Yesterday, I alluded to big pieces of small pies vs. small pieces of big pies. I can definitely say in hindsight that I was focused on keeping a “big piece” of the Startup 1.0 pie that I was baking. (I had 90% of IPI to B of A’s 10% at an $83mm valuation.) But this strategy cost me almost everything in the end.

It was October of 2000, and my wedding bells we ringing just as things were getting a little funky in the “e-services” space that IPI occupied. Razorfish made an offer to acquire IPI that fall for barely more than the cash we had on hand at the time. Their rationale was that at $16/share, Razorfish “couldn’t go any lower” (it was down from nearly $60/share in 2000)  but we all know how that ended.

What I didn’t notice was that it wasn’t just Razorfish; a lot of other e-service consultancies were stumbling too. My key managers apparently noticed, though, because I can see clearly now the exact time (2nd quarter of 2001) when their minds shifted from growing the business to preserving their $200k+ compensation packages if the e-services tanked and took IPI with it. Ultimately, every single one of IPI’s key managers under me jumped in house to current or near-past IPI clients. They usually took at least one or two co-workers with them and, within 60-90 days, the revenue stream we had from that client @ IPI went dry.

A pessimist would say, “That’s why you get those people under non-competes and employment agreements” and frankly the pessimist would have a point. My second-tier managers weren’t people I knew before I hired them, but they all definitely became (I thought, anyway) close friends after countless late nights working together on high-profile client jobs.

The real learning here is that cash — even a lot of it, and even a lot of it together with company-paid BMW’s and rent-free condos on South Beach – can’t get people motivated during rough patches if they aren’t true shareholders in the business.

Today, I subscribe to the notion that the first thing a startup should do is form an option pool and share a little something with everyone. Does it a mean a smaller piece of pie for the person with the original idea, or for the startup CEO? Sure. But I’d rather have a smaller but still really good scotch pie than a whole candied Big Boy pie that I can remember from my youth.