Why you need a co-founder
If you’re trying to get a high growth startup off the ground, you’ve probably realized that growing a startup to the point of being able to fundraise requires far too much work for one person to handle by their lonesome. It’s not uncommon for a sole founder to feel overwhelmed or easily steered off path, which is why having a co-founder (read: partner in crime) can help make your entrepreneurial journey feel more manageable.
It’s improbable (yes, improbable but not impossible) that as a solo founder, you’ve cultivated all the requisite skills to successfully build a business that will end with that elusive billion dollar exit. A co-founder can bring a different type of experience and expertise to the table, an alternate approach to problem solving, and the list goes on – all in an effort to further build upon the strategic direction of your venture. Furthermore, and perhaps most enticing to those reading this blog, data shows that startups with co-founders who have had successful exits in the past tend to experience greater success in terms of fundraising.
How the qualities you need in a co-founder differ from those of an early employee
The differences between co-founders and early employees are many. Consider the following questions as you determine whether an individual would add the appropriate value as a co-founder as opposed to an early hire: are they helping you set the strategic vision and mission of the company? Are they so essential that the startup cannot function to exist without them? Are they in this for the long haul, willing to risk it all because of their soul shattering belief in the company? Do they have ample skin in the game, or are they joining your startup just for the salary?
When selecting co-founders, you should make sure that you choose people whom you respect as much for their strategic intelligence as for their professional expertise and ability to execute. Not all co-founders need to be business oriented, but as they are directly involved in determining the vision of the company, they should understand your startup’s true north.
Co-founders should also be the type of people that you wouldn’t mind working under: people who will be effective and inspirational managers as your teams grow. If you don’t see leadership qualities and potential in your co-founder, it’s unlikely that your future hires will either.
One theory in choosing your founding team is to look for “a hacker, a hustler, and a hipster.” The hacker is responsible for creating the actual product; they will be absolute data monsters and logistics oriented with laser sharp focus. The hustler, on the other hand, is key to selling the masses on the greater vision as well as the product itself. An exhaustive rolodex and the charm to sell ice to an Eskimo certainly won’t hurt their cause. And hipsters? Where do they fall into the equation? The hipster is the purveyor of all things in vogue. Their responsibility is to make the product marketable, through creative design and that ever elusive “cool” factor. It’s possible that one person may possess more than one of these character traits—Bill Gates, who managed both the technology and business side of Microsoft in its earliest days, is a classic example.
The hacker, hustler and hipster roles are not to be confused with being an exhaustive list of all the character traits you will need to run your startup – rather, consider this one model among many that illustrates the diversity of mindsets that it takes to achieve success. Because every situation is unique, knowing what qualities will be most important in a co-founding team starts with a clear understanding of yourself as well as your business—what value do you bring to the co-founding team and what does your startup need that you aren’t able to bring to the table?
In early-stage startups, both co-founders and employees are usually paid less than market rate, but compensation between the two differs drastically. Founders typically don’t take salaries until funding or revenue has been established. Rather, co-founders should work to increase the value of their equity stake in the startup, understanding that they have the potential to earn much more by scaling the business and taking a large chunk of the proceeds from an exit than they can by taking a salary from day one. Significant equity can help a co-founder remain focused on the long term viability and success of their startup.
Employees may receive equity in place of lower-than-market salaries, but even early employees are rarely given stock options corresponding to more than 1% of fully diluted shares. Both co-founder equity and employee options should be vested, meaning that the co-founder or employee gradually earns the right to retain the equity or to exercise options.
How to find co-founders
If you are looking for a co-founder, why not start with your existing network? Many founders find their co-founders among former colleagues, which means that they already understand their quality of work as well as working style. Other co-founders have met through industry events or other common interests related to the startup. If you know someone from your professional experience who has impressed you in the past, you might want to reach out to them to see if they would be interested in joining you in your new venture.
People in your existing network may also be able to introduce you to like-minded individuals that they think have the potential to be solid co-founders. Referrals tend to shorten the screening process and the likelihood of finding quality candidates within this pool is higher.
But don’t hesitate to think beyond your network. If you’re looking for potential co-founders with startup experience, attend entrepreneurship conferences or participate in meetups to engage with others who are entrepreneurially minded. Even if you don’t end up meeting your co-founder directly at these events, the alumni/staff/researchers in attendance may know aspiring entrepreneurs who could be a good fit for your founding team. If you don’t ask them, how are you to know?
Not to mention, you will be searching for co-founders in many of the same places that you may be looking for investors or employees, so it can pay to keep an open mind. Talking about the problem that you aspire to solve for the world could lead you to make valuable connections that you hadn’t originally anticipated.
How to evaluate if a potential co-founder is the right fit
Once you’ve found a potential co-founder, there are a number of ways that you can determine if they will be a good fit.
Do they have a skill set that is complementary to yours? They should have, or be able to quickly develop, the skills necessary to help you scale the business. Furthermore, you should feel confident that your potential co-founder is willing and able to continue to provide this value through the test of time.
Additionally, you and your potential co-founder need to be able to collaborate effectively. This doesn’t mean that you need to be close friends. Rather, you might focus on sussing out if you have good chemistry and a similar set of workplace values. Date before you commit to marriage —try a provisional working period. A provisional working period gives both parties the opportunity to determine if this could be the right fit.
Focusing on what you need to get your startup off the ground and setting a goal that will be mission critical to early stages of success can help you determine if you and a potential co-founder see eye-to-eye strategically during exploratory conversations. This person should agree with your vision or metrics or be able to convince you how and why their strategy is better. Consider sitting down with your potential co-founder to define a few early milestones and key metrics before making a commitment.
Is your potential co-founder cut out for entrepreneurship? Being an entrepreneur means having a willingness to accept risk with no guarantee of success and everything on the line. It’s critical to the success of your startup that your co-founding team be flexible and nimble, willing to pivot, and able to hold focus even in the most chaotic of situations. It can be a major advantage if your co-founding team has experience with startups, but if they don’t, they should at least be prepared for the entrepreneur lifestyle (read: not glamorous)—long hours, a roller coaster of highs and lows, and daily adversities that will require sticktoitiveness and tenacity in order to persevere.
Finally, you and your co-founder should set and agree upon expectations from one another in terms of working hours and compensation: specifically, the equity split amongst the co-founding team, vesting schedules, how many hours each founder is expected to grind, as well as intellectual property ownership. If you’ve yet to incorporate, consider establishing these expectations in a founder accord. Creating a founder accord will force you to have the necessary (and often uncomfortable) conversations, help you avoid confusion, and give you a basis for establishing these things legally after you’ve incorporated. If you have already incorporated your startup, it’s important to consider the same points, but you will solidify any expectations through legal documents and processes after you find your co-founder.
Finding the right co-founder is mission critical to the success of your startup. Ultimately, when you’re looking for a co-founder, it is most important that you work well together and that you both are equally committed to the startup’s mission, vision and long-term success. Once you’ve walked through all of the above considerations, you’ll be ready to bring on a co-founder, take the first steps together on your entrepreneurial journey, and let nothing stand in the way of your newly shared vision.