Co-founders, how many and how do you choose them?
It is said that success has many fathers. Similarly, innovation often requires input from more than one individual. A founder has a vision – to bring something new to the market; but this vision always requires support. So picking a co-founder is the most important decision when starting a company. More important than your product, market size or the investors. As one investor once told me about his criteria to judge start-ups, Team, Team, Team, Idea!
The ideal founding team is two (or more) complementary individuals, where one can build and the other can sell. Even better is when the individuals have a history of working together, are similar in age and financial standing.
Two is the perfect number – think Hewlett and Packard, Jobs and Wozniak, Allen and Gates, Omidyar and Skoll and there are others. One (Facebook) or three founder (Twitter) companies can work but do come with their own sets of challenges.
In three of more founder companies, there are issues of politics, gang-up votes, board seat issues. A 4-5 founder scenario in a company brings its own challenges. A start-up needs to be dynamic, agile and rational. With more than two founders, this can be more difficult. Two is simpler, because unanimity is possible, leading to quick implementation of decisions, and perhaps most importantly, founder stakes are high post financing which keeps them motivated.
So how do you choose a co-founder?
- (Preferably) someone you have worked with in the past – knowing the other persons reaction through the highs and lows. It’s the lows which matter to see the durability of the relationship
- I (intelligence) E (energy) I (integrity) – Building a start-up is a tough job and you will need the IEI between your co-founder and you to build the right company
- A good level of technical understanding – Ensure your co-founder has a strong grasp of technology. Both founders should have a good level of understanding of how products are built, technical intricacies of the product, and the architecture of what’s being built. This level of understanding really helps when you are out, trying to develop Product / Market fit and making changes to your proposition to perfect it based on user + business experience.
- A classic set up is one builder, one seller – One founder needs to focus on building a great product, going through numerous iterations based on customer feedback while keeping the vision of the company in mind. The other needs to focus on selling; a good seller can sell to customers, investors, partners and one’s own employees)!
- A great talent scout – The founders set a company’s DNA, and the culture is an extension of the founders’ personalities. It’s the initial DNA of the first 10-20 employees that will define the culture of a company forever. A good co-founder will attract the best talent and help you build the right culture. Building a great team around you is crucial to build the vision. Hiring (the best) people takes a lot of time, esp. the initial recruiting and scouting. Often founders spend an enormous amount of time in the early days of the company identifying and hiring the right people to join the company. One of my favourite examples is how Tony Hsieh offered $3k to employees who wanted to leave – an efficient filter
- Walk the walk with Investors: Raising capital from investors requires multiple pitch meetings (as few as just two before Term Sheet with Episode 1), email exchanges, negotiation and all the paperwork, which follows. A (ideal) co-founder with experience or knowledge in this can be very helpful from the first meeting to the signing of the shareholders agreements.
- Breakup – If you realise that it isn’t working out with your co-founder, cut the cord early. Recover the founder equity, run the company and find someone better to fill their shoes. Make sure you have founder vesting from the get go to keep breakups from destroying the company.
I am recently married, and a lot of the points are applicable to a marriage as it is to finding the right business partner. It’s a marriage of a different sort, you will certainly spend more time with your co-founder than your wife. So, be wise and choose carefully, because with the right co-founder, building a company is a whole lot easier. Like a company goes from strength to strength until IPO, I look forward to connecting again on this subject when I reach the next level in my marriage…