[Case Analysis] The Tale of the Lynx
1. What were the most critical choices faced by James Milmo early in the founding of Lynx? Do you agree with his decisions? The most important issue was equity stake. Milmo insisted that Curtis should work for 2 years before being fully vested whereas Milmo himself would be fully vested immediately. Furthermore, Milmo considered Pascal as a critical piece of Lynx and argued that the three founders should be equal partners in Lynx and therefore should each receive a third of its equity. Pascal could participate in the Lynx as a co-founder with Curtis’ consent. Finally, Pascal received only 25% of the company equity, and Milmo and Curtis each received 37.5% of the equity, with Milmo’s vesting immediately and the others vesting over two years. At first glance, Milmo’s decision would be reasonable and pertinent. However, I think he should not have insisted the right to immediately vest. Even though he got the right, it was not likely for him to leave Lynx before the 2 year vesting period. His assertion is likely only to provide distrust to his partners and potential investors. In case of Pascal’s stake, even though the final agreement might be fair, Milmo was impetuous. He should have discussed the issue with his partner, Curtis, in advance before he made an agreement with Pascal. He stepped off on the wrong foot, which became another cause for the constant disharmony and mistrust between Curtis and Pascal. As we know, the absence of trust amongst team members is the first and critical dysfunction.
2. Has the founding team done a good job of structuring itself and building the Lynx organization? Three co-founders established Lynx with the triumvirate structure. Milmo was President and Chairman, Curtis was CEO, and Pascal was CTO. Milmo and Pascal were appropriate for their positions, while Curtis, who had years of sales experience for VC-backed companies, was suitable for marketing or raising funds rather than CEO. Given the circumstances at the time, I think that they made the right choice as a start-up company. However, they should have considered that the triumvirate structure could cause dissensus, make decision making unclear, and deepen the abrasive nature of their relationships. In that sense, I think that they should have clarified their role and responsibility, and that they should have prepared milestone for its structural evolution as the Lynx would grow. Human resource is one of the weightiest assets for a start-up company. In this aspect, they made right efforts to hire ‘Renaissance people’ and retain them, which effectively established a close-knit culture and overall moral within Lynx and provided another driving force for overcoming a series of crisis. However, the problem is that the co-founders were very averse to turn-over and made excessive efforts for retention of its people, even to the extent of offering excessively large salaries to staffs who announced to leave Lynx. What’s worse, they were more likely to lose morale if a key person left. Although they stopped the excessive obsession of Renaissance people a bit late, it showed an example of poor administrative capacity within Lynx.
3. If you are James Milmo, are you going to fight back against changing your strategy, or are you going to agree to the change demanded by your board member? What factors motivated his demand? Should James have known this was coming? How could he have avoided the problem? The board required to cut off the RealCell distribution, take Lynx down to a “kernel” of a few people who would rethink its strategy, and make a dramatic strategic change, shifting from a consumer-focused company to a wireless enterprise company developing strictly business applications. This is because Lynx still could not make any profit, the advertising downturn had hit with full force, and the climate in the capital markets had changed. If I were Milmo, I would insist a gradual change in...
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