They Shoot Founders, Don’t They?
Posted By Randy Jones on
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July 8, 2009
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One of the not-so-pretty laws of capitalism is that the new money calls the shots. It is not the creator of the genius idea or the smart manager who reaps the reward—it is the provider of the capital who gets rich. That is why another unwritten rule of M&A is “Shoot the founder.” All too often when lone-ranger founders, who think they can do it all, need—or are forced—to raise capital to get the business off the ground or to scale up, they quickly find themselves pushed out of the way, with nothing to do and as much to show for their efforts. Fully 94 percent of RMITS have the title “Founder” on their resumes; fewer than 20 percent, however, have taken their companies public.
Most who have retained ownership cite the short-term thinking of Wall Street as a key reason. When a company is forced to manage from quarter to quarter, as opposed to taking the long view, employees become commodities—and management becomes groupthink. Savannah, Georgia’s Robert (Bob) Jepson has enjoyed three great successes: Jepson Corp., Kuhlman, and Coburn Optical Industries. But before he was making the decisions himself, he worked for other companies, and was frustrated to be told by one early boss, “Bob, you want to move faster than the institution is willing to move.” In retrospect, he told me, his time in the corporate trenches was a great education on someone else’s dime, but he knew deep in his heart he was an entrepreneur: “I loved working with people,” he said, “but I liked better working with people than for people.”
Another important reason so few RMITs give up ownership of their companies is that they would lose control of their own destiny. RMITs trust themselves more than anyone else to protect their interests. Phil Ruffin, the multibillionaire developer, oil tycoon, and manufacturer, owns real estate interests including the Trump International Hotel and Tower and the Frontier Hotel and Casino in Las Vegas; the Wichita Greyhound Racing Park; 61 Total convenience stores; and 100 oil wells. And all of Ruffin’s companies are 100 percent owned by Ruffin. “I could never work for someone else,” he told me. “You don’t get rich working for other people!” He declared he has never invested in publicly traded stocks, instead putting his money solely in his own businesses. “Why would I invest in some other company where the management is sucking it dry in salary and stock options?” he said. “I’ll stick to owning things.”
According to the Federal Reserve Board, in 2007 the average net worth of self-employed people was $1.3 million, more than six times that of working stiffs. That doesn’t sound like a bad reason to start your own business—even if you’re willing to settle for average. Which, if you’re RMIT material, you’re not.
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