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THELEAN
Trevor Owens
CEO, Javelin.com
ENTERPRISE
@TO
PM,Google
ChristopherIsaacStone
Heleftagreatjob&$2M
stockoptions,tostarta
podcastingstartup.
Hehadnosavings.
Thepodcasting
startupfailed,but
Chrispivoted
MeetChristopher“Biz”Stone
Founder,Twitter
BizGained
“EntrepreneuroftheDecade”
“NerdoftheYear”
X-GoogleEmployees
* = Full Growth Not Realized
**
* *
ManyFoundersLeaveCorporations
Theaverage
entrepreneurhas
14yearspriorwork
experiencebefore
starting
Withsomuchtalentin
companies,whatcanwe
dowheneventhemost
innovativecompanycan’t
retainentrepreneurial
people?
Bytheendofthis
presentationyouwillhave
ananswer
Allstartupsand
disruptiveproduct
developmentfollowthe
samepattern
The Startup Curve
Before
Startup
Source: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Before
Startup
Source: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Reality
Sets In
Before
Startup
Source: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Reality
Sets In
TROUGH OF
SORROW
Before
Startup
Experimenting
& PivotingSource: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Reality
Sets In
TROUGH OF
SORROW
Before
Startup
Starts
Working
Experimenting
& PivotingSource: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Reality
Sets In
TROUGH OF
SORROW
Before
Startup
Product/
Market Fit!
Starts
Working
Experimenting
& PivotingSource: Paul Graham; avc.com
Time
Happiness
The Startup Curve
Initial
Enthusiasm
Reality
Sets In
TROUGH OF
SORROW
Before
Startup
Product/
Market Fit!
Scale
Starts
Working
Experimenting
& PivotingSource: Paul Graham; avc.com
Time
Happiness
Startupsarechaoticand
experienceaperiodof
extremeuncertainty,thisis
theTroughofSorrow(ToS)
Moststartups&
corporateinnovationprojects
failintheTroughofSorrow(ToS)
It’seasiertonavigateToS
outsideofcorporatecontext,
howcanwefixthis?
Theanswerliesinthe
motivationsofentrepreneurial
individuals
ResearchshowsRisk
Aversiondoesnotaffect
decisiontostarta
startup
Dr.TimButlerofHarvard
studied27,000
individualsandfound
entrepreneursvalue
rewardsverydifferently
Entrepreneur
1. Power

2. Control
Employee
1. Security

2. Recognition
…

11. Power

13. Control
…

…

13. Security
Theproblemin
corporationsisthatwetry
torewardinnovatorswith
thingstheydoNOTvalue
Entrepreneurswillingly
giveupsalaryinexchange
forequity.Thisformof
ownershipisthepathto
Power&Control
Inconversationwiththe
FounderofInstagramon
whytalentedpeopleleave
Google,ChrisDixon
said…
“Ownership is why you stay
up all night. It’s why you think
about this all day, every day.”
!
-Chris Dixon
Andreessen Horowitz
“Stock options in a 

[large corporation] can 

never feel like ownership.”
!
-Chris Dixon
Andreessen Horowitz
Ok,butcan’twetakethe
peoplewhowantasalary
andhelpthemdeliver
innovativeproducts?
NO!
In environments
of uncertainty
Extrinsic Rewards
lead to worse
performance
Extrinsic Rewards
lead to peak
performance
when the rules
are simple and
goal is clear
Startups live in
the Trough of
Sorrow,
equity ownership
is needed to
succeed
1.InnovationLabs
2.IntrapreneurPrograms
3.Skunkworks
Corporationshavetriedeverything…
Exceptgivingemployeesequity!
1.InnovationLab
2.IntrapreneurProgram
3.Skunkworks
Thesestructuresfailtoproduce
repeatablesuccess
Disney
INNOVATION COLONY
IntheColonialEra,
establishedcountries
sailedtodistantshoresin
searchofeconomic
advantage.
Colonieskeptaunique
formofindependence
whilebeingownedbythe
mothercountryand
benefitingfromits
resources.
Citizenslefttheamenities
ofhome,togainpowerand
controlascolonistsofthe
newworld.
Manydiedorreturned
destitute,butthosewho
stayedfoundednew
nations.
Astructurethatenablesentrepreneurial
employeestobecomeentrepreneursfor
benefitoftheenterprise
InnovationColony
Astructurethatenables
ownershipandradicalautonomy
yetlimitsriskfortheenterprise
InnovationColony
RadicalAutonomytoNavigateUncertainty
1.AllocateResources
2.Changedirection(pivot)
3.Raisemoneyfromoutsideinvestors
Structure
2to3ManagingDirectors
$1Mto$50MFund
InnovationAccounting
1,000TeamsApply
10AreSelected&FormOwnCompanies
$50kto$300kinFunding
3MonthstoGettoMarket
DoWhateverTheyWant,It’sTheirCompany
How
Techstars“PoweredBy”Program,
isafantasticexampleofthe
InnovationColony
In3months,Metricshubgotto
market,acquiredcustomers,and
hadatermsheetfromaVC.
Microsoftdecidetobuythe
companyoutright.
Results
ofInnovationColonyteams
raisemoneyorgetboughtback
75%
Fewcorporateinnovationprojects
evenmakeittomarket…
Thecompaniesthatallow
entrepreneurialminded
employeestohaveequity
intheirprojects,arethe
oneswhowillprofitfrom
theirgreatestinventions
LeanEnterpriseBook.com

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