Business Models

The Founder’s Curse

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We here at Butts In The Seats blog, (okay, me), are not afraid to admit when we may have been wrong. This summer, Elizabeth Schmidt, wrote a piece on Non-Profit Quarterly challenging the myth of the Founders Syndrome.

There have been times in the past when my posts have played into the notion that Founders tend to hold their organizations back in various ways. As Schmidt enumerates:

The label seems to be applied if one or more of the following symptoms are present. The first is a sense of grandiosity—that the organization is the founder’s, and it exists to serve his or her ego (or pocketbook). The second is an inability to delegate—poor management on the part of the founder. The third is an inability to make a smooth transition from the founder to new leadership. And the fourth is an unwavering dedication to the original vision for the organization.

Schmidt makes the common sense observation that you don’t need to be a founder to exhibit these characteristics and gives a few examples of non-founders who have damaged their organizations by manifesting them. She also notes that being normal human beings, not all founders possess these traits, nor do they suddenly become infected with these inclinations upon deciding to found a company.

She notes the inability to plan a smooth leadership transition is so widespread it is more of an organizational failing than attributable to the influence of a single individual.

The worst in Schmidt’s mind seems to be the fourth stereotype of not allowing the organization to evolve beyond the original vision.

“This symptom is particularly disturbing, however, because it has the potential to squelch necessary dialogue among the stakeholders of the organization. To say, as soon as a disagreement arises, that the party who conceived of the initial mission suffers from founder’s syndrome, severely handicaps that party’s standing in the discussion.”

Schmidt acknowledges that there is always some basis in truth to the anecdotes that form these generalizations about founders and it is likely that many organizations have encountered troubles for just these reasons.

However, she points the lack of research providing evidence that this is a particular problem for founders. The only study she found that attempted to collect empirical data concluded that there was ““considerable truth to some of the rumors and stories about founder’s syndrome.” However, Schmidt feels the following data does not support this assertion and is at best, inconclusive.

-Founder-led organizations tended to have smaller budgets.

-Term limits for board members existed in 31 percent of founder-led organizations and 49 percent of non-founder organizations.

-Eighty percent of founder-led organizations held at least quarterly meetings, compared to 87% of non-founder organizations.

-Three-fourths of the respondents in both groups thought either the executive director or the board chair was the most influential person during a board meeting, but founder-led organizations were more likely to say the executive director was the most influential.

-On the other hand, founder-led organizations were more likely to have reviewed the mission in the past year than organizations led by non-founders; they were more likely to attract full board participation at meetings, and they were more likely to set and mail the board agenda ahead of time.

I haven’t read the study she references, but on the face of the data, I would probably lean toward saying non-founder organizations employed better governance practices. Still Schmidt makes a strong argument about resisting the inclination to automatically dismiss a founder as the source of problems for a company and instead evaluate all elements potentially contributing to the organization’s weakness.

Founder or Flounder? Being An Employee Is Okay

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Hat tip to Jari-Pekka Raitamaa who tweeted an article about mistakes people make when considering founding a tech start up. It occurred to me that the same basic advice could be given to people thinking about founding an arts company of some sort.

The basic premise of article by Jolie O’Dell, Stop founding! 10 signs you’re ‘employee material’ is that many would be founders need to get some significant experience working in a company before they decide to start one. And even then, they may be better suited staying as an employee.

You’ve never tried a real job
[…]
If all you’ve tried so far is freelancing, consulting, or agency work, founding is a pretty big leap. You don’t know about how companies run from the inside, about different management styles. You might have trouble forming and functioning in teams.

Why this is bad for founders: Founding requires commitment and longevity. Regardless of your C-suite title, in day-to-day operations, you’re functioning as a team lead responsible for managing a small crew of professionals. Experience in management with a corporate safety net is a boon.

Along the same lines, if you have only worked as a performer or only done short term administrative work for an arts organization, you may not have the skills and endurance to lead a small group through the rough formative years of the company.

You’ve already failed at one or more startups
We fetishize failure in the startup community, and we especially fetishize failing quickly. But regardless of the lessons you learn or the network you build, failure is still a bad thing.

In and of itself, failure is the universe telling you that your idea wasn’t good enough.
And it’s got nothing to do with execution. It’s your idea. Twitter was really poorly executed at first. It succeeded. Ditto for Facebook and lots of other consumer software. Ditto for a lot of programming languages. You can have wiggle room in execution for a truly great idea.

Why this is bad for founders: A string of bad ideas is more than just “throwing [stuff] at a wall and seeing what sticks.” It might be a sign that you’re jumping in too deep, too quickly. Fail at a few side projects, if you must. But be cautious about rushing into a new venture with nothing but failure under your belt.

The bit about fetishizing failure and failing quickly and often caught my eye (so my emphasis) because non-profit arts organizations are often criticized for their conservative approach and unwillingness to take chances and flirt with failure. To some extent, it may be to your credit to have embarked on a new endeavor and failed.

Still it is easy to fail as a result of ill-informed and conceived choices. The article makes good points about making sure you have learned from your mistakes before proceeding.

You can’t design or code (Translate as “You Can’t Directly Contribute To The Product”)

Lean startup culture says you need three archetypes for a startup: a developer, a designer, and a hustler. Traditionally, the hustler does biz dev, sales, hiring, and management tasks.

But what does a hustler do at a founding-stage startup, really? It often turns into long hours for long hours’ sake, lots of meetings with few outcomes, and boatloads of cheerleading and enthusiasm for a business that’s generating no income and has few or no users.

If you can’t pinpoint your exact skill set — and if your skill set isn’t unique, valuable, and directly related to product creation — you might want to take an employee position at a later stage company.

Why this is bad for founders: Creating a minimum viable product is often Task Number One at a lean startup. Your salary shortens the runway for such a nascent company, and you can’t sell, aka “hustle,” against a product that doesn’t exist yet.

While it might have been good to trim this one down, the bit about the hustler putting in long hours for long hours sake and doing a lot of cheerleading struck a chord.

True, the crucial function in an arts organization ends up being fundraising. But I am pretty sure the time is coming soon if it hasn’t arrive yet, given the expectations created by Kickstarter and its ilk, where it will be difficult to raise any sort of funding without some sort of interesting product example.

I suspect people won’t be as willing to give based only on the idea of a promising group creating good art. Unless you are in a position to pitch in and produce from the get go, your presence may be a hindrance rather than a help.

Paul Allen and Bill Gates didn’t bring Steve Ballmer on to run the business side of Microsoft until five years after the company had been founded and provided its first piece of software.

The arts are already full of people working unnecessarily long hours, don’t add yourself to their number.

Which leads to the next point:

Your big idea is unoriginal

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If the market is saturated with variations on your idea, back slowly away from your drawing board and wait for your next big idea.

Why this is bad for founders: With too many competitors come too many problems. You might not be able to wedge your way into a crowded marketplace. Or you might get suddenly squashed by a drawn-out patent or other IP lawsuit.

Along the same theory that people probably won’t give to groups without a demonstrable product, new funding for old ideas and methods of producing art is probably not long for this world either.

Again, along those lines…

You don’t know what you want

Why do you want to be a founder? This is brutally difficult territory and requires immense passion and Herculean dedication.

Scratch that: It requires Odyssean dedication. You’re on a quest with no end in sight. Every task seems impossible. There are new difficulties around every corner.

So why the heck would you want to do that?

If you don’t have a clear vision, if you’re only running on the heady fumes of startup mania, you will most certainly fail.

Why this is bad for founders: Enthusiasm only goes so far. Only a heart and mind obsessed with a specific mission will be able to sustain you through the hard times that await you.

Again, founding an organization out of simple rejection of the current choices isn’t enough. Your vision can’t be predicated on, “We will different from them and do it better.”

What does that look like in practical terms? It isn’t enough to say you will be nimble and more responsive to change, you have to have an idea of what practices and infrastructure you need to have in place to make it happen.

The other signs Jolie O’Dell lists that I haven’t expounded upon are pretty apparent or closely related to the points I have already made: “You’re young and/or inexperienced”; “You have no network”; “You get bored really quickly”; “You have no net worth”; “You’re the primary breadwinner of a multiperson household.”

I am not saying people shouldn’t found new organizations. It seems pretty clear we need new ideas and new methods. These are just some important things to consider before you undertake such an endeavor.

Embracing The Feedback Loop

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A few months back, Seattle based artist Clayton Weller, wrote a piece addressing what he feels is a self-limiting outlook held by many artists that theatre is dying and there is no money out there. He confesses to having embraced the same outlook until he worked for a start up company.

Now he advocates for every artist to work for a start up in order to adopt their more nimble outlook. (my emphasis)

When you say the word “business” to someone, especially an artist, they automatically assume you’re talking about something stuffy, rigid, uncompromising, and [insert horrible adjective].

You say “business” but they hear “bureaucracy.” THEY ARE NOT THE SAME THING!…

To eschew something because it can be done poorly, is a disservice to yourself, and might rival einsteins famous definition of insanity (look it up plebes!).

[…]

Talking directly to people, iterating ideas before execution, creating a feedback loop with measurable data; it all makes perfect sense.

By doing this you create a real connection with your customer (audience) and develop a product (art) people will not only tolerate, but will clamor for. In terms that an artist would use: your art becomes relevant.

That’s a big deal.

The average artist does NONE of these things. Not only that, they intentionally avoid them. They lock themselves away to pursue their secret “vision.” When they receive negative criticism, they blame their audience (customer). WHAT?!?

For me this addresses some age old debates about artists being more business minded and selling out vs. thinking you know what audiences/customers should like. (the most negative extremes of the spectrum)

Obviously, I like his point about not dismissing options because other people don’t do it well.

I think the complicating factor is the fear is that you too won’t do it well and the process will dominate your time and take you away from your creative work. Or worse, make you resent your creative work for making it necessary to become involved in the business side. For some it may not be a wholly irrational fear.

Still, I think regardless of your fears and regardless of your views about what constitutes selling out and remaining true to your art, the feedback loop Weller mentions is a useful process.

Failure and missteps are things you will face, especially when you are working in the arts. Proper feedback can help minimize this over time. If nothing else, the process can help you identify the proper people to solicit for feedback.

If you start a flow chart from the simple proposition that you want to support yourself with your art. You can ask, do people say nice things about my art? If the answer is yes but they don’t pay for it, you either need to find other people to get feedback from or figure out a different way to monetize your art from the people giving you feedback.

Likewise, if there are a lot of people who criticize your work, but still won’t buy it after you make the changes to the areas in which they say you fell short, then you may need to find other people to solicit feedback from.

Obviously it isn’t as completely clear cut as that. The problem may lie in your execution not being very good. My point is that you can’t depend entirely on your family and friends or trolls for feedback. It is necessary to identify people with the level of discernment you seek whose feedback you can trust and work from there.

You just need to recognize and own the potential implications of appealing to 1,000 versus 100,000. You can make a lot of money from those 1,000, but you need to be producing to a certain standard. Meeting the expectations of 1,000 can be just as burdensome as that of 100,000.

Info You Can Use: Flex Subscriptions And Your Subscriber Base

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I have been pondering whether we should start offering a “Choose Your Own” subscription series in future years. In my past jobs, we never programmed with an eye to filling slots in a series so we offered “Choose Your Own” discounts without any problem. Now I am working in a place which has historically had a number of series and I am looking to offer an additional flexible one.

Since this blog is about discussing practical aspects of arts administration, I thought I would share some of the issues I have been taking into consideration both to solicit some feedback, but also give a sense of the thought process you need to engage in when making these decisions.

The numbers I am using in my example aren’t the actual ticket amounts and they are equal for all events in a series for sake of simplicity. The discount for buying the full season relative to the sub-season pricing is the same though.

Currently we offer a full season of nine shows ($290) and three sub-seasons of three shows each: Broadway ($150); Variety ($105) and Classical ($75).

My idea for a flex subscription is to offer the sub-season pricing if to any three shows or more shows of your choice.

That might break out as follows:

Book1

 

Instead of buying a series, people would pick and choose from among all the series. Because they are picking and choosing willy nilly, we can’t guarantee them the same seats will be available at every performance, but they still get their seats before single tickets go on sale and at a discount.

Usually the idea behind flex subscriptions is to give people who can’t make it to all the shows in a series the ability to benefit from an advance purchase discount.  It is seen as a plus if you can get someone who has historically been a single ticket buyer to commit to attending multiple shows in advance.

But the important issue is the need to factor in the likely behavior of your audience. If there are a lot of single ticket purchases for three or four shows across multiple series in the days right after single tickets go on sale for full price, you need to ask if you think more people will pick up this practice or if you will only end up giving a significant discount to the same group who typically buys tickets at full price months in advance of the show. You could end up losing money in the process.

The same for those who buy the classic series and then one or two tickets to the Broadway series at full price of $65. If there are lot of those, you may end up giving up quite a lot at a $15 difference per ticket.

In our case, our biggest series base is in Broadway with far fewer in Variety and Classic. It wouldn’t represent a significant loss if the Variety and Classic people who buy Broadway  tickets at full price received a discount.

My biggest concern is that we may lose full season subscribers to a piecemeal flex series.  Every year there is a Broadway show people aren’t crazy about so if Full season subscribers didn’t like one show and picked the other 8 individually, that would represent a $10 loss per subscriber. Not a big deal individually, but if many people made that choice it could be problematic.

The same with the Broadway series subscribers. If they dropped one Broadway show and picked up one Variety or Classic show as their third, that is a loss of $15-$25 per subscriber.

Now the easiest solution to keeping Full Season subscribers from becoming  “slightly less than Full Season” subscribers is to place the “Choose Your Own” on the same footing as the other sub-series and limit it to any three events. That way you don’t have to worry about people defecting to a 7 or 8 event subscription.

But if you are in a situation like I was in my last job where you don’t have a large subscriber base, you can go all out and offer discounts on as many shows above the minimum as people care to buy.  You have a fair chance of picking up new subscribers.

I will confess I was pretty gung ho about flex subscriptions and the philosophy of giving people the most freedom to choose in return for making that choice in advance. Organizations that kept their audiences tied into a designated series were adhering to a dated concept of audience relations! But as I say, that was when I didn’t have a fairly reliable subscriber base.

Now that I am in a situation where I am doing an analysis of the pros and cons in preparation for pitching the idea to an organization with an established subscriber base, I find myself being a little more pragmatic. (Though note I am still trying to introduce a flexible scheme.)

So what about you? Thoughts about this? Are there packages you have put together to entice people to subscribe that worked? Some that back fired on you and made you lose income or subscribers?