This will be the first of a series of posts on what I consider the most important factors for business success; the human element. I will be arguing that having the right people around you is imperative in making your idea a success. Investors invest in the founders as much as the idea itself. You may have a great idea, but if they do not have confidence in your ability to execute it why will they invest in you? This may seem obvious but scenarios can easily evolve taking you in unwanted directions. Today we will start with the co-founder.
Let us set the scene – you have an idea, you’ve researched it and decided you will pursue it further. You leave your job (if applicable) and start working on turning your idea into a business. At this point you start to consider if you continue alone or find and bring in a co-founder? This opens up a whole load of questions and what ifs to deal with.
Co-founding a startup
Let’s start with the scenario of having developed an idea in conjunction with others. I hope it’s quite obvious that it is best not to try screw each other over. You should (and need) contracts/agreements in place as soon as it becomes apparent you need them, but knowing you can trust a person is a big thing. And you really should be evaluating this with each other at the soonest opportunity; understanding each other’s personality traits, temperament etc. That will be the key to success. Where people trip themselves up is in most cases down to greed. Being honest in how much you are contributing and then splitting equity accordingly is the most likely path to success. Disgruntlement usually arises due to a sense of unfairness/injustice in the relationship.
In many ways co-founding a company together is a lot tougher than adding a co-founder; I acknowledge that in many circumstances you just have to ‘live’ with whoever you started with – things can just happen from an early stage and you realise too late you’re not the most compatible pairing. But openness and honesty will help to bridge that gap.
Bringing onboard a co-founder
However if you’ve developed an idea yourself you have a lot of control on what to do next; to go it alone or bring in a co-founder. First up people get taken back by the title ‘co-founder’ and then get defensive on the notion of ‘giving up’ parts of their ‘company’ to others. The reality is you cannot do it yourself (we’ll discuss later what to look for in a co-founder), so best to accept that point as soon as possible.
But how early should you bring in a co-founder? My own opinion is to do it as soon as you believe your idea is worth pursuing. One of the biggest advantages of a co-founder is you have someone you can bounce ideas off and get a critical opinion from. The ones who go it alone for too long struggle immensely to tackle basic problems that can be solved by having a soundboard. The flip side of the coin is a co-founder brings an unnecessary distraction to continuing development of an idea. I find this a weak argument personally. The only industries I can see where going it alone is justifiable is in the creative arts, photography and journalism. And that is only if you see yourself as a freelancer with no intention to expand (expansion will naturally mean a loss of creative control).
Back on topic, I hope I’ve argued the case well enough to justify that you need a co-founder. So what do you need to look for in a co-founder? The skill set the person adds needs to be something that you have lacking (be honest about this….). So if you are confident in your technical abilities and want to maintain full control of this, maybe someone who has business planning/development experience. Relenting control is a hard thing (we can all be control freaks) but as I said earlier, you cannot do everything yourself.
Personality as in the previous case is of course applicable. It’s also an excellent opportunity to evaluate yourself and be a bit more self aware of your strength and weaknesses. You will probably be a bit more acutely aware of what you want in a co-founder as a result of it. I’ll add this point to my topic list – could be an interesting discussion for another time.
Let’s play the scenario out thus far. You need a co-founder, found someone who has the desired skill set and he/she has a personality fit you like. We now need to convince this person to come work on our idea. The likelihood is this person has other priorities/commitments. You obviously need to sell your idea, but expecting them to hop onboard without a good enough incentive is unrealistic. And so we get to equity talks. What is a suitable percentage? I think frank negotiations are required and I am uncomfortable to state explicit numbers here as each case is unique. You may even need to give up more than you want if you think this person will add tremendous value. Tough to do but think of the greater aims of building a company. I’d end with a note of caution. If you feel someone is being too greedy – and by this I mean not justifying their equity demands, then I’d walk away. We could hit potential trust issues later on…
I hope this post has been useful. There are a lot of points to absorb and ponder. Let me know what you think in the comments!