From the Crowd

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In search of a few great 'criminals'

April 18, 2011: 2:17 PM ET

The best founders are not just imaginative. They are transgressive.

By Matt Harris, contributor

As Balzac once said, "Behind every great fortune lies a great crime."

In the past few weeks, we have been treated to scandalous-if-true stories about the foundings of Facebook and Twitter. Allegedly, Facebook was founded by the guy who stole the idea from a set of Olympian twins, ripped off a wood-chip dealing fraudster for his first $2k of investment and then screwed the college buddy who provided him with additional growth capital. Twitter was the bastard child of a devious founder, who convinced his early investors that it was worthless so he could look like a hero for buying them back at cost, only then to reveal the true glory of the product and, oddly, not even let most of them invest back in later when they tried their damndest to do so. Oh, he also fired the real founder and, in an Orwellian turn, pretends the guy never existed in press interviews.

I have no idea if these stories are even partially true. Frankly, I don't care, and am pretty sure anyone who isn't actually involved shouldn't care much either, beyond gossip value (though perhaps "gossip value" is an oxymoron). There will be those who insist that the veracity of these claims goes directly to the moral fiber of the founders, and hence perhaps the culture of these companies, and that therefore we all have to know the truth. I think that take is ridiculous, and that's the thrust of this post.

If I had to pick one adjective that describes all radically successful founders, it would be "transgressive." That trait is what it takes to start a company that attempts to redefine an industry, or, like Facebook, redefine large parts of society. It is not a polite thing to do. It is audacious, disruptive and preposterous on the face of it. Founders have to be persistent (bullheaded), persuasive (flexible with the truth) and visionary (delusional).

Please don't take this as a defense of actually criminal, or even unethical, behavior. We would never work with a founder who was guilty of what we considered an actual ethical lapse, and surely if all of the allegations regarding Twitter and Facebook are true, those founders have a lot to answer for. When I'm checking references on a founder, I definitely focus about integrity and ethics. It's incredibly important to me that I can implicitly trust the people I'm in a foxhole with.

Having said that, I'm painfully aware that the world is full of gray areas. So what I always pursue, in addition to positive character references, is 100% alignment. To be honest, if an entrepreneur I really respected came to me and offered to buy me out for 1X my money, and said he was going to carry on with the project without me, I WOULD ALWAYS SAY NO. Always.

I don't get paid to return 1X to my investors, and I never want to sell when one of my founders is buying (although occasionally I do buy when they are selling, for other reasons.) Further, when I'm doing these reference calls, I sometimes hear things that seem bad, but I interpret as good: "John had a bad habit of promising things to the client that didn't exist, then scrambling like mad to backfill those capabilities;" "When Jill wants something, she can be pretty hard to deal with until she gets what she's after;" or "Seth asked a lot of his people, and would occasionally burn some of his weaker performers out."

You should know that all of this comes from a guy who is married to an entrepreneur, and started a firm with one (different people, thankfully). I am a charter member of the cult of the founder. Of the 10 guys I lived with in college, nearly all have started a company or been on a founding team. Perhaps the best part of my job is getting to spend time with people who do 10 impossible things before breakfast (i.e., my portfolio company CEOs). But we should be honest about what it takes to change the world. It takes more than chutzpah. It takes Balzac.

Matt Harris is co-founder and Managing General Partner of Village Ventures, an early stage venture capital firm with over $175M under management.

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