1.2 – Who Might Be Involved in Your Venture
Building a company is hard. It requires long hours and diverse skill sets. Having a co- founder is a common way to share responsibilities, to build complementary skill sets, and to smooth out the emotional ups and downs.
This module will cover the following topics:
- Having a Co-Founder
- Understanding Your Entrepreneurial Function
- Choosing Your Board of Directors, Advisors & Mentors
By the end of this module, you will be able to:
- Assess the pros and cons of having a co-founder
- Examine the three core skill sets involved with developing a startup
- Identify the roles and responsibilities of various actors in a venture
Section A: Having a Co-Founder
Any friendship or relationship has its pluses and minuses; having a co-founder or business partner is no different.
Consider the following benefits and challenges to having a co-founder.
Benefits
Contribution Of Resources
- Time and energy: Each new partner offers labour, energy and ideas to speed up the venture. Multiple co-founders can also conquer the seemingly endless list of tasks.
- Money or startup capital: Potential co-founders can bring startup capital to cover early expenses.
- Network: Adding co-founders expands your company’s network of potential customers, investors, and employees.
Complementary Skill Sets
The next section covers the variety of skills needed to launch a new venture. For example, engineering, sales, and strategy are the most common skills needed in a venture’s earliest days. It’s rare for one person, however talented and experienced they may be, to have all the necessary skills.
Diverse Perspectives And Opinions
This TechCrunch article highlights the clear benefits of a diverse founding team:
“Diverse teams perform better. First Round Capital found that, over 10 years, teams with at least one female co-founder performed 63 percent better than male-only teams. Racially diverse teams also perform 35 percent better than their industry peers. Yet only 8 percent of venture capital money is going to women-led companies, and 1 percent is going to companies with a black founder. While black and Latina women in particular are behind 80 percent of new female-led companies, they capture a meager .2 percent of VC funding.”
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Sharing Responsibilities, Decision Making & Stress
As discussed in the last module – The Start Up Roller Coaster – getting a company off of the ground can be a lonely, difficult and stressful process. Many entrepreneurs succeed on their own, but having a partner can make the process a lot easier.
A partner can help with decision-making. You may think your idea or strategy is the greatest ever, but smart entrepreneurs know the benefit of a second set of eyes, ears and thoughts. Having a partner helps vet ideas and strategies to ensure the approach is well thought out and sound.
Make no mistake, however: deciding to work with a partner or co-founder differs from hiring a senior employee. With a senior employee you give direction and monitor performance; with a partner you share responsibilities, decision-making, successes and, yes, stress. Senior employees, no matter how dedicated or skilled, don’t share the full emotional stress of running a business.
Investors Often Favour Teams
For the reasons mentioned above,professional investors often favor investing in teams rather than solo-founders. This isn’t a law; solo-founders can successfully raise outside capital, but often with more difficulty.
Review this TechCrunch article by Haje Jan Kamps which provides two viewpoints, breaking down the data to show that solo-founders have been more successful in raising capital and selling their ventures than larger founding teams, while recommending having a co-founder.
Hanna Haponenko, Sarah Butts, and Martin Magill share their opinions on the many advantages of having a co-founder.
Challenges
Differences In Values & Communication Styles
Partnerships, like any relationship, can expose differences in opinions, values, motivations, work styles, and communication styles. When looking for a partner on a new venture these differences need to be discussed as early as possible.
Review this article from Crunchbase by Sami Rusani and consider the tricks it outlines for assessing a new partner.
Commitment To The Venture
Another common source of tension: differences in each partner’s commitment. This difference in commitment can arise from waning interest in the project, pressing family commitments, or differences in motivation and values.
Co-founders can make your business succeed. When choosing a co-founder, however, you need to choose right the first time, as Paul Graham shares:
“Co-founders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your co-founders is hard.”
Having a co-founder can have its disadvantages as well. Hanna Haponenko, Sarah Butts, and Boyd Reid share their insights on some of the disadvantages of having a co-founder.
How to Know if it Will Work With Your Co-Founder
In a lot of ways, having a co-founder is like being married. You make a multi-year commitment to a partnership to share in the responsibility, stress, and ups and downs. You will spend a lot of waking hours with your partner and you will need to get along for the sake of the company. Here are a few areas to explore with a potential partner before becoming committed to each other.
- What are their motivations for starting a company? Are they intrinsically motivated to solve a problem, or are they extrinsically motivated by money?
- What is their vision for the venture? Do they want to create a small company that sustains their lifestyle, or do they want to build a billion dollar company?
- How do they like to work and communicate? A company’s culture is set from the top, built on the values held by the founding team. It’s important for partners to align their values in the earliest days of the company.
- When determining what the company values in order to determine how it gets work done, it’s best to prioritize some values over others. For example, does the company value speed over accuracy?
Airport Rule
Picture yourself stranded in an airport, seated next to your partner or co-founder for 24 hours straight. How might that day play out? Could you get along for long periods of time, in close contact, during stressful times?
Finding a Co-Founder
Analogous to marriage, there is no easy solution or formula for finding the right partner. Co-founding often happens in a very organic way, as two or more people come together around a common goal or set of values. Also like marriage, it is best to move slowly through this process; maybe you need to “date” first before you jump into the venture?
There is no perfect solution for finding a partner, but there are services to assist in corporate matchmaking like the CoFoundersLab.
Optional Reading
Farley, Shannon “Why we need diverse founder and funding teams and how to find them”
Hellstern, Meghan, and Kim de Laat “Growing Their Own Way: High-growth women entrepreneurs in Canada
Section B: Understanding Your Entrepreneurial Function – Hipster, Hacker, and Hustler
When starting a new venture it is important to consider the three core functions of a successful business: determining the business strategy, building the product or service, and selling the product or service. These three core functions often fall into these early job titles:
- Set the vision of the company – Chief Executive Officer (CEO)
- Build the product or service – Chief Technology Officer (CTO)
- Sell the product or service – Chief Revenue Officer (CRO) or VP Sales
In modern startup culture these three functions have been coined the Hipster (design), Hacker (engineering), and Hustler (sales and strategy).
Review this Forbes article written by Andy Ellwood which dives deeper into the Hipster, Hacker, and a Hustler concept.
In reality, the three job functions can be split across two people. For example:
- Product or service focused CEO: Job 1 and 2 can be done by the same person – think Mark Zuckerberg
- Sales focused CEO: Job 1 and 3 done by the same person – think Steve Jobs
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Section C: Choosing Your Board of Directors, Advisors, and Mentors
It takes a village to build a startup, and advisors form a big part of a startup’s development. This might include a Board of Directors or Board of Advisors.
Board of Directors
When you incorporate a company you need to define your corporate legal structure: namely your Shareholders, Board of Directors, and Management. A board of directors has a fiduciary responsibility to act on behalf of the shareholders in governing the overall enterprise, and in overseeing the management team. The CEO reports to the board of directors during regular board meetings.
When a startup is incorporated, the shareholders, board members and founding team may be one and the same. It’s often much later in the startup’s life, perhaps at the stage of fundraising from external investors (e.g. Series A financing), that the board of directors becomes formalized with regular meetings and structure. At this later stage, investors and seasoned independent advisors may be added as board members.
Board of Advisors
A board of advisors serves as an informal group of advisors and industry experts that provides guidance and advice to the management team; such advisors can also open doors to key industry leaders. Often these advisors offer years of experience in a specific field, or can fill skill sets missing in the founding management team. A board of advisors is, however, not part of the corporation’s legal structure.
What to Look For in Advisors
When asked to provide advice, many mentors, advisors, and coaches often tend to provide their opinions on which market to tackle, or what product or service-features to build. Advisory opinions, however, can cause a few problems:
- Unless the advisor has built this exact type of business before, they will never know your business better than you do.
- Advice from multiple advisors can conflict, leaving the founder confused on which advice to follow.
- Opinions disguised as advice are still opinions, not facts. No matter the opinion expressed, it represents only one data point in a spectrum of perspectives.
Surrounding yourself with the right people is crucial to the success of your business. In this video Boyd Reid, Nick Baksh, and Michele Young-Crook share what characteristics they look for in mentors, investors and co-founders.
The best advisors respect the founder’s depth of knowledge of their own business, and provide the founder with disciplined thinking and sound logic; they often prove useful in challenging and validating the founder’s assumptions when helping to make decisions.