you.

"Never half-ass two things. Whole-ass one thing."

Find someone competent to execute your other business plan and provide them a seed investment and take a percentage. Join the board and get involved if your current venture fails/exits.

I've been at 4 startups, ground floor at 2, executive level at 3.

You know the answer to this, talk to your most friendly board member/investor. If he's not receptive to trying an experiment, it's doubtful anyone else will, at that point you either decide to stick with the current business, or leave and start the other business. Just because he doesn't like the experiment idea doesn't mean he may not stake you in the new venture. Also if you were not hand picked as the CEO, you might find that leaving is met with happiness. Just like you the board/investor always think there is something better to be had, so they might be happy to get an upgrade at CEO, or think they can get an upgrade.

Having being a CEO for around 10 years singly mindedly focussed on a single company, I am coming around to the view that maybe running multiple companies is better.

Though most people here would disgaree with me, and even me myself 5 years ago would have vehemently disagree with my current self, I am of the view that you should consider running both businesses.

The critical insight that fosters this view is that after a certain amount of time being a CEO you realize that the growth of the company is not entirely in your hands. Market forces play an indeterminate but critical role in the growth of a company. Consequently, it maybe the case that your current business might actually benefit from you stepping away and letting it mature by itself.

After having run a particular genre of company for a bit, you start getting a feel of what will move the needle and what will not. If there is incremental growth to be had and little scope of exponential rampup, you might be better off baking something else. There is a chance that this business will turn around by itself over time or maybe by focussing on something else, you get a better perspective on your existing business to take it to the next level.

I am currently ramping up on a business that I started on the side 5 years ago. It wasnt really a business, it was an experiment. But it took a life of its own. A couple of months back, I realized it had the potential to be a big business and I was well placed to capitalize on it. Now I am ramping up that 'experiment' so that it employs a handful of people. The 'experiment' will pay for these people and I will again let this idea bake for another year and focus on something else.

I am coming around to the view that this is best way to work for 'serial' entrepreneurs. Most people who arent serial entrepreneurs, that includes almost everyone who have been a founder for less than 10 years wont see the wisdom in this. Unfortunately, this will include your investors and other employees. The only way to get them to fall in line is if you can get them to fall in line without requiring them to see the wisdom of your action. It might be impossible in your current setup, in which case you need to restructure so that you can operate optimally.

What you have described is the serial entrepreneur model i.e. someone who founds companies, runs it past seed stage and leaves it to a professional CEO at the growth stage. I wouldn't call it "parallel".

Don't ask us - ask your board. Clearly they already have confidence in you, this opportunity came from your current work, and you would need capital anyway. So see if they will fund/find investors for it, whether they agree it should be separate, and see which effort they want you to lead. Maybe they will surprise you and let you run with the new thing, and bring someone new up to your current CEO role.

In my experience: I worked for a business unit where the "CEO" became distracted with pursuing other opportunities unrelated to our core business. It didn't pan out very well for him. He got canned, all of the people he brought in to chase these ideas lost their jobs, ect.

One thing you didn't really describe is how long you've been in your company, and what you accomplished. Are you a founder? Were you hired as a CEO? How long were you in your position, ect?

If you're a founder, at some point it's expected that you'll leave to start another company. If you replaced the founder, it's expected that you'll drive growth in a defined marketplace.

I think you need to find out what the board expects you to do with the current company, and see if it's a good time to transition your interests.

I'm the founder, the company has done well. We are serving customers in four continents now. W

A lot depends on what stage you are at - Series A/B/C? Do you have VCs or angels?

But the worst thing you can do is to come across as unreliable or a cheat, so if you are having doubts - talk them over with your investors. After all they are your partners, and are equally interested in seeing your company succeed. If you screw them over chances are you will be banned from the VC community for good, which ruins any chances a new startup would have. Talk the idea through with them, they will have insights that will prove useful. If they get equally excited you will find a way out together that makes all parties happy. If they don’t - perhaps the opportunity isn’t as great as you think, otherwise they’d want to be a part of it too. Treat them like you would want to be treated yourself.

I don't see why your investors wouldn't be interested in pivoting the current company to a bigger opportunity with less competition. What are the objections going to be? They are not going to get mad at you for finding a bigger opportunity when you were out talking to customers.

Find someone who can chase the idea and you'd trust and fund them.

Most b2bs take 7-10 years to see through, with derisking inflection points at say 100k, 1m-3m, and 10m arr. So much matters in terms of valuation, kiss of death, etc, around those that generic advice seems unlikely.

It does sound like your heart isn't in it either way + it's early, so I worry for your team both if you stay OR leave. They are your bigger responsibility, so a transition discussion w cofounders seems like the real thing. But again... Vague. Good luck!

Do both. Life is short. This is YOUR life not others. And there are examples. Jack Dorsey Twitter and Square Carlos Ghosn, Renault and Nissan Elon Musk, Tesla and SpaceX Warren Buffett, Berkshire Hathaway and Salomon Brothers Steve Jobs, Apple and Pixar Deion Sanders, National Football League and Major League Baseball Bo Jackson - same

I can't find evidence online that Salomon Brothers was founded by Buffet, our that Nissan was founded by Ghosn. Were they?

If the new idea is sound and you've got others that believe in it, then go for it! Don't waste any time following a path, when you rather want to go another. Talk with the board and say you want to pivot, if they don't like it, then consider starting a new company, take the loyal people with you and offer them some equity.

Do NOT mix the companies up. Corporations were invented specifically to separate unrelated concerns.

You are not enslaved. You can move on. It will just look irresponsible.

Just be responsible.

Also startups and marriage are the same in so many ways. If one is having a seven year itch the reason is not the spouse but a fear of commitment.

Dance with the one that brung ya.

If the business is growing fast, why bother about competitiveness?

If you switch to this new business idea, and you find another better idea again, how do you deal with that?

Big or smaller opportunities? How do you justify that?

Also, how long did you involve in the funded business?

Even as CEO, accepting outside capital makes you an employee of the investors. If your new idea requires even more capital than your current, couldn't you end up in a similar situation, with even more strings attached?

Have you considered getting someone you trust (co founder) to try out or validate the new concept.

You would hold board position to start with.

Meanwhile look for your replacement Or Merge entities at a later date.

Do you mind putting your contact info in your profile. I know someone who is your exact situation, I'd like to forward the outcomes of your decision to that person.

check your contract and see if there is any legal issues with leaving the company, usually there is and it's significant

after that you will be able to think more rationally but honestly, if you have drive to do something else then leave transition period for leaving the company and in no way tell investors your idea is to start a new company, they will claim this came in the time of working there thus IP for new product should stay in the company

One idea, I haven't seen mentioned, have you thought about selling the company? This will give you a win and freedom to start you new project.

People like Branson and Bezos have done well allowing managers under them to act as CEOs of new ventures under the umbrella.

How different is the business opportunity? You could create a new division and devote a few engineers to it.

I imagine that Elon Musk might have been in a similar position in the past, maybe more than once.

If a plan has 'but it worked for Elon Musk' as one of the important underpinnings that will almost certainly work against you. (Unless, of course, if you're Elon Musk.)

How so ?

For one, he invested tens of millions of his personal assets into his companies, so having tens of millions to put into a startup is one prerequisite

So, step 0 would be having real-world experience building a viable business, which Musk gained from Zip2 and PayPal.

The whole reason his name is mentioned here is because is somewhat exceptional.

Not necessarily. Tesla was originally founded by Martin Eberhard and Marc Tarpenning in 2003 before Musk joined as chairman and major shareholder in 2004. Musk became CEO out of necessity since he was already CEO of SpaceX.

Being like Musk is not the norm. In fact, he has publicly admitted in an interview he did with Bill Gates about China, that combining two CEO roles makes for a terrible work-life balance -- he wouldn't wish it on anyone.

https://en.wikipedia.org/wiki/Tesla,_Inc.#Roadster_and_priva...

Why not just incubate the new product idea your under current well funded company?

Post your idea here, with an honor-based ask for a seat at the table/retainer in exchange for contacts to get it off the ground once you've vetted that you are not dealing with clowns. You could be nicely surprised. True innovators are in this together. Cheers.

Sounds like a pencil problem.

Ask no one but you. My 2 cents, do it. This is you, not other people. And there are examples. Every CEO of GE or other is running 20 firms. Plus...

Jack Dorsey Twitter and Square Carlos Ghosn, Renault and Nissan Elon Musk, Tesla and SpaceX Warren Buffett, Berkshire Hathaway and Salomon Brothers Steve Jobs, Apple and Pixar Deion Sanders, National Football League and Major League Baseball Bo Jackson - same

This is terrible advice. Those examples are all very established.