How do I choose a leader for my startup?


OK I was reading this post here Equity distribution amongst startup co-founders And I was thinking ok once the equity has been discussed and agreed upon, who is the leader,Is it the guy with the most shares??
or How is the leader chosen? Should there be a leader, or someone who has the final say? what happens when there is a disagreement?
I want to know all this before I approach my candidates so if they agree we can discuss this stuff off the bat.

Co-Founder Decision

asked Jun 5 '11 at 06:45
I Scotts
152 points

2 Answers


It depends on what your team agrees to in the operating agreement. For larger decisions, it can be done with simple majority vote or majority vote proportional to interest of the co-founder with some rules on how to resolve ties. For day to day operations, the decisions ought to be made depending on the area of expertise of each founder provided they are complementary. So if there is a marketing/sales co-founder, all sales/marketing related decisions should be made by that person whereas product based decisions are made by the technical co-founder.

answered Jun 5 '11 at 09:40
46 points


There are two different things at work here - the equity ownership and the actual management. In theory equity ownership does divide the say you have in the business so anyone who has over 50% has absolute control. You can modify this in an agreement if you wish.

However you can't hold a shareholder vote to decide if a customer should get a $5 refund, and in practice even much larger decisions are impractical to decide by voting because you'll miss an opportunity by the time everyone understands them.

This is usually resolved by creating a separate management structure, which divides authority and responsibility in any way you want. You can appoint or hire a CEO who has the responsibility to manage all areas of the company so they hit certain targets, and the authority to use all the company's resources. They can then appoint or hire someone as the VP of Sales (for example), agree that they will provide a strategy to target and locate the right markets and then sell $5m per year (their responsibility), and give them authority to spend $250,000 per year on their team (their authority). In turn they may hire 3 sales people and give them responsibilities and authorities.

In theory, the owners may just need to vote (based on the percentage ownership) on who is the CEO. It could be one of the owners or an outsider, with pay in equity, as a regular salary, with bonuses, etc. The CEO is then responsible for the rest because they can make decisions faster and better; if the owners don't agree with the decisions they can replace the CEO.

In practice, a small business may have owners filling a lot of the key roles and being paid more in equity than in salary. However the principle of using ownership to decide who is responsible and then letting them do their job still makes things much simpler. You need a balance between not paying attention to what happens and not letting people do their jobs; it's hard to find and requires constant adjustment.

answered Jun 6 '11 at 01:13
474 points

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