Investors and founders alike recognise that a great idea is a starting point. Executing it brilliantly is what attracts consumer love, channel love, and yes, investor love, too.
Why get a co-founder?
It’s not the skills you’re filling for or completing a VC investable business checklist. You’re increasing your odds of success with a solid foundation.
- Entrepreneurship is a lonely journey, an emotional rollercoaster with its ups and many downs. A co-founder is someone who will see the journey together with you, support you, grow with you. Honestly, in our opinion, this is the single most reason to get one – share your joys and your tough days with someone, while you’re building something for the world!
- Running a business involves multiple building blocks and many decisions daily. You can’t handle everything on your own! At different stages of the business, you will be required to focus on competing priorities. It’s always good to have the other person focus on the rest, for a smooth running of business. You’re only increasing your productivity by getting yourself a partner!
- Founders are always in need of a thought partner – someone who can challenge you, co-create your idea, help convert that idea into real execution, think alongside you and optimize for the business and the organization.
| At Fireside, we have invested in both, solo founders, as well as co-founding teams as large as 4. What we’ve seen, though, is that having co-founder teams increases the odds of a startup’s success. |
When should you get a co-founder?
Sometimes it’s natural for friends or colleagues to come up with an idea and then go on to become co-founders. But there are other times, where you have a great idea, have identified your space and purpose, and are at the point of trying to take this idea to its consumers.
If you have a deep understanding of the area that might be the business’ alpha or moat, then go right ahead and start off. You can always bring someone on later. If you’re not the expert or the differentiator for this idea to succeed, however, then it would be advisable to spend time finding a co-founder in one of those areas to work alongside you.
If you choose to go solo for the time being, then hire capable and experienced L1 leaders to fill the gaps. You can always elevate a CXO to co-founder later if that’s merited. And be on the lookout for a co-founder always.
Simply naming founding team members with “key skills”, or a mentor with significant equity, a “co-founder” is not advisable for the longer term.
|
Who makes for a good co-founder? We’ve identified a few common traits that we believe make a co-founder. A co-founder is someone who:
|
What should you look for?
- Experience. This is the quality you’ll hear most often. Complementary experience is always useful, but don’t fixate on this alone. Are they willing to learn/ adapt? Can they acquire new skills and grow with you and the company? Eventually as co-founders you will have to play different roles through the various stages of evolution of the company.
- Complementary personalities. This is probably more important than experience, in our opinion. Founders don’t focus on this enough. If you think daily execution and numbers, get a founder who can think big picture and long term. If your first preference is to stay away from the public eye, get someone who enjoys being out there, representing your company.
- Shared vision. At the highest level, do they have the same goals and value system as you? You can assess that by deeply understanding why they do what they do, what does success look like for them, what is their preferred way of operating, how will they want to run this company? Do you both see the same type of organisation and business in 10 years?
- Leadership. A smart L1 employee or a CXO can help you fill an experience gap. When it comes to a co-founder, look for leadership. Can they influence the business direction, guide and inspire people to work on a shared goal, co-create the vision with you?
Remember, if you choose to bring co-founders but continue to make all the decisions for the business, and they only execute on your vision, then you have not brought co-founders, but senior employees.
How do you calculate equity?
If you get the ‘why’ and ‘what’ mentioned above, the equity should fall in place. However, we’ve found that founders often struggle with this one – always wondering if it’s too less or too much!
Equity shouldn’t be a negotiation. Your aim is to maximise motivation, to increase the value of the company. Think about today, as well as tomorrow! If you don’t want them for the long term, then why are you calling them a co-founder?
Remember to be generous. Your co-founder is essential for your product to reach the customer and then be loved by them. Otherwise, they’d be an employee, right?
If not equal equity, 10-15% stake is a good number to start off with, and ideally the vesting schedule between all founders should be the same so that the incentives are aligned, and everyone feels like owners.
|
We’ve heard of several reasons for inequal or lower equity, ranging from “They negotiated lower” to “It’s my idea, s/he just has to build now” to “They weren’t there in the initial phase of heavy lifting” to “They are earning a salary and I’m not”. Our rule of thumb is to ask yourself what remains to be done. Has your product found PMF? Are you still testing out your hypothesis? Are they key to execution now, until what you want to build? |
Your co-founder absolutely must be a key contributor to your success. And once you’re clear about that, then you can join forces to take on all the other challenges – winning over consumers, sharing your vision with investors, and selecting the best strategic partners for your success. For all of these, two heads are better than one.
Where will you find your co-founder?
Look for people in your network, in college or previous workplaces – people you’ve spent some time with or have known in some capacity. Attend meet ups and events in the area you’re building in, you will find people with common interest and skills here. Speak to folks you might have some things in common with – just reach out and share your idea. It’s always more fun to build with folks you’ve known for a while.
VCs will introduce you to their networks or engage with search firms to find people for you. However, you’re likelier to click with someone from your own network better.
How do you decide on your co-founder?
Well, if there can be founder matchmaking, then the next step is – obviously – founder dating!
- Spend time together getting to know each other better, understand your working style, and personal and professional goals.
- People often discuss the business plan, but not their shared purpose. Discuss your vision for the company, what do you want to create, what will give you joy, the impact you want to leave.
- Get the spouses to meet – you’re going to be spending a lot of time together, it’s always great for families to meet and get comfortable too. Basically, spend some time outside of business too.
To read about nurturing founding team relationships, aligning on founder roles, and deciding on the CEO, please click here.
Join the discussion