Chapter Nine- Foundations

Foundations are very important. A start up messed up at the foundation cannot be fixed. Start off by choosing the right co-founder. Don’t choose just anyone. Everyone in the company needs to work together, including the founders. It’s very hard to go from zero to one without a team. There needs to be structure, and roles need to be defined.

To anticipate likely sources of misalignment or conflict it’s useful to distinguish between these three concepts.

• Ownership: who legally owns the company’s equity?
• Possession: who runs the company on a day-to-day basis
• Control: who formally governs the company’s affairs

Thiel emphasizes the fact that the smaller the board, the easier it is for directors to communicate and come to decisions or compromises. A board of 3- 5 members is ideal. There can be conflict in any case, but a smaller board is more effective in any situation. A CEO that has a low pay conveys to everyone on the team how committed he may be and makes it easier to keep everyone else’s pay low as well.

Everyone needs to be compensated well, and cash compensation keeps people focused, short term. Equity is one form of compensation that can effectively orient people into creating value in the future. It makes employees feel like they are part of the company, but make sure to be discreet about how much equity each employee holds, as it can spark conflict within the workplace. This is a good way to increase employee loyalty although some employees prefer cash pay.

Bob Dylan said, those who aren’t busy being born, are busy dying. Encouraging innovation within your organization can keep your company new and innovative.