Over the last seven years I have launched a few different startups. I came close to launching several more. I have been asked to be the Chief Marketing Officer (CMO), but typically I am spearheading the startup as CEO.
Most of the companies didn’t end up becoming anything. This isn’t for a lack of effort. Unfortunately, a lot of time was spent into several different ventures that never materialized monetarily.
Fortunately, I had a couple successes, which allowed me to continue on with my entrepreneurial journey.
Over the years, I have learned a lot when it comes to starting a business by myself, starting one with Co-founders, and joining a startup that is someone else’s idea.
Of the different ways to start a business, I prefer doing so with a Co-founder.
The Structure of Your Team
I prefer starting a business with someone else (or even multiple people) because there are many wheels that need to be in motion for a business to take off.
You need to have some sort of backend developed to manage/automate things (or the product itself if you are going with software), you need to have marketing to get your product seen be the masses, you need someone who can sell, and you need someone with business management experience who can pull the company forward with their vision.
Now, this isn’t to say you need all of these people to be different. In fact, there should be some overlap. The person with the vision might also be your sales person or marketing person. Or, you might be like a friend of mine who is an awesome developer, but likes the business management side of things even more.
Which one are you?
Fill the Gaps
If you are going to start a business by yourself, you need to know which of the above you fit into. You’ll need to have an honest assessment with yourself and then determine what holes you need to fill. You can, and should, attempt to fill some of those holes. You might not have the development chops, but if you know marketing you can understand sales. You will need to be more than just a visionary.
Once you decided on what role you will fill and where you need help, then you need to find a Co-finder right?
Finding a POTENTIAL Co-finder
Before you jump right into a discussion with a potential Co-founder, you shouldn’t ask them to join you.
Instead, you need to set the table. Learn about what they are working on currently. Understand their schedule and availability and make sure it jives with your expectations. During this discussion, you need to ask the following question.
“If I validate the idea with pay-ready customers, will you join me as Co-founder?”
Write this down, because it’s critical.
You don’t want to waste anyone’s time with your “idea”. Chances are, your idea sucks anyway. No offense, but I’ve seen a lot of bad business ideas (some of them were mine)!
The same is true if you are the one being approached to be a Co-founder. Tell the person coming to you to validate their idea first and THEN you’ll consider joining it.
Validating the Idea
So what does validating an idea actually entail? It means talking with prospective customers and getting their buy-in.
You don’t need to necessarily have them pay you, but if you can position it to get paid first then that would be ideal. As long as you get them to say this is something that they would be willing to pay for, that’s at least something you can go to a potential Co-founder with and show them.
Keep in mind, this isn’t to say that they ultimately will pay you. However, it is at least an indication that your idea seems to have merit. Enough of those, and you can feel more comfortable moving forward and showing your potential Co-founder the legwork you’ve done.
Some people are against having Co-founders because they don’t want to give up equity, which is not a valid reason if you can find the right person.
Another reason ,is they are scared of what will happen should things don’t work out. In this case, just use a four year vesting schedule in your contract with them with a one year cliff period. The cliff period means that co-founder can be removed and they would get nothing should things not work out.
Lastly, they might not know the right person and therefore just don’t feel comfortable working with someone they don’t know. In this case, good luck always knowing the right people. You’ll want to start networking. Hang out in the communities where your ideal Co-founder might hang out.
It won’t be easy always finding a co-founder if you don’t have the track record of success. So be prepared to put in some honest grunt work to find the right partner. Due to the complexities, it is easy to just start working with the first person who agrees. You need to really get to know the person you’re about to go into business with first. Just be prepared to validate your idea first!
Have any of you found Co-founders? What process did you go through?
Great article Justin! What do you suggest in terms of legal agreements? I heard about a lot of startups not getting funding because of a co-founder who left the startup with big junks of equity.
Great question Alexka.
A few years ago I had lawyers draw up an agreement and I use that as a baseline now. To avoid having Co-founders take off with a lot of equity, you just need to structure your agreement to have a vesting schedule (I recommend four years) + a cliff period.
The vesting schedule means that Co-founders only get 25% of their equity allotment per year. So after four years they would own their full equity. Having a one year cliff period just means that no one gets their equity until AFTER a year. So this way Co-founders can move on within the first year and still not own any equity at all. This keeps it as an “earning” process essentially where they need to stick around and help the company for four years in order to take their full equity.
Hope that helps!