Earlier today I had a long conversation with one of my students, a scientist who had participated in the founding of Madison’s most prominent biotechnology company. After working as a bench scientist for many years, she became an entrepreneur in the early 1990s, and now she is studying to become a lawyer. She had some interesting thoughts about employees in a technology startup.
In a word: paranoia. She now works as a consultant for startup companies and claims to see the symptoms in (almost) every firm. When the firm is formed, the founder(s) and the early venture investors claim the largest stakes. They reserve smaller pieces of the pie for future employees. Those employees — often extremely talented scientists — are introduced to a world that is foreign to them. Their subsequent interactions with business people, particularly venture capitalists, are confusing and alienating. Despite their efforts, their share of the company recedes with each round of financing. Even he language of their claim against the company — “common” stock, as contrasted with the “preferred” stock held by venture capitalists — reinforces their sense of vulnerability.
The most interesting part of the story is that the employees’ sense of paranoia manifests itself in myriad ways, sowing contention throughout the firm. While law and finance professors stand aloof, assuming that equity compensation will work its magic, the firm rots from within. (OK, I took a bit of dramatic license on that last part, but you get the idea.)
According to my student, the solution here is honest communication. The problem resides in the distrust that grows from lack of understanding. The scientist-employee needs some training in the ways of finance, law, and business. Interesting thoughts.
A question for my readers: does this resonate?