Risk and Motivation.

Here’s an interesting article on risk, personal motivation and how reducing your risk can (counter-intuitively) increase your motivation.

Most founders have a shareholding in their company and, as the valuation increases through the investment rounds, they become (in theory) richer.

But the wealth they hold is very notional. Typically, they can’t sell their shares and, even if they wanted to, there isn’t a ready market for them. So, as the valuation of the company increases, they have more and more to lose.

The founders of Lemlist took a different approach. Instead of getting more investment into the company, they sold 20% of the shares they held (for $30m). Ie. the investor’s money didn’t go into the company, it went to the founders.

Each of them now has enough money never to work again but, if they do choose to carry on working (which is what they have done), they can be more adventurous, take bigger risks, and take a longer term view of the business. Because it’s de-risked the business for them, they can now afford to think bigger.

The investor now has a slice of the company (as they would in a normal investment), is hoping it will increase in value (as investors do), but now has a management team that is thinking bigger.

Makes sense to me.

The founders of Lemlist took a different approach.