Startup Founders in High Technology by Phatty Arbuckle B.S Computer Science, Alabama A&M University, 2002 Submitted to the System Design and Management Program in partial fulfillment of the requirements for the degree of ARCH ES Master of Science in Engineering and Management MAss i :3 TUTE At The Massachusetts Institute of Technology AUG 0 6 2015 June 2015 LIBRARIES C 2015 Phatty Arbuckle. All Rights Reserved. The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. A u th o r: .................Signature . --- ------- redacted----------. ............. Phatty Arbuckle System Design and Management Program April 2, 2015 Certified by: ............. Signature redacted ......... Michael A. Cusumano Sloan Management Review Distinguished Professor of Management I'Sloan School of Management -Thesis Supervisor Signature redacted A ccepted by : ................. V. ... %..... ....... ...................... --.. ----- Patrick Hal Chairman & Senior Lecturer, Enginee WtgSystems Division Director, System Design and Management Program Arbuckle, Phatty 1 MIT SDM Thesis Startup Founders in High Technology by Phatty Arbuckle Submitted to the System Design and Management Program on April 2, 2015 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Engineering and Management ABSTRACT Startup founders are thought to be the super women and men of the technology world these days. Many founders transition into the Chief Executive Officer (CEO) role within their companies and are expected to have the knowledge to lead large organizations through these fast growth and transition periods at a rate much faster than previously encountered in history. While some founders have backgrounds and experience to leverage in order to help them, many do not. Regardless, many high technology founder CEOs are leading companies that grow from nothing into billion dollar valuations and various stages of growth or failure between. This thesis seeks to investigate key traits of high technology founder CEOs, the technologies they create and manage, and research surrounding their transition from founder into the CEO role to include leadership characteristics. An effort will be made to further understand what contributes to a founder CEOs success and based on that recommendations will be given providing some key guidelines. Lastly, example cases will be showcased to highlight how and what founder CEOs have and are doing to create success for not only them, but also their companies, investors, and employees. Thesis Supervisor: Michael A. Cusumano Title: Sloan Management Review Distinguished Professor of Management MIT Sloan School of Management & Professor of Engineering Systems, MIT School of Engineering Arbuckle, Phatty 2 MIT SDM Thesis Acknowledgements A tremendous amount of people have helped me along my journey through MIT during my fellowship and in the creation of this thesis. Countless classmates, professors, friends, and advisors filled my mind with all the wonders MIT provides and encouraged me to push my limits to be better in every way. My family has provided instrumental support and encouragement in allowing me to easily take this journey. Special thanks to Pat Hale and the MIT SDM staff for making sure our needs were always met and helping us accomplish our big projects and our small whims. As my SDM family of classmates and advisors, you will always be close to my heart. My thesis would not have been possible without the kindness of strangers who happened to be founder CEOs that took time out of their days to let me interview them. My sincere appreciation goes out to all of them: Bettina Hein, Jim Dougherty, Jeremy Allaire, Alfonso "AJ" Perez, John Moore, Dr. Nancy Rizzo, Steve Hamby, Sameer Joshi, and Gary Voight. I'd like to thank my thesis advisor, Michael Cusumano, who took the time to provide candid advice at the right time while still giving me space to work when I need it. You provided me the feedback I was looking for and pointed me in the right direction whenever I inquired. You made this process go as smoothly as I can possibly imagine. Thank you!!! Lastly, I'd like to thank my close friends and family who spent time discussing, proofing or just letting me bounce ideas off of you. Mom, Lori, Jim & Ryan, I appreciate your support no matter what distractions might have been in my life, you kept me focused and gave me the right prompts when they were needed. Todd thanks for taking time to read and give encouragement. Suzie, Alhely, Sarah, Carrie, Melissa, Andrea, Shanthi, Joan, Marianna and all the other inspirational women whom I've met along this voyage, thank you for being so awesome and showing the world what women leaders can provide. Everyday do at least one needlessly and flagrantly nice thing for someone! Arbuckle, Phatty 3 MIT SDM Thesis Table of Contents 1 - In tro d u ctio n .............................................................................................................................. 6 1.1 -Thesis Organization ............................................................................................................ 6 1.2 - M otivation.......................................................................................................................... 8 1.3 - Background ........................................................................................................................ 9 2 - Fo u n d e rs ................................................................................................................................. 1 3 2.1 - Experience Levels ............................................................................................................. 13 2.2 - Education & Environm ent............................................................................................ 14 2.3 - Personality Traits ............................................................................................................. 15 2.4 -Thinking Patterns ............................................................................................................. 22 2.5 - Sum m ary .......................................................................................................................... 24 3 - Technology Traits .................................................................................................................... 25 4-What does it take to be a Founder CEO? I The Incomplete Leader Perspective................................ 29 5 - Founder's Dilem m a ................................................................................................................. 34 5.1.1 - VC Funding ................................................................................................................ 40 6 - M arriage of The Incom plete Leader and The Founder's Dilem m a...................................... 43 7 - Recom m endations .................................................................................................................. 44 8 - C a se s ........................................................................................................................................ 4 6 8.1 - Circle Internet Financial CEO Jeremy Allaire................................................................ 47 8.2 - HubSpot CEO Brian Halligan .......................................................................................... 49 8.3 - Pixability CEO Bettina Hein .......................................................................................... 51 8.4 - Linked in CEO Reid Hoffm an .......................................................................................... 53 8.5 - Globe United CEO Jesper Jones ................................................................................... 56 8.6 - Sum m ary .......................................................................................................................... 59 9 - Conclusion ............................................................................................................................... 60 9.1 - Further Research.............................................................................................................. 62 9.2 - Final Thoughts.................................................................................................................. 62 10 - Bibliography .......................................................................................................................... 63 Arbuckle, Phatty 4 MIT SDM Thesis List of Figures Figure 1 - Kauffman Index of Entrepreneurial Activity (1996-2013) (Fairlie, 2014) ................. 11 Figure 2 - Kauffman Index of Entrepreneurial Activity by Gender (1996-2013) (Fairlie, 2014) ... 11 Figure 3 - Kauffman Index of Entrepreneurial Activity by Age (1996-2013) (Fairlie, 2014)......... 12 Figure 4 - Kauffman Index of Entrepreneurial Activity by State (2013) ................................... 12 Figure 5 - Kauffman Index of Entrepreneurial Activity by Education (1996-2013) .................. 14 Figure 6 - Causal vs. Effectual Reasoning (Sarasvathy, 2001)................................................... 23 Figure 7 - Founder's Trade-Off - Rich vs. King (Wasserman, The Founder's Dilemma, 2008)...... 34 Figure 8 - Value of Founder's Equity Stake, Depending on Degree of Control Maintained (W asserm an, 2012, p. 339) ......................................................................................