Management Buy-In

When you hire managers you should ask them to invest in the company. This is called "management buy-in". This gives you, the founder, a sense of security. The security is in the risk the management is taking together with you.

You should not sell a lot of your company equity though. 5% should be more than enough.

When you are in the start-up phase you should usually ask for a lead investor who will take the CEO position in the company. This lead investor/CEO will invest US$100,000 - US$200,000 in the company (or pay you this sum of money). This CEO will then lead the company and have a $100,000 - $200,000 at risk if the company should fail. This ensures that every manager do what needs to be done to ensure the success of the business. This is a very good thing for you, the founder. Nothing boost the founder ego more than the success of this act. Because you don't need to entice the managers as much, the money risk speaks for itself.

Also, the other good thing about management buy-in's is that the company value rises. As mentioned before: If you sell 5% for a given sum, then the value of the company rises 20 times the invested amount. This can be a big gain in your net-worth.

If you are really smart, you lead the company yourself until the company is bankable. You then borrow a little money at a very low cap rate and then you sell 5% of your company at the value you now get from using "earnings / Cap rate". If your company makes money the managers will be easier to entice.