Leadership in Startups:

A Penniless Powerless Approach

A Collective Case Study of 20 Entrepreneurial Leaders from MINC

By

Michael Yang

2016

MSc. Thesis in Management

Supervisor: Stein Kleppestö

Abstract
Startups. Why are the odds of surviving the initial stages so low? While the internet revolution has
made it easier to start up, for example by democratizing investments through crowdfunding, the rate
of success is still daunting. Why? Ultimately, the world is still being built by humans. That means a
group effort is required. To realize this, leadership is an undeniably crucial element. Yet, not a great
deal of research has been dedicated to studying leadership in startups, especially how they enlist and
retain people (labour), in the early prefunding stage, when money and power are limited. The aim of
this thesis is to build a rich holistic picture of how entrepreneurial leaders do this, without the use of
financial means or hierarchical power. This is a collective case study of 20 entrepreneurial leaders
at the startup incubator MINC in Malmö, Sweden. Methodology is based on in-depth, face to face,
one on one, qualitative interviews. The findings reveal that entrepreneurial leaders use a series of
psychological tools and techniques, which have been arranged into a practical framework aimed at
accelerating the learning of aspiring entrepreneurs.

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Acknowledgements
I would like to thank my supervisor, Stein Kleppestö, who provided guidance, shared thoughts, and
gave me the freedom to complete this project at my own pace. Furthermore, I would like to thank
all the entrepreneurial leaders (interview participants) who took time out of their busy schedules to
talk with me; the insight and knowledge is priceless. Additionally, I would like to thank my family
for their incredible support during this time; this would not have been possible without your help.
Finally, I would like to extend my thoughts to all entrepreneurial leaders out there, for the road
stretching ahead: success is not final, failure is not fatal, it is the courage to continue that counts.

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Table of Contents
1. Introduction....................................................................................................................................1
1.1 Background ................................................................................................................................1
1.2 Purpose of Study ........................................................................................................................2
1.3 Outline of Thesis........................................................................................................................3
2. Literature and Theory ...................................................................................................................4
2.1 Review Process ..........................................................................................................................4
2.2 Entrepreneurial Leadership ........................................................................................................4
2.3 Employee Satisfaction................................................................................................................7
2.4 HR Staffing ................................................................................................................................8
2.5 HR Compensation ......................................................................................................................9
2.6 Research Gap ...........................................................................................................................11
3. Design and Methodology .............................................................................................................13
3.1 Research Design.......................................................................................................................13
3.2 Research Context .....................................................................................................................14
3.3 Data Sampling..........................................................................................................................15
3.4 Data Collection ........................................................................................................................16
3.5 Data Analysis ...........................................................................................................................17
3.6 Validity, Reliability, Generalizability......................................................................................18
3.7 Limitations, Weaknesses, Drawbacks......................................................................................18
4. Findings and Results....................................................................................................................21
4.1 Setting and Premise..................................................................................................................21
4.2 Trust and Morality ...................................................................................................................21
4.3 Vision and Values ....................................................................................................................22
4.4 Dreams and Aspirations ...........................................................................................................24
4.5 Ownership and Freedom ..........................................................................................................25
4.6 Learning and Development......................................................................................................26
4.7 Rhetoric and Communication ..................................................................................................27
4.8 Mentality and Culture ..............................................................................................................29
5. Analysis and Discussion...............................................................................................................31
5.1 Trust and Morality ...................................................................................................................31
5.2 Vision and Values ....................................................................................................................31
5.3 Dreams and Aspirations ...........................................................................................................32
5.4 Ownership and Freedom ..........................................................................................................32
5.5 Learning and Development......................................................................................................33
5.6 Rhetoric and Communication ..................................................................................................33
5.7 Mentality and Culture ..............................................................................................................34
5.8 Approach and Discussion.........................................................................................................34

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6. Conclusion ....................................................................................................................................38
6.1 Research Findings ....................................................................................................................38
6.2 Practical Implications...............................................................................................................39
6.3 Future Research........................................................................................................................39
References .........................................................................................................................................41
Appendix ...........................................................................................................................................46

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1. Introduction

1.1 Background

At the risk of sounding ostentatious: leadership in startups is an important topic that has received far
too little attention. It is a commonly held view that entrepreneurship and innovation are the engines
driving economic development and spurring social change (Fagerberg, Mowery & Nelson, 2005).
Where would the world be without the steam engine or the personal computer? Furthermore, it has
been argued that leadership plays an essential role in new venture creation (Ensley, Hmieleski &
Pearce, 2006). This is also reflected in the paradigm shift from idea to execution. It is not the idea,
but rather the execution that is paramount to the success of a startup (Lidow, 2014). Therefore, on a
socio-economic level, one can reasonable argue that leadership in startups is a worthy research topic.

The odds are stacked against entrepreneurial leaders as startups operate/manoeuvre in a unique
context that is characterized by lack of human resources, financial capital, and hierarchical authority
(Zäch & Baldegger, 2014), especially in the prefunding phase before receiving any investment.
Consequently, it is very difficult to bring people on board without being able to pay them much or
boss them around. Given such extreme conditions, how can entrepreneurial leaders mobilize the
critically necessary resources?

Under these conditions, when it comes to academic research, the intersection between leadership
and entrepreneurship is interesting from both perspectives. From the entrepreneurship viewpoint,
this kind of research might help to shed some light on how to improve the odds of startup success,
since the leadership is arguably crucial to its survival. From the leadership viewpoint, this type of
study could produce surprising/intriguing findings by magnifying the psychological dimension,
contrasted with having people follow based on the typical constructs of established firms, such as
financial compensation and formal authority.

Startups go through different stages, where the influx of money and the degree of power will vary.
The early stage, specifically pre-seeding, is most interesting as these aforementioned constructs are
kept at a minimum. This is the stage where founders spend their own time and money working on
the idea, before any external investments are made and organizational hierarchies are introduced.
Usually, the founders will try to maximize the time spent and minimize the money spent. However,
there is a lot of work, so they still need extra hands.

Given the nature of leadership in startups through the penniless-powerless goggles, one might draw
parallels to volunteer associations and religious movements, where money does not play a role and
everyone is mainly driven by the mission. However, one difference might be the formal authority,
as hierarchy could still be present in these types of organizations.

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It appears there is good reason for investigating entrepreneurial leadership behaviour in startups.
While some research on leadership behaviour in relation to startup performance does exist, very
little consideration has been dedicated to what entrepreneurial leaders actually do to enlist/retain
people (labour) and why such actions might work. How entrepreneurial leaders go about this can be
important for the study of management, as it might expand the range of psychological techniques
and motivational tools.

1.2 Purpose of Study

The aim of this study is to get an insight into how entrepreneurial leaders obtain the help of others
during the early stage (pre-seeding) when financial compensation and formal authority are limited.
By evaluating and comparing in-depth interviews conducted with 20 entrepreneurial leaders from
the startup incubator MINC (12 incubatees with currently incubated startups, 8 advisors with proven
track records), the hope is to achieve a better understanding of leadership in startups. The advisors
are experienced serial/parallel entrepreneurs who have become startup coaches and angel investors.

Practically, this research aims to build a roadmap/toolbox for aspiring entrepreneurs to enlist and
retain the help of others, without the use of financial compensation or formal authority. Considering
that many ideas never make it beyond this early stage because of inadequate support, this set of
tools/techniques might be particularly useful for entrepreneurial leaders to bring their startups into
the seeding stage or even beyond it.

It is also worth noting that the leadership behaviour of entrepreneurial leaders will and must change
during the transition of a startup as it grows (Lidow, 2014; Zäch & Baldegger, 2014). Consequently,
it might be more meaningful to look at a particular startup stage: early prefunding stage. This brings
us to the main research question, which is divided into two sub-questions.

Primary Research Question:

1) How can entrepreneurial leaders enlist and retain people (employees/labour) during the early
prefunding stage, without the use of financial means or formal authority? Why might this work?

Secondary Research Questions:

2) What do entrepreneurial leaders (founders) (incubatees who are currently immersed in early
prefunding stage) do to enlist and retain people (employees/labour) in great detail? And why?

3) What do entrepreneurial leaders (founders) (advisors who have already succeeded in early
prefunding stage) do to enlist and retain people (employees/labour) in great detail? And why?

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To be clear, there are three limitations to the research questions above. First, this study only gathers
data from the perspective of entrepreneurial leaders. Second, it only considers what entrepreneurial
leaders do without the use of financial means and formal authority. Third, it only considers labour
which means employees, freelancers, interns, etc.

Being in the early prefunding stage and looking back at it could produce different narratives; it is
important to recognize that while looking back might be more of a wised up version, being in it
might give more of a real time version. Hence, the combination of these two narratives should
produce a rich picture.

1.3 Outline of Thesis

This thesis is divided into six chapters. Chapter 1, Introduction, argues the importance of the topic
and explains the purpose of the study. Chapter 2, Literature and Theory, reviews published research
on themes related to the subject and its theoretical boundaries. Chapter 3, Design and Methodology,
describes the approach, design, methods, limitations, weaknesses, drawbacks and argues why such
choices were made. Chapter 4, Findings and Results, presents the empirical data gathered from the
interviews conducted and provides the background of the participants. Chapter 5, Analysis and
Discussion, evaluates and compares the data and findings from the 20 participants and relates these
to the literature and theory. Chapter 6, Conclusion, articulates the findings of the research, and
additionally, suggests practical implications and puts forward recommendations for future research.

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2. Literature and Theory

2.1 Review Process

On a general level, the vast literature on leadership focuses on the ability of leaders to influence a
group of followers and highlights the relationship among three key factors: the leader, the followers,
and the landscape (Gupta, MacMillan & Surie, 2004). While the consideration of context has often
been postulated, it has mostly been neglected (Zäch & Baldegger, 2014). The context of startups has
seldom been subject of empirical studies, as shown in the systematic review of leadership literature
by Zäch & Baldegger (2014). Startups operate in a unique context which is characterized by lack of
financial capital, human resources, and hierarchical authority (Zäch & Baldegger, 2014).

The context of early prefunding stage creates extreme conditions and is key for this study. However,
there was a lot of broad literature and research, but very little that is closely related to this specific
context, regarding leadership behaviour towards enlisting and retaining employees (labour).

It was useful and necessary to narrow down the literature review and research publications to the
areas most relevant. In the context of startups and relevant for the main research question, there
were four areas of interest: entrepreneurial leadership, employee satisfaction, HRM staffing and
HRM compensation, all of which are examined specifically in the context of startups.

2.2 Entrepreneurial Leadership

Leadership has been described in many ways, but the most common and widely accepted definition
is a process of influencing (Sveningsson, Alvehus & Alvesson, 2012) that obtains/enlists the help or
support of others toward the achievement of a particular goal (Chemers, 1997).

The entrepreneurial leader is seen as distinct from other kinds of leadership styles, such as those
discussed by Kets de Vries (2007). McGrath & MacMillan (2000) believe that an entrepreneurial
mindset is needed to more effectively manage the particularly high-velocity environments of
competition and change. This is echoed by Gupta, MacMillan & Surie (2004), adding that a focus
on the concept of entrepreneurial leadership is an important step in this direction.

Gupta, MacMillan & Surie (2004) define entrepreneurial leadership as leadership that creates
visionary scenarios that are then used to assemble and mobilize a supporting cast of participants
who become committed by the vision to the discovery and exploitation of strategic value creation.

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On the other hand, Lidow (2014) deemphasizes the importance of the vision itself, explaining that it
is much more about entrepreneurial leaders’ self-awareness, ability to build relationship, and ability
to motivate others. Lidow (2014) puts it colloquially as: changing the world based on your idea
requires that you get other people to help you and the way to do that is to create shared objectives.

The vision can be considered a static object and therefore cannot inspire or motivate followers by
itself. It needs some kind of agent to help it bind with followers. Therefore, paramount to success is
the ability to shape, sculpt, and translate vision into a motivating force in a way that followers can
connect with. Consequently, it requires the aforementioned abilities, as proposed by Lidow (2014)
who is somewhat more compelling than Gupta, MacMillan & Surie (2004).

One of the most important distinctions accepted in leadership literature is transactional leadership
vs. transformational leadership; these have also been the two dominant approaches (Bass, 1985).
While transactional leadership regards the leader’s role as instrumental rather than inspirational and
is based on the principal of exchange, transformational leadership concentrates on how leaders can
evoke/induce super-ordinate performance from followers by transcending self-interest, appealing to
the need for self-actualization, deeply held personal values, and implicit motivations of followers
(Bass, 1985; Sveningsson, Alvehus & Alvesson, 2012). Contrasting this (heroic) transformative
leadership is post-heroic leadership, which has gained more recognition in recent years, noted by
Sveningsson, Alvehus & Alvesson (2012), adding that the post-heroic leaders are the everyday
heroes who take part in everyday based actions; they talk, listen, and focus on the interaction
between themselves and their followers. But do these approaches bear any kind of resemblance to
that of entrepreneurial leadership? Gupta, MacMillan & Surie (2004) connect the dots, stating that
entrepreneurial leadership has much in common with transformational leadership because the leader
tries to evoke super-ordinate performance by appealing to the higher needs of followers. More than
this, entrepreneurial leaders must also entice followers to abandon their opportunity costs, which
might not necessarily be the case for transformational leaders.

Another branch is team-oriented leadership theories, which focuses on interaction between leaders
and group members, specifically emphasizing the ability of leaders to bring forth heightened levels
of involvement by team members. One such theory is leader–member exchange theory (LMX),
which examines leadership from the perspective of role theory (Graen & Uhl-Bein, 1995). But is
there any similarity compared to entrepreneurial leadership? Gupta, MacMillan & Surie (2004)
think so, nothing one difference: entrepreneurial leaders must orchestrate constantly changing role
definitions driven by an uncertain organizational context, rather than negotiate based on the more
stable role exchanges characteristic of static environments.

Furthermore, value-based leadership, a perspective elaborated by House & Aditya (1997) suggests
that leaders articulate an ideological vision/mission, show high degree of confidence in themselves
and their beliefs, and lead by example. Adding to this view, Shamir, House & Arthur (1993) assert
that leaders must appeal to a vision/mission derived from a set of super-ordinate values and behave
in a manner that reinforces this, communicating high expectations to followers, and conveying

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confidence in their ability to meet such expectations. But how does this relate to entrepreneurial
leadership? Gupta, MacMillan & Surie (2004) argue that the similarity between value-based
leadership and entrepreneurial leadership lies in the leader’s capacity to build a high-expectation
vision and to convey confidence in the followers’ abilities to accomplish that vision.

A picture of entrepreneurial leadership is beginning to form. To sum up, entrepreneurial leaders

must mobilize the resources to rise to the challenge. This may only be done by a leader who can
elicit/extract exceptional commitment and effort from stakeholders, convince them that they can
accomplish the goals, articulate a compelling organizational vision, promise their effort will lead to
extraordinary outcomes, and persevere in the face of change (Gupta, MacMillan & Surie, 2004)

Consequently, entrepreneurial leaders face two interrelated challenges: creating the vision and
building the team. This resonates with scenario enactment and cast enactment, as proposed by
Gupta, MacMillan & Surie (2004), arguing that the pursuit of these two activities is interdependent
as the vision cannot be shaped without the team and the team cannot be formed without the vision.
Therefore, these two activities co-evolve as a cumulative and iterative process, which require
entrepreneurial leaders to undertake five roles (Gupta, MacMillan & Surie, 2004): 1) framing a
challenge that will push the team to the limits of its abilities without pushing them over their limits.
2) shouldering the burden of responsibility for being wrong about the future thereby absorbing the
paralyzing effects of uncertainty for followers and building their confidence to act as if it is possible
to realize the vision. 3) dissolving potential resistance, obtaining support from stakeholders, and
eliminating obstacles to the accomplishment of desired goals. 4) inspiring and moulding a team
highly committed to extending extraordinary energy/effort to accomplish the vision described by
the leader. 5) specifying limits to reshape individuals’ perceptions of their own capabilities by
eliminating self-imposed ideas of limitation.

In contrast to this, Lidow (2014) emphasizes the importance of being self-aware, which looks at
how to work with one’s own motivations, traits, and skills - also termed capability mix. To lead
others, one must first lead oneself, and leading oneself requires that one must realistically evaluate
own capabilities. The importance of knowing your own strengths and weaknesses is echoed by
Drucker (1999). Furthermore, Lidow (2014) believes understanding how to build relationships, for
which there are three kinds: cooperative, competitive, and retreating, is crucial in leveraging
resources toward goal achievement (shared objectives). Finally, Lidow (2014) proposes to create a
setting that allows self-actualization, based on Maslow (1947), which happens when people feel in
control of their environment/destiny (autonomous), they are performing to the best of their abilities
(masterful), and they are doing something that is meaningful to them (purposeful).

These ideas on entrepreneurial leadership behaviour are intriguing, but fail to shed light on how to
mobilize and motivate people/labour in the different startup stages. For entrepreneurial leadership,
the closest that any discussion came to stages was Lidow (2014) talking about it from a growth
perspective, and not people perspective, leaving an unfilled gap.

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2.3 Employee Satisfaction

There are two relevant studies investigating employee satisfaction in new entrepreneurial ventures.
The first is Ardichvili (2001), comparing the impact between leadership and managerial behaviour
in Russia, concluding that transformational leadership improves job satisfaction and fosters extra
effort among employees in entrepreneurial ventures. An additional discovery was that contingent
rewards do not seem to affect employee satisfaction. These claims were a result of comparing data
covering 138 startups and 150 established firms from Russia, of which 70% were in retail or service.

However, it is important to note that the study compares the impact of actions/behaviour between
(emphasis on between) entrepreneurs and managers. Keeping in mind that past studies have shown
an autocratic leadership style due to the high power distance in Russia (Elenkov, 1997) and that
entrepreneurs display an autocratic leadership style, preferring to make decisions by themselves,
without consulting with their peers or subordinates (Ardichvili, Cardozo & Gasparishvili, 1998), it
can hardly be seen in a global context of inspirational motivation and charismatic leadership.

A second very similar study was conducted in The United States by Jensen & Luthans (2006) on
authentic leadership and its impact on the attitudes and happiness of employees. With a sample of
62 firms employing 3.6 workers on average, the study found that authentic leadership positively
affected job satisfaction, work happiness, and organizational commitment. Authentic leadership was
defined as: a positive psychological process that results in greater self-awareness and self-regulated
positive behaviour on the part of leaders and employees, fostering positive self-development. The
authentic leader is confident, optimistic, resilient, transparent, moral/ethical, future-oriented, and
gives priority to developing employees to be leaders (Luthans and Avolio, 2003).

While these are interesting findings, there could be a potential gender effect. Given that the majority
(69 percent) of the employees surveyed were female and a significant correlation was established
between employee work happiness and gender, this might warrant some consideration. Furthermore,
evidence also suggests that women leaders may tend toward more a more caring, follower-focused
leadership style (Eagley, Johannesen-Schmidt & Engen, 2003).

The results of both studies are valuable. But while there is some indication of the size and stage of
these startups, they fall short in clarifying the context, especially the financial situation. Have any of
these startups received investment? What are their plans for growth? There is one major difference
between entrepreneurs and those termed lifestyle small business owners; that is employment and
sales growth orientation, either because of market constraints or by personal choice - simply put:
ambition (Marlow, 2006). While entrepreneurs try to grow, lifestyle small business owners wish to
sustain. Furthermore, neither of these studies have discussed the possible impact of investment on
leadership behaviour. It is conceivable that investment will change the behaviour of entrepreneurial
leaders as financial compensation and formal authority become leveraging points. Prior to such
investment, when money and power are limited, it is likely that entrepreneurial leaders will use a
different set of tactics for enlisting and retaining people. Thus, introducing investment into a startup

7
could have a significant impact on the leadership behaviour. This important aspect is not covered in
either of these studies.

2.4 HR Staffing

Barber et al. (1999) compared staffing practices of large and small firms, noting major differences
between them; advocate treating large and small firm labour markets as nearly distinct entities. On
the topic of human resources, staffing is probably the most widely examined and discussed, in the
context of small businesses. Despite not having formal policies, all firms have implicit ways of
getting things done (Aldrich & Von Glinow, 1991). This develops as the need arises. According to
Lidow (2014), entrepreneurial leaders should only focus on critically important tasks that ensure
survival and getting to the next stage, because all other tasks are distracting and a waste of time.
Furthermore, as the situation can quickly change, part of the workforce is arranged on a contingent
basis since demand for labour can be unpredictable. This then points to some kind of ad hoc or
muddle-through method of staffing (Windolf, 1986), since establishing formal processes can be
extremely time consuming.

Marlow (2006) made a convincing argument when discussing human resource management in
startups, stating that anticipating uncertainty, seeking flexibility and managing change cannot be
based on formal, bureaucratic policies and procedures. It is entirely conceivable that maintaining
employee confidence during uncertain times requires entrepreneurs to inspire people and ensure
they share the vision for the organization; such an approach will inevitably require informal and
idiosyncratic approaches.

Selection is very important for small firms and may be essential for effectively managing people.
Research shows that small firms view lack of the right qualified people as a threat, not only to their
plans to grow and expand, but more importantly as a threat to their very existence (Mehta, 1996;
Heneman & Berkley, 1999). It is important to note that the emphasis on matching people to the
startup seems to be a different line of thinking than letting the vision and team co-evolve together,
as argued earlier by Gupta, MacMillan & Surie (2004).

Despite being critically important, recruiting and retaining people can often be quite challenging for
small organizations. This is observed frequently because of very limited financial resources, lack of
legitimacy as an employer, and the fact that employees often have to wear different hats with fuzzy
boundaries and unclear responsibilities (Hannan & Freeman, 1984; Williamson, 2000; May, 1997).
Often, staffing is sporadic and ad hoc; this further undermines the firm’s legitimacy and decreases
their potential to recruit and retain people (Williamson, 2000; Heneman & Berkley, 1999).

Several comparative studies of small and large firms, such as those by Heneman & Berkley (1999),
Deshpande & Golhar (1994), Hornsby & Kuratko (1990), and McEvoy (1984), indicate that HRM

8
in small ventures differs significantly from large companies. Tragically, for small firms, HRM tasks
may interfere with managerial responsibilities that are directly related to revenue production, which
is critically discussed by Lidow (2014). This is especially problematic for small venture managers
who are already resource and time constrained (Cook, 1999; Klaas, McClendon, & Gainey, 2000).

Given these conditions and contrary to what one might expect, Williamson (2000) maintains that
the person-organization fit (based on norms, values, and beliefs) is actually extensively considered
when small firms make hiring decisions. This is further supported in Williamson, Cable & Aldrich
(2002). Often, hiring managers in very small firms concentrate on matching general organizational
beliefs rather than specific job needs (Heneman & Berkley, 1999). On the other hand, Alexander
(1999) argues that for some small businesses, competitive advantage in acquiring labour resources
lies in uniqueness rather than imitation (Barney, 1991), where firms intentionally adopt practices
that are radically divergent from industry norms/standards. Hence, many startups are founded on the
idea that they will be anti-bureaucratic, for example, and are able to successfully recruit and retain
employees based on their informal, empowered approach to work, while the size of the workforce is
small (Cardon & Tolchinsky, 2006). One might therefore wonder under what conditions imitation
and legitimacy are more (or less) effective than uniqueness in bringing and keeping people on board.

On the point of contingent labour (temps, interns, freelancers, etc.) in emerging firms, given their
reduced size, payroll capabilities, and legitimacy concerns, Cardon (2013) suggests that such small
firms may be able to use such labour to supplement their workforce and even form a source of
competitive advantage as they emerge, expand, and diversify. This is because contingent labour
enables the firm to lower its cost structure and respond more quickly to changing market conditions
(Matusik & Hill, 1998). Furthermore, as contingent workers are engaged only when their specific
skill, knowledge, or productivity is needed, they represent a variable cost rather than fixed cost and
can be released more easily once their contribution is no longer needed (Foote & Folta, 2002). In
other words, it gives startups flexibility.

2.5 HR Compensation

Compensation is an important topic because it significantly affects recruiting and retention efforts
of small firms; if startups cannot pay people enough salary, then they might not be able to recruit or
retain the human resources they need to meet the entrepreneurial challenges. As with staffing, there
is some indication that compensation could be different in small firms, not only because of scarce
resources, but also because of the high degree of uncertainty/ambiguity concerning the future of the
firm (Cardon & Stevens, 2004). That being said, unfortunately most of the literature focuses on
financial compensation structures in not-so-early stage startups.

Graham, Murray & Amuso (2002) argue that because entrepreneurial firms are likely to have more
fluid jobs, fewer monitoring resources, and employees with relatively short organizational tenures,

9
the use of performance-related incentives and stock-related rewards is expected to be greater in
startups as compared to non-entrepreneurial firms.

However, Ouchi (1979) explains with a quirky but convincing story that there are three basic forms
of organizational control: supervision, market, and values. While some responsibilities can be
measured and rewarded (market), others cannot (supervision). Thus, it depends on the kind of job.
Given the fact that everyone is overlapping in responsibilities without any processes, it is highly
doubtful that performance-related incentives can be connected directly to specific jobs. At the same
time, stock-related rewards are contingent on the organization. Finally, it is important to note that
the most cost/time efficient control method is management by values. This view is supported by
Williamson (2000), Williamson, Cable & Aldrich (2002), and Heneman & Berkley (1999).

That being said, Balkin & Logan (1988) found that small firms would, to a greater extent, turn
potential earnings into pay incentives. This is done so that salary expenses can be reinvested into
the business when it is vulnerable and needs liquidity. In other words, asking employees to give up
small current rewards to grow the business for big future rewards. Consequently, salary is decreased
and risk is shared.

The pay incentives can be short-term and/or long-term. Short-term pay incentives may include
profit-sharing when specific preset organization-level targets are met. Heneman & Tansky (2002)
argue that, in small firms, these sharing plans might be more motivational than in larger companies,
since workers have greater ability to influence the outcome. Long-term pay incentives may include
equity-ownership, such as stock options, which can be a useful retention tool. Graham, Murray &
Amuso (2002) argue that this kind of risk sharing means that employees who have a significant
financial interest in the venture will be less likely to behave opportunistically and more likely to act
in the best interest of the organization.

The pay mix has also been shown to change over the course of a firm’s lifecycle, such as when it
moves from a growth stage to a mature stage (Balkin & Gomez-Mejia, 1984). Employees may
receive a different form of compensation as the organizational strategy evolves and the uncertainty
concerning the firm’s ability to pay its workers changes (Nesheim, 2000). As an example, when a
firm matures and the risk wears off for employees, cash compensation must increase to competitive
external market levels in order for the firm to retain employees (Graham, Murray & Amuso, 2002).

The pay structure may also differ between small and large firms. As proposed by Mintzberg (1980),
entrepreneurial firms tend to have flat organization structures, where people are treated relatively
equally with regard to compensation (Graham, Murray & Amuso, 2002). Balkin and Logan (1988)
argue that in small firms, hierarchical distinctions are kept to a minimum so that compensation is
not indicative of status differences among employees.

The pay raises may also differ for entrepreneurial firms. Consistent annual salary increases, which
are typical in large organizations, are not affordable by small ones (Balkin & Logan, 1988). With so

10
much ambiguity/uncertainty, startups cannot afford to have annual raises increase at a rate greater
than sales. Instead, contingent lump-sum bonuses might do the trick.

Furthermore, rewards can be multidimensional, which could be especially relevant to consider in

the startup context. It has been proposed that compensation should be viewed from a total rewards
perspective, including psychological rewards and learning opportunities, in addition to monetary
rewards such as salary and incentives (Graham, Murray & Amuso, 2002; Heneman, Tansky &
Camp, 2000). Additionally, case study evidence suggests smaller organizations are more likely to
view compensation from a holistic view than larger companies, but more research is needed on this
(Heneman, Tansky & Camp, 2000).

It is important to emphasize that compensation here is not being viewed holistically. That being said,
what does the picture look like in the very beginning of new ventures, before any external funding
is injected? Cardon & Stevens (2004) suggest that a great deal of empirical data need to be gathered
concerning what entrepreneurial leaders are actually doing and the impacts of those activities on
employee satisfaction, commitment, productivity, and firm performance.

2.6 Research Gap

It was difficult to review the literature on human resource management in small and emerging firms,
as many papers do not define the boundaries of firm size or startup stages clearly. The management
needs of firms with 1, 10, and 100 (with/without external funding) are significantly different, so to
classify these organizations into one overall category is problematic. That being said, it seems that
most research is focused on not-so-early stage startups, usually after funding, though not explicitly
stated of course.

Furthermore, not much empirical data has been gathered concerning what entrepreneurial leaders
are actually doing from a holistic perspective, in non-financial terms, to recruit and retain people
along with the impact of those activities on employees’ satisfaction, commitment, productivity, and
performance. This is a different angle into the field of human resources.

Additionally, entrepreneurial leadership has been conceptualized generally, but not specifically
examined prior to investment, when financial compensation and formal authority are limited. Could
entrepreneurial leaders be behaving entirely differently at this stage, under the extreme pressure of
being penniless and powerless? In this context, what kind of tactics are they using to enlist and
retain people? Introducing investment into a startup can significantly impact leadership behaviour.

These aspects have not been considered in combination thus far in the literature/research. All this
taken together leaves a research gap. To close this gap, one might aim to design a study that furthers
our understanding of entrepreneurial leadership behaviour towards recruiting and retaining people

11
in the early prefunding stage when money and power are limited. There is one major difference
between entrepreneurs and those termed lifestyle small business owners: growth-orientation. Thus,
it is important to ensure the ambition, quality, and stage of startups, for example, by sampling
through an incubator, if one were to undertake such a study.

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3. Design and Methodology

3.1 Research Design

The main purpose of this thesis is to gain insight into how entrepreneurial leaders can enlist and
retain labour during the early prefunding stage when financial compensation and formal authority
are limited. The research is designed around an extensive collective case study, with features of a
comparative cross-sectional investigation, based on 20 entrepreneurial leaders who all share a
connection to the startup incubator MINC, either as incubatee or advisor. Situated in the heart of
Malmö, it is one of the largest startup incubators in the southern region of Sweden (Skåne). That
being said, the design frame may then also be viewed as a single incubator case of MINC with
associated/attached entrepreneurial leaders. Furthermore, the research methods are based on a
qualitative approach that seeks to capture the experiences and opinions of entrepreneurial leaders at
MINC. Additionally, self-ethnography was to some degree used as the researcher is quite familiar
with entrepreneurial leadership. The choice of selecting MINC and its entrepreneurial leaders for
this study was based on feasibility and accessibility.

Striving to understand how entrepreneurial leaders can obtain the help of others in such a context,
this study evaluates and compares data from interviews conducted with 20 entrepreneurial leaders
from MINC. However, there are several ways in which one could go about answering this research
question. While asking leaders what they do to attract interest and retain help is useful, one could
also have asked followers what worked, observed the interactions between leaders and followers, or
a combination of all these. Given the nature of this type of study, triangulation is useful to reduce
potential bias (Thomas, 2013); reality should be based on the shared experiences between leaders
and followers, closely observed by the researcher. These views brought together will create a richer
picture of attitudes, reactions, emotions, and therefore, also the true relationship between leaders
and followers (Alvesson & Sveningsson, 2012). Some might go as far as to argue that to capture
complex and subtle intricacies of human behaviour and dynamics in small teams, it is necessary to
conduct ethnographic research based on careful observation of day-to-day realities (Alvesson &
Sveningsson, 2015). This method is typical for single case studies (Thomas, 2013). Why not use the
abovementioned method combination in a single case study? Because the aim is to capture a very
rich set of tools and techniques, which would have been too sporadically and sparsely distributed
over time and space to be discovered this way. In early stage startups, such interactions are expected
to be infrequent, scattered, and random. Furthermore, there might be an issue of access; as an
example, investor meetings can be highly confidential. Consequently, this study only evaluates and
compares interviews given by entrepreneurial leaders.

This study will compare the data between two groups, incubatees and advisors, from an interpretive
stance throughout the research, leaving considerable room for interpretation on my behalf, as self-

13
ethnography was used. Comparison of data derived from the interviews necessitates the analysis of
similarities and differences within and between each group of entrepreneurial leaders. Furthermore,
the analysis will relate these to the topic of the thesis: the leaders’ perspective towards what can be
done to obtain the help of others. While scientific methods generally require objectivity from the
researcher, I have to be honest about the fact that I have been an entrepreneurial leader myself and
am therefore, as a researcher, not be able to distance myself from this topic.

In the search for entrepreneurs, efforts were made to contact various incubators and accelerators in
the southern region of Sweden (Skåne). As a result, two incubators helped to facilitate contact with
its entrepreneurs: MINC (Malmö) and IDEON (Lund). However, whereas MINC had dozens of
startups, there were only a handful being incubated in IDEON at the time of research. Accordingly,
20 startups from MINC accepted the invitation to participate while only two startups from IDEON
were interested. Instead of skewing the sample, IDEON was not included in the study.

To gain a rich picture of the tools and techniques used necessitates in-depth conversations with
entrepreneurial leaders, which should allow for thoughts and emotions that may not be at the
forefront of people’s minds to emerge. Therefore, semi-structured open-ended interviews were
conducted to leave room for this kind of process. As a result, the interviewees had the freedom to
lead the conversation in new directions. The interview schedule was open and flexible, changing
directions as the interviews progressed. An interpretative stance was adopted to make better sense
of the meaning from the various accounts, experiences, and opinions given during the interviews.
To some degree, this means augmented individual perception of reality (Thomas, 2013).

3.2 Research Context

It is important to note that making generalisations within social science and qualitative research is
complex since behaviour and interaction are unpredictable and tightly coupled with the context in
which they are situated (Thomas, 2013). In qualitative research, by clearly describing the studied
context in detail, transferring the results to other contexts might be possible (Farrelly, 2013). Thus,
a brief description of MINC will be given.

Malmö (Sweden) is regarded as one of the most innovative cities in the world, ranked fourth by
Forbes Magazine. The entrepreneurship scene in Malmö is dominated by the startup incubator
MINC, which started in 2003 and has fostered a number of successful startups in a relatively short
period of time. This has increased interest from both international VCs and companies like Apple,
which made two acquisitions, both initially incubated by MINC, during the past three years.

Funded by Malmö Stad (Malmö City) and through various programs from the EU, MINC is a non-
profit incubator and serves as the hub for entrepreneurs, innovators, and investors. MINC has a
proven track record, successfully incubating over 100 companies over the past 13 years, and thus a

14
very strong (alumni) network. It serves highly ambitious entrepreneurs with innovative business
ideas and significant growth potential. MINC focuses primarily on media, design, technology and
ICT companies due to regional expertise within these areas.

The incubator program runs over 12 months, where the selected startups are mentored, monitored,
and supported. MINC provides support services including but not limited to business development,
pitch training, legal consultation, individual coaching, and access to its international network of
mentors/experts within several industries, along with office space in a creative start-up environment.

There is a stringent selection process, with an acceptance rate of approximately one in ten, before
entrepreneurs enter the incubator program. The criteria for getting into the incubator program are:
scalability potential, innovative nature, international ambition, and of course a great team. MINC
and Malmö are currently attracting more entrepreneurs than ever.

Therefore, entrepreneurial leaders picked from such an impressive incubator in one of the most
innovative cities in the world should indeed represent a worthy sample, even by global standards.
Furthermore, the advantage of having entrepreneurial leaders from the same incubator is that it
ensures the same quality level and sampling consistency across the board, through the existing
vetting process already implemented by MINC.

3.3 Data Sampling

MINC and its entrepreneurial leaders were selected based on purposive non-probabilistic sampling
(Thomas, 2013) as the aim was to find a locally accessible incubator with startups currently in the
early prefunding stage as well as seasoned advisors. However, only entrepreneurial leaders with
enough curiosity and availability were interviewed, which is recognized as convenience sampling
(Thomas, 2013). Thus, a mixed sampling method was used for this research.

At the time of research, MINC was incubating 40 startups and had 30 advisors. When selecting
interview participants, the aim was to achieve roughly an equal distribution among these two groups.
The criteria for participating in this research were entrepreneurial leaders currently listed as an
incubatee or advisor at MINC, and be based in Skåne, Sweden for interview. This would then
produce the following sample groups:

1) entrepreneurial leaders (incubatees), who are currently immersed in the early prefunding stage.
2) entrepreneurial leaders (advisors), who have already succeeded in the early prefunding stage.

While these two groups are not necessarily mutually exclusive, largely due to enthusiastic serial or
parallel entrepreneurs, the following distribution is considered: 12 (incubatees) currently immersed
and 8 (advisors) already successful. Thus, a total of 20 interview subjects participated in this study,

15
consisting of approximately one third of the startups and advisors at MINC (see appendix for the list
of interview participants).

The demographic breakdown of the 20 interview subjects is as follows: 90% male vs. 10% female;
90% Swedish vs. 5% Irish vs. 5% Dutch; age range is 24-54. The interviews lasted 45-120 minutes.
All 20 interviews were conducted in person and recorded. To maintain anonymity, participant codes
are used when referring to statements given during interview sessions.

3.4 Data Collection

Interviews must be conducted in person for best possible result. It was therefore quite important to
pick an accessible local incubator with local entrepreneurs as time and budget did not permit long-
distance travelling for such a small scale study. As a result, all 20 in-depth qualitative interviews
were conducted successfully in person, solo (one on one), face to face, and ranging from 45 minutes
up to 2 hours. This provided a chance to capture/interpret full contextual and behavioural details,
such as surrounding environment and body language, which would have been more difficult via
internet or telephone. It is also much better to use icebreakers and establish rapport when in person
(Thomas, 2013).

People in group settings might be less willing to share information freely, especially when the topic
is delicate. It was important to conduct the interviews individually, and thus, made it more likely
that interviewees felt comfortable and could speak without inhibition. Nevertheless, answers might
still have been adapted to sound more politically correct, as people were recorded. One might argue
that this is reflected by the lack of tools and techniques from the dark side.

All interviews were in-depth conversations with open-ended questions, creating very rich dialogue.
While some of the participants had additional office facilities in Malmö, most of the time interviews
were conducted at MINC. The interviews were held in English and 90% of the respondents had
Swedish as their native language. The language barrier occasionally limited some of the answers.
Hence, to reduce the impact of the language barrier, whenever interviewees visibly struggled, the
researcher would sometimes help to translate from Swedish to English.

The interview schedule was semi-structured and mostly used as a starting point. For this reason,
none of the interviews were structured in exactly the same way, depending on the answers, but also
on the background and experience of the interviewee. Some questions were revised based on the
first couple of interviews, since these disclosed valuable insight. Resembling an emergent design
(Thomas, 2013), this concept/method can be useful for social interpretative research. The research
was therefore able to evolve naturally along the way. The plan was not to transcribe the interviews,
so detailed notes were taken during the interviews. This may have resulted in the interviews taking

16
a bit longer because of split concentration, as there was only one interviewer. A team of two might
have been better in this particular case.

Furthermore, it was important to question the degree of trustworthiness of the material collected. Do
the results and transcripts indeed represent original intentions (Farrelly, 2013)? Obviously, it can be
quite difficult to judge the trustworthiness of what people say. Nevertheless, the researcher would
occasionally, during interview, challenge certain statements and use logical traps. Additionally,
when a participant needed more guidance, the researcher might also have intervened with possibly
leading questions. This might have caused experimenter-expectancy effects (Thomas, 2013).

The interviews were performed loosely following to an interview guide, which was developed on
the basis of the research question. Although the list of interview questions might look extensive and
structured, the interview itself was very open-ended. Many of the questions were simply different
ways of asking the same thing. This was incorporated to better stimulate thinking and conversation.
Additionally, some questions only targeted advisors or incubatees. Perhaps, just a fraction, typically
between 5 and 10, of the planned questions were covered per interview. Furthermore, unplanned
follow-up questions were also asked, permitting the interviewees to share added thoughts and
experiences. Although used very little, the interview guide contained many questions to make sure
there would not be a shortage of ways to stimulate thinking and conversation - better safe than sorry.
It is better to have too many, rather than too few, questions since some of the interviewees will have
difficulties expressing their thoughts.

3.5 Data Analysis

As previously stated, following the recommendation from my thesis supervisor and due to the large
data set, the interview recordings were not transcribed. Instead of transcribing 20-40 hours of audio
recording, it was more effective to decide on the spot what was important and then take notes in a
summarized or paraphrased form. Analysis was therefore primarily based on the notes taken during
the interviews, supported by listening to the audio recordings again whenever needed. The constant
comparative analysis method was used in combination with theme mapping, where interview data
was reviewed and compared repeatedly and analysed/coded based on patterns, allowing common
relevant themes to be identified (Thomas, 2013). This was assisted by an interpretative approach
where meaning was derived from what participants had to say, using both the interview notes and
my own prior knowledge/experience within entrepreneurial leadership to nuance the interpretations
(Thomas, 2013). The themes were organized naturally afterwards into more general groupings.
Approximately 20 themes were identified, after which was narrowed down to 8 themes.

A particular theoretical lens was used, thereby inevitably colouring the studied phenomenon and the
constructed themes (Thomas, 2013). Furthermore, analysis was based on induction, meaning that
the themes were framed through collected data, rather than the other way round. Additionally, the

17
personal values and experiences of the researcher also shaped prior understanding of the research
topic (Thomas, 2003).

3.6 Validity, Reliability, Generalizability

Generally, the validity should be quite high due to the sound design and methods used to illuminate
the phenomenon being studied. However, as discussed previously, there is a lack of triangulation as
the study is based on interviews with leaders only, without asking followers or doing observation.
Having said that, one might argue that being able to attract interest and retain people is necessary to
succeed in the early prefunding stage. If this argument is accepted, then the data from interviewing
advisors who have a proven track record should weigh up for the lack of triangulation, which is also
additionally compensated by the range and richness of the tools and techniques that were discovered.
Notably, the reliability should be very high due to the extensive data set, given that others try to
reproduce this study in the same context. This means if someone does the same research at MINC
within a reasonable time period, the results should be very similar to these findings. That being said,
generalizability should be very low because the sample of entrepreneurial leaders was taken from
one specific context (one startup incubator in Sweden), which does not consider cultural factors or
industry aspects. Therefore, the research sample cannot be said to represent the whole population
(all entrepreneurial leaders on a global level for all industries), which is also not the objective in
qualitative research (Thomas, 2013). Nonetheless, on a hunch, the data set is probably solid/large
enough for the results to be replicated, with slight variations, inside or outside incubators generally
in Sweden.

3.7 Limitations, Weaknesses, Drawbacks

First, the research design might not be bullet-proof since the two groups (incubatees and advisors)
were not mutually exclusive; so some of the participants may be considered as part of both groups.
As a result of this, there might be a potential ambiguity in the data sources and therefore also too
much consistency in the results. There was no clear way of dividing the participants into better
groupings, so to keep it simple, the existing distribution split between incubatees and advisors by
MINC was maintained.

Second, the methods and collection of data may also be criticised. As mentioned earlier, leading
questions might have created a bias in the original intentions of interviewees. On the other hand,
one could argue that it is impossible to capture original intentions through interviews with absolute
certainty, since the interviewees could be lying. Furthermore, interview participants might believe
their actions to have larger impact than in actuality. They might believe in what could be an illusion
of control. Having said that, entrepreneurial leaders are actually intelligent human beings, who use a

18
combination of intuition (sensing) and feedback (measuring) to evaluate the impact of their actions.
Additionally, knowing something and doing something are two very different things. They might
think it, but might not, or be able to, do it or practice it. The extent to which interviewees adapted
their answers to sound more politically correct also cannot be evaluated graciously. That being said,
the fact that researcher observation and follower interviews were not done means that there are
some weaknesses in this study. However, as argued earlier, the distribution of exchanges is too
sporadic/sparse in an early stage startup, for such a small scale study on a 10 week time frame, to
permit these kinds of luxurious activities. Instead, this is compensated by the range and richness of
the tools and techniques discovered, albeit partial to the viewpoint of entrepreneurial leaders. Given
the psychological nature of the questions in this study, interview participants might have been a bit
more nervous and/or reluctant, since nobody likes people inside their heads. While attempts were
made to moderate this, it could also have distorted some of the answers.

Third, cultural factors also shape the reality at MINC, as an example: Sweden is a comparatively
very small power distance society (Hofstede, 1994) and therefore formality levels between leader
and follower is often low. Also, industry factors affect the study. MINC is an incubator focused
primarily on media, design, technology and ICT companies. Startups in other industries may not
share the same characteristics. Examining entrepreneurial leaders from one incubator in Sweden
makes transferability across cultures and industries difficult.

Furthermore, the fact that these entrepreneurial leaders are from an incubator means that results
could differ from startups outside this kind of organization. MINC might also influence how many
and which people circulate in its environment. The kinds of people who go to MINC are naturally
interested in startups and may very well be more inclined to help or assist; support and networking
are integral features of MINC. For these reasons, startups inside an incubator might differ from
startups outside of it. As a result, the findings and claims may not be generalized to other contexts.
Having said that, this study does not seek to make general claims via Grounded Theory, but rather
to develop a rich nuanced answer to the research questions, which is the hallmark of case studies
(Thomas, 2013). This is a qualitative study that aims to form some kind of groundwork to build
upon, perhaps using quantitative studies.

Although weighed up in the range and richness of information uncovered, one limitation could be
the subjective interpretation when working with data analysis from using a qualitative approach.
My familiarity with entrepreneurial leadership meant that elements of self-ethnography were used.
In self-ethnography, the researcher turns towards a group of people where he/she already belongs
(Eriksson, 2010), for example: being an entrepreneur, one might study other entrepreneurs. This is
useful in a setting where one is more or less on equal terms with other participants, and can perhaps
use this familiarity as an empirical starting point for the research (Alvesson, 2003). It does not place
the researcher and his/her experiences at the center of the study, but recognize its relevance for the
interpretative research process (Alvesson, 2003; Thomas, 2013). Naturally, it follows that this has
affected my interpretations, ideas, and interactions with participants. While it may be more difficult
to free oneself of preconceived notions, the familiarity can also be a resource. Since I was an insider,

19
participants probably trusted me more, which meant more likely to be honest. The researcher should
therefore not deny any personal relationships with the field, but instead try to use it to assist in the
research process and in interpreting the results (Thomas, 2013).

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4. Findings and Results

4.1 Setting and Premise

This thesis investigates how entrepreneurial leaders can obtain the help of others during the early
prefunding stage through a particular lens, one where financial compensation and formal authority
are limited. Therefore, it is only natural that such an essential assumption be verified empirically.
The result was a robust confirmation of this statement. All interview participants supported this
claim, most of whom even stated it explicitly:

Nobody is being paid at market price. You don’t have much leverage, so you can’t get
angry with people. You can’t enforce it. It’s easy to lose motivation when you’re not
getting paid. It’s a very fragile and tricky balance. I can totally understand if someone
at any time on this journey say ok I quit I’m done with waiting for the big promise.
There isn’t a strong formal, legal, or cultural agreement. Bigger companies can afford
to bleed, but not when you’re a startup. – R09

There is a little bit of a feeling that you need to tiptoe around people, that feeling where
okay I’m not paying this guy, he believes in it, I’ve managed to convince him, I’ve
managed to convince some people of my dream that this is gonna be huge, so don’t
frighten them away. It’s like they’re here under the wish of a dream. There’s no money.
You put in this effort, you get rewards in the future, but we can’t guarantee them, and
that’s why it’s a little bit of this feeling of tiptoeing around people. – R17

It seems that it is difficult to get people to stay and work when you cannot pay them, or partly as a
subsequence of that, boss them around. Since it is easy to lose motivation when there is a lack of
financial compensation, the early prefunding stage of a startup is particularly volatile and uncertain.
To summarize the conditions for entrepreneurial leaders at this stage: no leverage, no enforcement.
People will also look at opportunity cost: what they are giving up to be there. So what is holding
people there?

4.2 Trust and Morality

As a fundamental precondition for collaboration, creating trust was mentioned as an absolutely

crucial element. This was found to be one of the most important things that entrepreneurial leaders
do to lay the foundation for attracting and retaining people. Having said that, how do you build trust
and what kind? There were two basic kinds of trust: trust in the abilities of the leader and trust in the

21
character of the leader. In relation to both kinds of trust, many of the interviewees mentioned that it
was generally important to be open, honest, and transparent.

It’s important to build trust in the team. People can rely on me. I’m never afraid of
doing dirty work. People trust me. They said it’s because I have a good heart. If you
have a good heart, you can show empathy. – R18

I’ve had a lot of employees, hundreds of employees. I think it’s very important to be
honest and honest means both when things are good and bad. Just be honesty about
everything. That is very important. People have different views, there is no right or
wrong, the only thing you can measure is if you have done the task or not. But if my
intention is good and to make things better, that is the core I think. And if everybody in
a company does that, not for personal gain, if the intention is good, then there is trust
in a company. – R03

You need to create a culture based on trust and help, by keeping your promises and do
what you’re supposed to do. It comes down to getting the work done, no matter what.
Then respect follows. People trust in my abilities to lead this company. – R10

The first kind of trust seems to be outcome based, where people follow because they trust the leader
to be able to lead everyone to a triumphant victory. The second kind of trust was intention based,
where people follow because they trust the leader to be able to lead everyone in a righteous battle.
As a result, it seems that trust and morality are the intertwined double helix of the foundational
DNA in attracting and retaining followership.

That being said, entrepreneurial leaders discussed both as important, indicating that there must be a
minimum hygiene level for both kinds of trust in order for people to be willing to follow the leader.
Several entrepreneurial leaders also talked about establishing trust, not just between themselves and
the followers, but among the whole group. This points towards creating a certain kind of culture and
mentality, which will be discussed later in this chapter.

4.3 Vision and Values

Find the right people. That was echoed as another critical component by the vast majority of the
interviewees. The next question then becomes: who are the right people? Essentially, the right
followers are the ones who share the same vision, values, and views, as the leader. That means a
match between leaders and followers. Once this happens, people will follow the vision. This is
another way of saying mission or purpose. People should do what they love.

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 I have thought a lot about it, and I think the answer is the same. It doesn’t matter if it’s
a big company or little company, if you have money or don’t have money, the best way
to get the most out of people, it’s difficult in English, you have to have people in your
company who share the same values as the company. You can’t buy people or change
what they believe in. If you don’t believe in the vision, doesn’t matter how much money
you get, you can’t last. I don’t believe I can influence people. I actually really like this
stage when you don’t have the money, because you’re attracting people who really
believe in what you’re doing. – R03

The startup model I see the world from is called the 6Ps: Purpose, People, Problem,
Product, Profit, Potential. Do something you care about, then find your followers. They
are your tribe, so it’s about finding like-minded people. It’s all about getting the right
people on board your purpose or cause. Why? Why do you do? Why do you exist? If
you ask people in a big company, it’s surprisingly rare that they know why they’re
doing what they’re doing. Do you know the golden circle? Simon Sinek talks about it on
TED. Imagine you’re stuck at a dinner table, and someone asked you what if you had
all the money in world, what would you do? – R15

First of all, I try to find out in which phase is he. Is he interested in doing something
new? Is he interested to join other groups of people than the one which he might be in
right now? What is driving him? Is this a guy who sees there is a problem as we have?
Is it something which he thinks is important to solve? If he is not convinced on that, he
might not think it’s important for him to join either, right? Listen to him. Listen to find
out what kind of guy he is. If it’s a guy I don’t know, I need to know him a little bit more,
so I socialize with him. We take a cup of coffee or we go out to dinner or whatever and
we brainstorm and we go round and what he thinks is fun, you know. – R19

This means figuring out what people want. Interviewees might employ a series of probing questions,
and then paying close attention to the responses. This is basically how entrepreneurial leaders assess
people and determine if they are the right fit.

That being said, since the startup and its environment are so unstable and unpredictable, it means
that the vision, values, and views can quickly change. Consequently, people might not match over
time, especially if a startup pivots. Because of the high volatility, keeping enough pieces together all
the time can be tricky.

Be clear about the values. Talk about why we do what we do. Find the right people. It’s
important that they match the company’s core values, and what those stand for. But the
situation is changing quickly, and people don’t fit always all the time. – R06

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4.4 Dreams and Aspirations

As part of getting and keeping the right people on board, entrepreneurial leaders also play on their
dreams and aspirations. While these are similar to the purpose or mission of the company in nature,
they are individual. People are after all self-centered. An employee might share the broader vision
of the company for democratizing the education industry, but may also have individual dreams and
aspirations for becoming a highly respected and esteemed professor. Consequently, entrepreneurial
leaders will try to capitalize on these personal goals by somehow linking them to the company.

I would say I look at what is important for that person. I’m thinking of one of the guys,
he’s a designer. He has a goal to become more of a designer than a frontend developer,
he wants to go towards design, he wants to build a portfolio and experience and
reputation, and there, maybe intentionally, maybe unintentionally, I don’t know, I try to
help him get there, and make him feel, make him understand, not lie to him in any way,
absolutely not, but to show him when I see this here can actually help you get to that
goal, I’ll try to bring that to his attention because it’s easy to get bogged down in
details and forget about the big picture. I think I’m more of a big picture person than a
detail person, so when I see somebody getting a little bit uninspired or annoyed with
something or the team is frustrated, I’ll try to bring that back and say look this will be
your baby, you’ll have been the design lead for this, so when we launch, when we got a
reputation here, you can take benefit of that. A little bit of play with their ego maybe, it
sounds a little bit malicious or that you’re manipulating people but I don’t see it that
way because I don’t feel that I’m lying to them in any way. I’m trying to bring it to their
attention. A little bit see the dream kind of thing, see that vision, because it’s so easy to
get lost in why we’re here. – R17

Once the entrepreneurial leaders have figured out what people want, they could for example play on
the dreams, aspirations, and egos. Based on the experiences of the interviewees, it seems that people
can be susceptible to influence in this way, more in some than others.

Prestige. Ego. I think titles are a very good way for people to boost that. Many sales
representatives have much need on this, so they are very competitive, they are very
important with prestige, respect, and so on. Many of those needs are very common
within successful sales representatives I think. I would say also that many times people
up in hierarchy it’s very important for them prestige and what other people think of
them and my ego. A title can be very good there. Not in all companies, maybe if you
have a tech startup I don’t think titles are so important there cuz I think there are other
needs which would drive them, but in sales it can be more important sometimes. – R08

The interviewees seem to be quite divided on this theme. While some people do play a lot on the
dreams and aspirations, others find it manipulative and try to manage expectations more realistically,

24
emphasizing from the beginning that they cannot promise anything. Generally, it is more senior or
experienced interviewees who are rejecting this method.

You have to find people who are interested, genuinely interested, and you have to be
very clear from the beginning, say that I can’t give you a job, because I don’t have
money yet. Perhaps I will have, but I can’t promise you anything. Be clear at the start
and see if they follow you. – R20

4.5 Ownership and Freedom

There were two concepts in particular, ownership and freedom, which were emphasized by nearly
all entrepreneurial leaders when discussing how to manage and retain people. Once they join the
venture, it is extremely important that people feel ownership and have freedom. The definitions of
these shall be explored further in the next chapter. For this to happen, entrepreneurial leaders would
have to trust and believe in people, so that they can delegate responsibility more and involve people
more. Furthermore, it was vital to give people freedom to manage their own time and make some
own decisions as well, which further enabled ownership.

Building a successful startup is all about engaging people and making them feel that
they’re part of doing something bigger. We delegate a lot of responsibilities to our
employees. You need to involve your employees in more processes than only doing that
one thing. Our developers have also been really involved in producing our investor
proposal because they also know graphical design and I said we need to help out now,
we need to do a really really cool investor proposal that shows our soul. And now
they’re really proud that they were part of doing the investor proposal, which means
they’re helping to send it out to potential investors, so they met this guy at a party
whose dad is an investor, so they sent the investor proposal to him, and they do that
because they were involved in making it. So I mean delegation, involvement, all fits
together. It’s an ecosystem of different things that all fits together. If you manage to
incept the heart and soul of the company, you start involving them in some other
processes and you give them responsibility to manage parts of their own time and also
responsibility to make some decisions, then you have created a good ecosystem, and
that is part of why people can in the beginning accept a lower salary. – R13

So whenever they are delivering something, however small it is, they need to feel like I
delivered something good, and in the end when you add up all these small good things
and people feel like oh I have achieved something, I have done something good, they
have felt it all the way, and when they get to the end goal so to say, they can see that the
full picture actually adds up to something that is really really good, and that vision I
have, but they can’t see that maybe in the beginning, but after a while, they start to see

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 the vision, they start to understand it, oh this is where we’re going, this is what we want
to achieve, and then the interesting thing comes, because then people start pitching in
themselves, because then they realize oh but you say that we should do this and this and
this, but I don’t think that’s the right way, because I think this and this is the right way.
And when everybody feels that they have the possibility to affect the end result, then
they feel much more engaged into the product. So what you do is that you take people,
making sure they engage in it, making sure that their voice is heard. Sometimes what
they’re thinking might not be the right way and then I have to argue for my opinion and
why I think this is not the right way. – R05

What is really interesting in both these two accounts is that the impact is observable. The leaders are
reading the signals and able to determine roughly the effect their actions are producing on followers.
In addition to this, the leaders said that they ask for feedback to help gauge how the followers feel.
As ownership is a psychological effect, it cannot be measured exactly. Nevertheless, there are some
reasonable ways to evaluate this.

4.6 Learning and Development

There were quite many interviewees who said that they were providing learning and development
opportunities for their employees. This is done by creating variation, which can be achieved by
involving people in many different matters and processes. Though not stated explicitly, it was
understood that this meant incorporating interesting and meaningful tasks to a reasonable extent.
Unless it is a startup with diverse specialist skills, everyone can help to do many things in a small
early stage team.

You have to invite them to the startup community and when you get these pitch events.
You have to invite them to everything, so they feel part of it, so they can have some
learning, and get something to take with them that is not money. Do you understand
what I mean? You have to create some value and some personal development. Like the
leader, you have to get them along. Please come with me and meet this customer, I
think you are very good at this, and you will learn something, so even if I don’t have the
job for them now, they have an experience. That is what I have to offer. – R20

The most important thing is that you need to get people to think that what you’re doing
is very interesting and it’s also developing their skills because if you start only getting
into everyday work and everything is the same all the time and nobody is developing
then you will get less motivation in the team. You make sure people feel all the time that
they’re learning, that they’re developing, and when you do that then you have fun, and
then you feel like I’m doing something useful. If I’m not getting a huge pay, I’m instead
getting a lot of knowledge, and that’s what you can bring to the table. – R05

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The two interviewees above were referring to interns on both accounts. This specific strategy relies
on leaders being more experienced than followers, and can therefore help them to grow. Therefore,
it does not work on everyone. While these are highlighted, there were also others who emphasized
similar kinds of opportunities for growth with freelancers and so on. Interviewees acknowledged
that freelancers might very well be more experienced in their respective fields, and any project
would therefore just serve as an opportunity or channel through which they could do some kind of
dream project on their own terms, together with the promise of future reward, if things turn out well.
In contrast to the interns, for this to work, entrepreneurial leaders recognized that they could at most
provide input, but would have to give up control of the project and let the freelancers take the lead.
While freelancers are accumulating knowledge and skills, they also have complete ownership of the
project and freedom to work as they like.

That being said, it goes beyond just learning and developing. Though not highlighted here, many
interviewees are pushing people to fulfil their full potential, by encouraging a go-through-walls-
and-be-all-you-can-be attitude, and turning negatives into positives, seeing challenges instead of
problems, opportunities instead of obstacles, and failure as learning.

4.7 Rhetoric and Communication

Perhaps the pragmatic reader might find the concepts covered thus far a bit fluffy. This section will
discuss more tangible tools and techniques. Among all interviewees, probably the most commonly
used communicative instrument was rhetoric. Most entrepreneurial leaders were great speakers and
could deliver their messages in a convincing way, using dramatic language, colourful metaphors,
mental imagery, and story telling. This has a strong impact as it gets people to relate much more,
and especially powerful if it is an emotional underdog story.

You only think about how little money can you spend. I started my first company when
my wife was pregnant and we were waiting for our first daughter to be born and she
was on maternity leave. We had very little money and we only ate falukorv which was
on sale at the supermarket each week. I only bought stuff on coupons. It was extremely
tough at the time. I don’t think many people ever go through what we did at that time. I
don’t think I would be able to live on that little money today, but I am amazed how we
could succeed then. – R08

Yes, we jump in, we roll up our sleeves, we do everything. When it comes to making
decisions, I put my hand down gently, never the fist, cuz it doesn’t work. I feel I inspire
the team to say look this is going to be a big company, you’re in on the ground floor.
How do you drive people? Usually you’ve got the carrot and the whip. You actually
don’t have a whip in a startup. You only have a carrot and you don’t even have a carrot.

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 You can show them a picture of a carrot. I don’t have a whip or carrot. I only have a
dream of a carrot, and that’s a tough one to keep people motivated. – R17

Many of the interviewees also challenge and lead people in their thinking by employing a series of
questioning techniques, such as probing questions, leading questions, and implication questions.
When it comes to painting a mental picture, entrepreneurial leaders sometimes use a combination of
realistic and unrealistic elements to credibly entice people. This is done by connecting the dots but
not all of them. The technique involves leaving some mystery and letting the imagination take over.
Talk about what is possible, but let people think for themselves.

Talk about something that is realistic and something that is unrealistic, and then also
you need to make sure that you do not connect all the dots. Let me explain it like this, if
you’re selling a movie, you don’t give away the full plot, you don’t say that the girl will
be kidnapped and then the hero will come and rescue her. If you do that, then
everybody will say I’ve already seen this, it wasn’t that interesting, so what you do is
you give them parts of it, but still enough to see that this whole thing is interesting, and
then you start to connect your own dots, so when the hero saves the princess, you don’t
have to say that. That means you can do the visualization for yourself, that this is what
is going to be the end result. – R05

Some interviewees also confessed to using a technique known as inception, which can be thought of
as planting seeds or leaving breadcrumbs. It is a method/process where ideas are undetectably and
untraceably placed into the subconscious mind, resulting in the desired outcome. This is a difficult
but powerful ability.

Once you lock in a position, it’s much harder to make somebody change, so if they have
decided red is better than green, it takes a lot more effort to make them think differently.
If I know this is going to be hard to push through, I always try to plant something
before. It’s like magician’s work when they try to do this mind reading trick, they can
put up stuff along your way to work, if they put up yellow signs, your mind is gonna
notice them but you’re not gonna think about it and then when you come to work and
they say think about a colour, you’re probably gonna say yellow because there were a
lot of yellow signs but you were not thinking about it consciously but everything goes in
there, so that’s why if I have an idea, I try to work it in before. – R10

Apparently, it was also important to formulate and communicate the vision clearly and repeatedly.
There are so many messages every day that they can get mixed up. Additionally, it is not only what
you say, but also how you say it. A few of the interviewees also brought up body language, saying
that leadership is much more effective in person than over Skype with a remote team.

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4.8 Mentality and Culture

One of the most interesting findings is the mentality of entrepreneurial leaders. Essentially, it is a
mindset based on with three mantras: 1) don’t limit yourself in your thinking, anything is possible.
2) don’t be afraid to try, mistakes are part of learning. 3) never give up, it’s all about your mindset.

Values. It’s really important to have values. In a startup, you lead much more with
values and culture than in big companies. When you’re down, the important thing is to
get back up, every day, like Rocky Balboa. When I discovered this, I went out and
bought as many of this hanging head dog toy I could find. Whenever I see people down,
I get my dog toy and press it to lift its head. Up again then down. Up again then down.
Up again then down. That’s what entrepreneurship is to me. I try to teach this to people
around me. It’s really important to have a positive mindset. The negative spin is most
difficult to handle. – R08

When I’m really passionate about a new business, of course, that shows to other people.
And the energy you give yourself or your founding team translates to everyone working
in the business. I think the energy and the vibe in the building or the team is something
that attracts people. Then also the ability to always be up for change, I mean in the
early stage, you have to question your whole business model, you have to question
everything basically. It’s a lot of trial and error, and a particular type of people are
really interested in that. It’s almost like they’re the founder themselves, they get to
make decisions that they’re probably not used to make. – R04

Additionally, this thinking was connected to other formulations like passion, energy, positivity,
excitement, confidence, and fun. As one of the most common and powerful techniques employed by
entrepreneurial leaders, its impact is often observable when spread to others. The interviewees also
work a lot with raising the self-confidence and self-esteem in followers.

Praising is something that we work a lot with, saying that this was really good and then
I add another word that is celebrating. It could be as much as giving a high five for the
thing that you did. That is really really important. That builds the good atmosphere; oh
you did this really good, perfect, because that’s what people want to hear, they want to
hear I’m good, that I’m doing something good. You need to make sure that you think
that people are good and interesting. When you have a really good boss, he lifts you up,
he lifts up what you’re doing, he’s not pushing himself, he’s pushing you forward, and
making sure that you are succeeding. – R05

In order to convince others, it is imperative and necessary that the entrepreneurial leaders believe it
themselves. Furthermore, it seems that the idea is not only to spread this mentality individually, but

29
rather to infuse the whole group to create a self-reinforcing culture. To achieve this, many of them
practice leading by example, which is also known as role-modelling.

It’s very important to make yourself believe that it will take off. You have to excite other
people. Show that you are excited. That’s how you bring people on board. What energy
do you have inside or around you? There are no limits to what people can do, believe
in them. I tell people they’re unstoppable. I try to make them unstoppable. – R12

I can only create an environment where people can use their own motivation. If they
are performing bad, find out why. Give them goals and leave them alone. Let them
make mistakes and grow. Make them believe they can do much more than they think.
Tell them they’re bright, they’ll learn, and let go of the fear. – R18

If you’re owner or managing director, you have big responsibility in how you interact
with people because what you’re doing is you’re putting a culture into a company. If
the culture in a company is to be honest, as a director or owner, you’re setting the base
for that culture, and people are gonna do the same. – R03

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5. Analysis and Discussion

5.1 Trust and Morality

As mentioned in findings and results, it appears there are two kinds of trust. The first kind of trust
seems to be consequence-driven; this is also known as Consequential, from a normative ethics point
of view (Frederick, 2002). Followers want a leader who is morally competent of achieving results.
The second kind of trust seems to be intention-driven; this is also known as Deontological, from a
normative ethics point of view (Frederick, 2002). Followers want a leader who is morally capable
of acting virtuously. Both kinds of trust seem to be important, but most likely, followers will prefer
a higher degree of one over the other, depending on their individual moral stance. While some
followers will value the ends over the means, other followers will value the means over the ends.
Ultimately, ethical positions are very much influenced by culture and region. Hence, as previously
mentioned, the results of this study are context dependent and cannot be generalized to the rest of
the world.

While not implicitly mentioned in the entrepreneurial leadership literature, trust creation which is
tied to morality, is the principal enabler of cooperation. Studies have even shown that interpersonal
trust is a predictor for job satisfaction (Matzler & Renzl, 2006), adding that it leads to more positive
workplace attitudes, higher performance results, and increased organizational commitment, through
elevated employee satisfaction. This supports the findings from literature and theory on impact of
authentic leadership on job satisfaction, workplace happiness, and organizational commitment in
startups by Jensen & Luthans (2006). Though not validated by numbers, certain dimensions of their
results appear to be transferable to the context of this study on incubator entrepreneurs/startups in
early prefunding stage. Luthans & Avolio (2003) advocate that an authentic leader is, among other
things, transparent and moral/ethical. Additing to this, Goffee & Jones (2013) say that people will
not follow a leader whom they feel is unauthentic. These taken together, people will not follow a
leader whom they do not trust.

5.2 Vision and Values

As discussed in HR staffing, Williamson (2000) and Williamson, Cable & Aldrich (2002) maintain
that the person-organization fit, based on norms, values, and beliefs, is extremely important to small
firms. Heneman, Tansky, & Camp (2000) and Heneman & Berkley (1999) add to this saying that
focus will be to match applicant competencies to general organizational beliefs, values, culture,
rather than to specific job requirements. Hence, the importance of leaders and followers matching in
their vision and values corresponds quite well to the literature and research. However, since the

31
situation changes quickly, mobilizing the resources can be a difficult iterative process, as depicted
by Gupta, MacMillan & Surie (2004). When people match in vision/values, it means that salary is
no longer the main motivator and can consequently be reduced. The possibility to give people other
kinds of compensation is explained by the balance rewards perspective, as proposed by Graham,
Murray & Amuso (2002) and Heneman, Tansky, & Camp (2000) in HR compensation.

Likewise, the findings here resonate with management by values (Ouchi, 1979), which is the least
costly and most efficient way to manage people, a view also echoed by Heneman & Berkley (1999).
The amount of time or cost it takes to manage the right people is much lower because they are self-
motivated and self-sustaining. In stark contrast, one might have to spend excess amounts of energy
supervising others who are merely doing what they are supposed to do, which is very inefficient.

5.3 Dreams and Aspirations

Essentially, playing on the dream and aspirations of others is to exploit their higher needs, such as
self-esteem, self-actualization, recognition, growth, and other intrinsic motivators, as proposed by
Maslow (1943), Herzberg (1966), and Alderfer (1972). This falls in line with Lidow (2014): when
people are doing something that is meaningful to them (that is individually purposeful), it helps to
facilitate self-actualization and allows leaders to appeal to the higher needs of followers. That being
said, self-actualization is accomplished on a deeply personal level. It could be to become the most
caring teacher in the world for one and the most respected professor in the world for another. Such
facilitation/appeal is also one of the focal points of transformational leadership and entrepreneurial
leadership (Gupta, MacMillan & Surie, 2004), in order to elevate job satisfaction.

Furthermore, quite many interviewees believed that the degree of power/influence leaders can have
over followers is insignificant. It is worth noting that, though not all advisors, the interviewees who
expressed this view were older and somewhat more experienced leaders. This is an interesting
finding as it challenges the very idea of leadership, which is based on power and influence. This
says a lot about how people view/perceive leadership: whether leaders can motivate followers or
only create an environment in which people use their own motivation. This is a very important
distinction that questions the source of power/influence. If this line of thinking is entertained, then
one might argue that leadership is merely an illusion of control.

5.4 Ownership and Freedom

As with doing something meaningful (purposeful), when people are given the freedom (autonomy)
to do something to the best of their abilities (masterful), as argued by Lidow (2014), that is where
they are driven to perform best, during a process of self-actualization. The interesting thing is that

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ownership and freedom were the exact two remaining pieces needed to complete the puzzle. On the
point of ownership, to be clear, it is a psychological ownership, defined as the extent to which an
employee feels as though the organization or the job is theirs to the point that the company becomes
an important part of an employee’s self-identity. This can be largely achieved by involving people,
albeit easier said than done. Furthermore, it is conditional upon entrepreneurial leaders assuming a
strong belief in Theory Y (McGregor, 1960).

The idea of involving everyone in everything, as discussed in findings and results, is supported by
Mintzberg (1980), asserting that in small organizations or teams, there are no formalized roles or
processes. Thus, people are overlapping in their responsibilities and wearing many different hats,
which is explained by May (1997). It is somewhat of a muddle-through method, whatever works to
grow to the next stage (Lidow, 2014). Whether this is a result, cause, or coincidence can be debated.

5.5 Learning and Development

As discussed in findings and results, entrepreneurial leaders go beyond just giving people an
opportunity to better themselves, they actively drive and coach people to fulfil their full potential.
Such efforts seem to be steering people effectively towards achieving self-actualization as already
discussed and are supported by the mentality and culture that entrepreneurial leaders establish.
Given the power balance between leaders and followers exemplified in the narrative about interns,
one might claim that it is all about how much value entrepreneurial leaders can bring to the table,
and therefore, how much leverage they hold. But this will be discussed later as there are techniques,
especially those put forth in rhetoric and communication, which rather deftly contradict this view.

One general strategy, as presented in the findings, seems to combine or interweave personal goals,
so that the collaboration is productive for both leaders and followers, leading to a win-win solution.
This idea must be presented convincingly for followers to accept. It is supported by the idea of
negotiating a shared objective and establishing a cooperative relationship (Lidow, 2014) as well as
the notion of stag hunt (Skyrms, 2001), but differs in reality as people have many other options.
Hence, the tools and techniques under rhetoric and communication might be of some use here.

5.6 Rhetoric and Communication

Evidently, effective rhetoric and communication could be very useful. Alvesson & Sveningsson
(2012) add that transformational/charismatic leaders use symbolic language, beautiful rhetoric, and
story-telling to inspire devotion. This aspect has not been discussed for entrepreneurial leadership
thus far, but now appears that it shares rhetoric and communication as well with transformational
leadership. Leaders act as heroic role models in both types of leadership. So what is the difference?

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Mentality: fail fast forward. The entrepreneurial mindset incorporates speed through action and
advocates learning through failure - further discussion on this later.

As explained by Gupta, MacMillan & Surie (2004), rhetoric and communication help to reframe the
challenges ahead and reshape individuals’ perceptions of their own capabilities by eliminating self-
imposed ideas of limitation. Once the vision is articulated, it must be effectively communicated as
well to inspire confidence, and then repeated for consistency. The use of beautiful rhetoric and
effective communication is a useful addition to the concept of entrepreneurial leadership behaviour
in the early prefunding stage.

5.7 Mentality and Culture

One of the most interesting findings is the mentality of entrepreneurial leaders. It is a mindset with
three mantras: 1) don’t limit yourself in your thinking, anything is possible. 2) don’t be afraid to try,
mistakes are part of learning. 3) never give up, it’s all about your mindset. This mentality is
attractive because of the ambition, grandeur, and possibilities in its first component. The second
component effectively justifies and excuses any kind of failure and protects the ego. Finally, the
third component encourages people to continue by putting fate into their own hands. As the leaders
spread this mindset, followers may find it hard to resist. Essentially, it is a philosophy where your
dreams are entirely achievable, you cannot do anything wrong, and you decide if it happens or not.
Such philosophy bears strong resemblance to the five roles that entrepreneurial leaders must take on
to succeed, as put forth by Gupta, MacMillan & Surie (2004). Furthermore, this also connects to
coaching leadership, where the leader gives followers the opportunity for personal growth and
development, which corresponds to the findings in learning and development.

In relation to creating a culture, a few of the interviewees stated that it was also important to try to
give people identity and belonging. This is supported by case studies, such as the one authored by
Alvesson & Sveningsson (2015). Furthermore, entrepreneurial leaders build people up, lifting their
self-confidence and self-esteem. This can be very powerful as discussed earlier. While it is difficult
to evaluate the degree to which this is done, my gut says that it is significantly more than in larger
organizations.

5.8 Approach and Discussion

As depicted in the long snippets of conversations, there seems to be general consensus among the
entrepreneurial leaders from MINC about how they viewed their own leadership and what their
beliefs were. As one might predict, most interviewees generally preferred a democratic leadership
approach, since involvement was essential for engaging people. That being said, there were also a

34
few interviewees who thought an autocratic leadership style was necessary at times, as speed and
momentum are crucial in this early stage. This seem to be quite consistent with the entrepreneurial
leadership discourse by Lidow (2014) and Gupta, MacMillan & Surie (2004).

Furthermore, most of the interviewees also talked about leading by example (role-modelling),
which resonates with authentic leadership (Luthans & Avolio, 2003), explaining that it is a
psychological process of self-awareness and self-regulated positive behaviour on the part of leaders
and followers. This can be difficult at times when things are not going well. Thus, self-regulated
positive behaviour could mean acting to some extent, as seen in the findings. In doing so, it may
actually violate/contradict the principle of transparency in authentic leadership, as proclaimed by
Jensen & Luthans (2006). Therefore, it seems that there are some inconsistencies in the way that
authentic leadership is conceptualized. That being said, as opposed to financial compensation,
psychological rewards are particularly moderated by leadership behaviour. Thus, regulation of
behaviour should be critical on the part of the leader.

Additionally, quite many entrepreneurial leaders practiced coaching leadership, to varying degrees,
trying to drive people towards self-actualization, as depicted in learning and development as well as
mentality and culture. This seems to echo the image and description of entrepreneurial leadership
that is depicted in the literature. Finally, a few interviewees also mentioned informal leadership
since authority and hierarchy are not present in this early prefunding stage. Essentially, to gain
informal authority, one must prove oneself and build respect. This is where past experience comes
into play. With sensible reason, several interviewees mentioned that their track records give them
additional informal authority.

Generally, there was not much difference between incubatees and advisors when looking at the
findings. As mentioned in methodological limitations, this is because there was no clear way to
divide the two participant groups, since they were not mutually exclusive. As an example, some of
the older incubatees had much more entrepreneurial success and work experience than some of the
younger advisors. Thus, to keep things simple, the participants were divided according to their
current classifications at MINC. As this could very likely have distorted the results, they were not
presented in a comparative manner. That being said, there was one quite interesting exception that
emerged from the data. It seems that the less experienced (younger) interviewees believed more in
influence and the more experienced (older) interviewees thought less of it. This correlation to age
and/or experience is made as an unofficial observation.

Admittedly, to the untrained eye, the findings of entrepreneurial leadership in early stage startups do
resemble those of leadership in general. However, it is the weight and degree of these that matter.
Despite the lack of comparative studies, in the absence of money and power, it is entirely plausible
that the application of these themes, such as promoting ownership and freedom as well as playing
on dreams and aspirations, are of much larger magnitude for new venture creation. That being said,
there was one exceptionally interesting finding: the mentality of entrepreneurial leaders and its

35
attractiveness as well as effectiveness. Upon some reflection, as organizations grow, the mindset of
leaders might have to change as well, also supported by Lidow (2014).

As seen in ownership and freedom as well as learning and development, one might argue that it all
comes down to value and leverage, that leaders and followers are two counterparts stacked against
each other like stones on a scale. While this might be one way to see their relationship for those
particular cases, and momentarily rejecting the idea that control is an illusion, it would seem that
there could be some ways to influence the desire to collaborate, as stated in dreams and aspirations,
rhetoric and communication, mentality and culture. The entrepreneurial leaders might not possess
much formal authority, but can certainly have strong informal power or invisible hold on people.
Henceforth, for the purpose of this discussion, these two types of strategic views shall be referred to
as transaction-based method and influence-based method. That, of course, does not mean all themes
or techniques are one or the other. When used practically, most are a combination of both. With a
sense of humour and imagination, one might even view this in the light of transactional leadership
and transformational leadership.

The influence-based method is a set of psychological and communicative techniques. On this note,
one might say that it is the potential to make things seem more appealing. Breaking it down, this
potential consists of the ability of leaders and the susceptibility of followers, as the leader-follower
relationship is a social/mutual construction (Alvesson & Sveningsson, 2012). Thus, the potential to
influence will vary widely, depending on the leaders and followers. Consequently, it is conceivable
that leaders with more social experience and followers with less social experience might form a
relationship with the greatest potential to influence. If this is translated to a correlation with age, it
would unfortunately not support the unofficial observation.

Furthermore, psychological biases definitely exist. Kahneman (2011) points out cognitive biases,
such as availability bias, which was seen to be used under rhetoric and communication when one of
the interviewees kept reminding people of certain things or bringing it to their attention. That being
said, one might point out the entrepreneurs themselves are operating under an overconfidence bias
or optimism bias (Kahneman, 2011). Ultimately, this is overwhelming support for the existence of
the influence-based method.

However, if people try to persuade others using this method, will they be perceived as dishonest or
manipulative? Can they be used in a subtle and undetectable way? But do their eyes match their
words? To what extent can these be used effectively? This is where the disagreement lies. It is
perhaps here authentic leadership argues that human beings are highly intelligent and will pick up
any inconsistencies. When information is suppressed or spun, it is also known as cherry-picking;
Goffee & Jones (2013) put it simply: people will not follow a leader whom they feel is unauthentic.
Therefore, as discussed in mentality and culture, it is important to believe in it oneself first before
one can convince others. This also makes it easier to be open, honest, and transparent, which are
essential for trust creation as mentioned under trust and morality.

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It seems that the themes can be naturally arranged in the following way: trust and morality are the
foundation for collaboration; vision and values are the methods for screening; dream, aspirations,
rhetoric, and communication are the influence-based techniques; ownership, freedom, learning, and
development are the transaction-based techniques; mentality and culture are the tools for tying it all
together. Perhaps this could serve as a model or approach for aspiring entrepreneurial leaders.

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6. Conclusion

6.1 Research Findings

Startups are the seeds that could one day change the world. This is how Google started. This is how
Apple started. This is how Microsoft started. Maybe one of these startups at MINC will some day
join them. But the odds of succeeding are low. In this pursuit, leadership is an undeniably crucial
element. It is the leadership that will build the core vision and assemble the necessary resources
towards achieving that vision. In doing so, enlisting and retaining human resources is imperative.
But in the very beginning, when you are not able to pay them much or boss them around, what can
entrepreneurial leaders do? That is the question. The answer to this might shed some light on how
entrepreneurial leaders may improve their odds using a structured holistic approach to mobilizing
and maintaining their critically important human resources, without the use of financial means or
formal authority. With that aim in mind, 20 entrepreneurial leaders were interviewed from the
startup incubator MINC in Malmö, Sweden.

The findings indicate that there are plenty of ways for entrepreneurial leaders to enlist and retain
employees (labour) in the early prefunding stage, when money and power are nearly non-existent.
Such methods rely heavily on psychological tools and techniques. Firstly, trust and morality seem
to be preconditions for building any kind of followership and collaboration. Secondly, by selecting
people who match them in vision and values, entrepreneurial leaders ensure high self-motivation.
Thirdly, entrepreneurial leaders appeal to higher needs, such as self-esteem and self-actualization,
by playing on their dreams and aspirations, allowing them ownership and freedom, coaching them
to learn and develop. Fourthly, they use adept rhetoric and communication to when interacting with
followers. Finally, they tie it all together by nurturing a powerful mentality and culture based on
three mantras: 1) don’t limit yourself in your thinking, anything is possible. 2) don’t be afraid to try,
mistakes are part of learning. 3) never give up, it’s all about your mindset. These tools/techniques
are not discrete instruments, but rather function together as an ecosystem, reinforcing each other
and accumulating into a synergistic magnetic force.

While such tools and techniques do exist, the success of these might depend on the execution and
not merely their awareness. In other words, theoretical understanding does not mean actual result.
The two participant groups (incubatees and advisors) were very close in their answers, which does
not contradict the hands-on approach being the key. Therefore, it might take some practice to see
the results unfold in real life. What this research does for the pragmatic reader is to provide a clear
structured approach to help accelerate the learning of aspiring entrepreneurs.

It was difficult to gauge at what exact level these tools and techniques were being used practically
by the entrepreneurial leaders at MINC since findings are only based on interviews with leaders.

38
Thus, the exact impact of these tools is not known. Perhaps such techniques can only work as useful
nudges that may be limited to the short run, where both counterparts need to be rewarded on a
reasonable or acceptable basis for any kind of long run collaboration. In other words, people might
be persuaded to do some work in the beginning, but eventually the opportunity cost will catch up.

6.2 Practical Implications

By producing a rich holistic combined picture of what (currently incubated and already successful)
entrepreneurial leaders do to enlist and retain employees (labour), it gives aspiring entrepreneurs an
insight into how to better mobilize/maintain their human resources to meet the challenges ahead.
That being said, the picture is produced in Sweden and heavily skewed in gender distribution.

While the findings/themes have been arranged into a roadmap/toolbox for aspiring entrepreneurs,
this powerful ecosystem is a difficult concept to grasp and probably cannot be learned by reading.
One needs to be immersed in it to fully appreciate the degree of this magnetic hold. It takes some
practice; that said, mistakes are part of learning. Even though it lacks generalizability, this study
gives an insight into the minds of entrepreneurial leaders in the early prefunding stage, facing the
paradoxical enigma of having to enlist and retain people while being penniless and powerless.
Furthermore, as discussed early on, self-awareness and self-regulation are important to develop for
creating positive social interaction. There are two useful ways to develop these: asking for feedback
and sensing the reaction.

The study is based on the intersection of three topics: leadership, startups, and human resources.
This produces three most relevant central research/literature areas: entrepreneurial leadership,
employee satisfaction in startups, and human resources in startups. Consequently, this research may
also add some value to each of these three areas.

6.3 Future Research

Given the weakness of only having the perspective of leaders, it would be interesting to hear what
the followers have to say about this topic. There is very little research on followership compared to
leadership, so it might be useful to get a different perspective. Another potentially valuable study
could be to examine how the use of these psychological tools and techniques change as startups
transition through different stages. This implies that financial compensation and formal authority
will offset the psychological practices.

It seems that entrepreneurial leaders may draw on two kinds of methods: transaction-based method
vs. influence-based method. The former appears to presume that any exchange is objective and is

39
only seen in one way (fixed). The latter seems to believe that any exchange is subjective and can be
seen in multiple ways (rotatable). Consequently, the paradigm from which one views collaboration
is also important to consider. Furthermore, it is entirely conceivable that the combination of these is
most effective. Though these are interesting findings in themselves, perhaps future research could
compare the impact of these two types of methods. Is it more effective to offer people reasonable
transaction or beautiful rhetoric?

The ways to bring people on board in the beginning of an entrepreneurial venture is a complicated
discussion. If reality and truth can be constructed in a number of ways, depending on what angle is
used, then persuasion is of course possible. While outside the scope of this thesis, it is important to
note that the ability to influence also meets many moral questions and decisions. Can one get away
with it? Is it ethical? What if the intentions are good? But who decides what is good? Should one
decide that for others? At the risk of sounding cliché: with great power, comes great responsibility.

40
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Appendix

Interview Guide

Introduction:

Present Myself
Research Purpose/Theme
Interview Confidentiality/Anonymity

I know this is a difficult and sensitive topic and we’ve just met, but try to let go of your reservations.
I’m a fellow entrepreneur; you’re among friends. You will not be judged. Try to talk openly today.
There is an expression in Chinese, roughly translated as: The one who can capture your heart is the
one whom you will follow to the end of the world.

Demographic Information:

Company:
Name:
Gender:
Age:
Position:
Location:
Nationality:

Experience Overview (very briefly):

What does your company do?

What about possible time lag?
How many years of entrepreneurship?
How many startups have you done?
What startup stage? How much funding?

General Probes:

What? Why? How? (When? Where?)

What happened? Tell me your stories and experiences. Can you give some examples?

Observational Comments:

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Research Themes/Topics:

ENVIRONMENT PERSPECTIVE (Prefunding/Early Stage Startup)

Q1: What are the characteristics/conditions of an early stage startup? (in terms of money/authority?)
Q2: How does this affect things? How do you (and people around you) interact in this situation?

FOLLOWERS PERSPECTIVE

Q3: Who are the people you need to get to do things? How do you get/keep these people on board?
Q4: Who are the (most important) main stakeholders? Do you handle main stakeholders differently?

LEADERS PERSPECTIVE

Main Interview Questions

A1: Why do you think people follow you?

A2: What do you do to motivate people?

Q5: What do you want to achieve regarding the people aspect in this context? Why? How?
Q6: What do you think people/followers are looking for in terms of leadership in this context?

Q7: What is your role as an ESL? What do you do to lead people? What is essential in this context?
Q8: During the early stages of starting up, while money and authority are limited, what do you do?
Q9: Apart from money/authority, what do you do to lead/motivate/influence people around you?

Q10: What kinds of things do you say to produce an intentional effect on others? (words)
Q11: What kinds of things do you do to produce an intentional effect on others? (actions)

Q12: What have been the most difficult people related issues/challenges? What did you do?
Q13: Think of a situation where you handled a people issue without using money/authority?
Q14: Are there times when you would opt for using these techniques over money/authority?

Q15: What do you do when people don’t do as you would like?

Q16: What do you do when people do as you would like?

Q17: What motivations/needs/wants do you target? (Can you give me some specific examples?)
Q18: What techniques/tools/tactics do you use? (Can you give me some specific examples?)

Q19: Do you have a mental process or procedure? Is it based on situation and improvisation?
Q20: Think of a time when someone produced an intentional effect on you? How did you feel?
Q21: Looking back to the early phase now, what would you have done differently? How? Why?

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Situation-Action-Assessment

Q22: What was the situation?

Q23: What did you do? Why?
Q24: How did it help? Why?
Q25: How do you know it worked? (Feedback? Observation?)

Examples-Suggestions-Keywords

Q26: What do you say/do (specific action)?

(examples: praise, discipline, encourage/discourage, generosity, humbleness, morality, etc.)

Q27: What do you trigger (specific target)?

(examples: ego, pride, shame, guilt, trust, respect, attraction, fear, uncertainty, envy, etc.)

Q28: What do you achieve (specific effect)?

(examples: commitment, receptiveness, ownership, confidence, courage, competition, etc.)

(specific examples: nodding when listening, gesturing when speaking, painting a mental picture,
leading people's thoughts via questions, incepting ideas to give ownership, turning negative into
positive (argument into passion), boosting ego to get people to stay and turning mistakes/learning
into something beautiful, coaching/developing people which provides value and creates loyalty,
making people feel special, complementing other people to you, challenging people by turning a
task into a difficult prestigious assignment, fostering a dream-big-and-kick-ass mentality, pause to
create a meaningful silence.)

(Technique Categorization): what you say (psychological) and how you say (communicative).

(Technique Categorization): dark side of things (negative) and light side of things (positive).

Transferability and Generalizability

Q29: What are the opportunities/possibilities of using these techniques?

Q30: What are the shortcomings/limitations of using these techniques?
Q31: Do the techniques always work as intended? What do you think is the success rate?
Q32: Do your tools/techniques work on everyone or are they adapted to different people?
Aim: cultural differences (direct vs. indirect), ethical differences (effort vs. result), etc.
Q33: Do your tools/techniques differ depending on if it is one on one vs. group settings?
Q34: Do you try to create a certain culture/atmosphere? How do you go about doing this?

Awareness-Importance-Perception

Q35: How aware are you in using these techniques? How often do you use these techniques?
Q36: How important are the use of such techniques for the survival/success of a startup?
Q37: How do you feel about using these tools? Are they effective? Are they manipulative?

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Context and Comparisons

Q38: Comparatively, would you say these techniques are more or less significant in later stages and
mature firms (once monetary rewards and formal authority are more substantial)? How and Why?

Q39: Leaders use such techniques: what do you do that is specific to ESL in early stage startups?
Q40: Leaders use such techniques: what does the version look like for ESL in early stage startups?

49