Startup Strategy: The Founder(s)

Last week I wrote about „the idea“ – the first in a series of „10 strategic building blocks for your startup“.

While „the idea“ is an important first step, it needs people who are committed enough to take the next step and do something about it. This week’s column is about those people – the founder(s).

In short: the founders of a business are the ones that put together the strategy around making the idea a reality and then execute it with discipline, diligence and awareness.

There are many variations of founder implementation:

  • one founder (often the one whose idea it was in the first place),
  • two or three (when somebody else likes the idea or has a complementary one, they may join forces) and
  • even an entire team (when an idea takes shape together in a group early on and it’s hard to tell who really came up with it – for example at an startup event like Startup Weekend).

Me or we?

I’ve started businesses alone and with co-founder(s) – and my experience is that both are equally possible and both have their pro’s and con’s.

Typically, if the idea is very big (and we need more of those!), you need a network of people with a lot of connections covering very different backgrounds and experiences. In these cases a great co-founder, much like a great life partner, is not only a good idea, but can quickly become a necessity.

You may also need assistance with the volume and type of decisions that have to be made in turning the idea into a viable venture.

Even more important is the ability to share the responsibilities of these decisions and the load they ultimately carry. A founder will always be „alone“ in certain situations and especially so if he’s also the CEO. But, with two founders in place, the loneliness while raising your startup – at least from a founders perspective – gets much better.

Depending on the nature of the idea and the challenges related to its execution, I’ve observed the best founders are either alone or together with one or two co-founders. When say 5 or 6 people are equal founders, it is often difficult to get a clear lead and there simply has to be one finally making decisions.

The clarity around who (typically the CEO) ultimately has a final say in decision making in a founding team is important for investors as well as it is for the rest of the team (especially the early employees). Just like in the kitchen with too many cooks spoil the broth, this is equally true for the founding team.

How to find a Co-Founder?

Founders are ideally a well-composed team that share common principles and ideals, add value and complement each other. They should be equally confident in their individual abilities and realistically aware of their achievements so far to avoid any imbalances between themselves. Apart from the idea, the founders are probably the most important factor that investors pay attention to, so ideally their biography should match the experience required to execute the idea.

There are many ways to find co-founders:

  • Startup meetups where you can often get an opportunity to present your idea and afterwards network with others. You’ll quickly see in person if somebody buys into your cause.
  • Pitch the idea on a Startup Weekend or other startup initiative where teams naturally form.
  • Apply for an accelerator like Techstars (note: for most accelerators the founding team must be in place, but not always).
  • Write in a professional forum or try announcing a founders vacancy via startup newsletters
  • and many more.

Personally I like pitching my idea to other (previously experienced) entrepreneurs that could also become potential investors in the business itself, especially as such founders then sit in the same boat not only strategically, but also financially.

What are the pitfalls?

It’s important to have clear conversations around the expectations that exist of each other and around the different types of capital that the founder(s) bring on board:

  1. Financial Capital (ideally all founders invest some real $ or a piece of IP already exists – leading to a fixed equity component from day one).
  2. Time Capital (it should be clear who can invest how much time for how long – leading to a variable equity component that can change over time).
  3. Social Capital (how valuable is the founders social and professional network and are they prepared to use it? Now, or only when a certain milestone is achieved? – This could be utilized for bonus or incentive programs, leading to another variable equity options component).
  4. Cultural / Intellectual Capital (this acts like an accelerator for 2) and 3) – a big network doesn’t help if you’re not taken seriously and a lot of time „simply spent“ causes more grief that anything else if not utilized wisely and productively).
  5. Spiritual Capital (personal beliefs, ethics and all the good and bad stuff a person encompasses – including a big portion of „fate“ is naturally becoming part of the founding team).

The key message is: when splitting equity between founders, it’s not only about the financial capital. All these capitals have a value attached to them and should be considered when equity is distributed, so look out for them when searching for or dealing with co-founders as otherwise imbalances can arise later.

When I look for somebody to join me on my mission, I place great importance on my co-founder having

  1. a real passion and genuine interest in the product or service we’re building;
  2. a certain financial independence; and
  3. full (or near full) time available to spend on building the business.

This usually goes a long way when more bootstrapping is required than initially thought – and it’s always more, never less!

What does a Co-Founder look for when considering joining a Founder?

If you’re considering to become a co-founder and joining somebody else, there are also some fundamental questions you should ask yourself. I asked those that joined me over time and here is what they consider important before boarding the ship they’d like to be known co-captain of:

  • Can I trust the captain?
  • How do I feel about him or her personally?
  • After a tough day, would I still wanna have a beer with this guy?
  • Does the captain have a realistic view of the world?
  • Can he plan realistically and is responsible but still has a bold vision?
  • Is he absolutely passionate (or rather obsessed) with the product or services we’re building?
  • Do we share common principles and values?
  • Can the person deal with money matters?

After having done these checks and conversations you may feel that you’ve found your perfect founder or co-founder and you both are keen to work with each other. Still, what if something goes wrong?

How to avoid disappointments?

The reality is that you can’t think of every possibility and eventuality, so asking „what if something goes wrong?“ doesn’t help at this point.

If you wait long enough, every person can disappoint you. The important thing is to ask whether that person is worth the suffering when that disappointment happens.

Am I willing to take this risk and the potential suffering with this (co-)founder for that particular venture?

If the answer to that question is yes and you’ve done all the due diligence you can, then there is not much more that you can do. Before problems arise, try to implement simple tactics such as:

  • Speaking your mind directly and listening with an open heart – both without ego.
  • Differentiate founder hats from job specific hats.
  • Don’t argue with each other in front of other team members. However, do have the confidence to articulate and show your own opinion if and where appropriate or required.
  • Have a good communication etiquette, especially in the relation to email.
  • Take a spring clean once in a while and tell each other the things you’re concerned about in each other (see first tactic), but keep it strictly professional.
  • Always represent yourselves as one in front of your investors.

Despite their simple nature, I have found these to have a significant positive impact on founders relationships.

You’ll always stay a founder. So don’t push it and don’t overstay.

About a year ago I wrote an article called „The Quest for Meaning“ in which I mention that the culture instilled by founders in the company or product early on, carries on for many years to come – visibly or invisibly. I wrote:

„The motivation of the early founders of a company ultimately sets the longer-term culture, and that may well outlive the founders presence at the firm.“

Founders do well to remember this and thus need not be afraid of „letting go“ when the time comes. As the title says: „founders“ found stuff. They (very seldom) invent, startup, run/operate, grow, restructure and re-invent. It takes a lifetime to do all of that and there are specialists for each of these phases that smart founders will recruit or tap into for advice.

For good reasons Larry Page and Sergey Brin handed over the wheels of Google to Eric Schmidt when they realized there is somebody else who could do a much better job at the time and eventually bring them closer to their common goal for the venture they’ve created together.

So don’t hold on for too long as this can also become a source of disappointments. You’ll always stay a founder, no matter what, simply because you’ve turned an idea into something.

Give it your best, take your responsibility and put the right people and processes in place, and things will happen.

2 thoughts on “Startup Strategy: The Founder(s)

  1. Pingback: 10 Strategic Building Blocks for your Startup | Toby's Blog

  2. Pingback: Startup Strategy: The Product | Toby's Blog

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