22 Responses

  1. You shouldn’t have had to fight for a good outcome here! That’s the thing that amazes me the most. A great board would have trusted your instincts at least long enough to advocate for the alternative.

    I am aghast that you had no one on your board that stood up for your view of the universe.

    • You forget, it is amazing sometimes how those with money and love to feel power will go out of their way to force someone to do anything…wrong or right is just subjective.

  2. Your ability to revisit painful mistakes and understand the root cause keeps this blog on my must read list.

  3. Nice post, something similar happend to me once. I just overplayed my hand in such a situation.

    Looking back, what would you have done differently? Rather sold it in a better to your board or negotiated with him in a different way?

  4. I had the same opportunity handed to me recently. A great developer that I worked with at another company, left his current company and wanted to take some time off. As soon as I found out – I went to meet with him. After talking with him, he still wanted to do some contract work. I asked if he’d be interested in helping me and said for him to name his rate. With a small, lean startup – one person like him will make all the difference.

  5. Steve,

    Great post, and excellent lessons-
    thanks,
    Chris

  6. Very nice read. I totally agree with you. I’ve made that mistake before and was almost crushed by a competitor. i’ll never let an opportunity slip away again…

  7. always great to read advice that is wise. thanks
    wyn

  8. This is interesting to me in another light – negotiating salary and stock as an early startup employee. You have to ask yourself, “am I a commodity or opportunity?” and if you are an opportunity stand up for your worth. If not, take the best you can get, say thank you, and work hard to become an opportunity in the future.

    I think big tech companies like Google and Microsoft are actually very good at seeing kick ass tech and product hires as opportunities, and treating/compensating them accordingly. Startups are the ones I see being pennywise (in the short term anyway) and pound foolish.

  9. Steve,

    Great lesson shared.

    On the subject of forming advisory board and stock budget – i’ve been having trouble finding guidance / best practice on this subject.

    Can you share links or thoughts on what is a reasonable budget and thinking process on selection?

  10. Whoah… Wait a minute.

    A VP of a division at Sun Microsystems who became CTO around mid to late 1990’s? (When Steve was at Rocket Science.)

    Is anyone else thinking that the “advisor” Steve lost was Eric Schmidt???!!

  11. Your post is a Godsend! I interrupt my reading to write a talented developer that has done some valuable work for free for my startup, to whom I promised some equity and I wasn’t delivering. Thanks!

  12. I don’t agree that you necessarily missed out. He himself said: “Thanks but no thanks. I’m now getting more involved in my new job as CTO and I’m too busy to go back and forth negotiating this.”

    If he’s too busy to negotiate his compensation, I have a hard time believing he has the time to be a good advisor.

    In my experience, advisory boards help sell investors, provide some confidence boost to the CEO, and that’s it. I know of no cases where strategic advice, hiring and sales connections, or inside information from the advisory board has had a material effect on the business. Can someone offer opposing evidence?

    • @chris, superstars don’t suffer fools gladly, i think he realized the negotiation phase revealed a underlying problem with the startup, like the dichotomy between sb’s enthusiasm and the ability to correctly value a resource, and decided that foupah would create more problems down the line, (ie hiring talent), and he wasn’t going to waste his superstar time with a potential mess. These lessons are painful, but it’s the pain that teaches us and makes us remember, so we don’t repeat these mistakes again.

  13. It’s those precious painful lessons that are the most valuable, yet the hardest to share. Thanks Steve, may your wound make us all fiercer at pushing what we know are unique opportunities.

  14. […] You Negotiate Commodities, But You Seize Opportunities It took losing something important to understand the difference between a commodity and an opportunity. Along the way I […] […]

  15. Interesting fodder, Steve!

    It seems like there are really two issues here that explain why it didn’t work out: a) the board was treating him like a commodity (i.e. they undervalued him), and b) the advisor thought very highly of himself– more important than others on the advisory board, “too busy to negotiate” (in other words, he overvalued his worth).

    Once one side digs in it’s heels on such perceptions of “value” the other reflexively does the same; stalemate ensues and no one wins.

    I agree with Danielle that this comes into play a lot WRT startup hiring; scrappy startups tend to value the future potential worth of their company very highly. They also tend to ask for or expect everything for free or cheap (in general, this is a very good thing). However, a side effect is that they often “signal” to key hires, advisors, etc. that they are commodities.

    I’m thinking of one instance where really key hires repeatedly walked because the startup low-balled them at the offer stage, thus ‘signaling’ a low perception of value. This startup ultimately became comprised of B and C players and never really went anywhere.

    Nathan Beckord

  16. […] writing about startups often offers insights far beyond the startup world.  Take this post, “You Negotiate Commodities, but Seize Opportunities“: I hadn’t just lost a potential advisor I had lost an irreplaceable opportunity. We lost […]

  17. […] Steve Blank says: Great entrepreneurs see opportunities before others do. Ask, “Is it a commodity or an opportunity?” If it’s a one-of-a-kind that gives you an advantage, it’s an opportunity. Grab opportunities with both hands and don’t let go. Sundry recruiting, talent KashFlow’s Orbit Accounts launched What do you really need? Honestly. […]

  18. That’s a lesson all entrepreneur’s, big or small, should learn and adhere to. Being able to differentiate a commodity from an opportunity can spell success to any business.
    I’d keep this lessons in mind. Thanks for sharing. :)

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