Why add co-founders to your team
Over time, I’ve founded numerous companies and have advised many others. I primarily work with early stage companies and have seen many grow and blossom, and others sink to the bottom of the ocean to never appear again. A topic that constantly comes up in meetings with founders of early stage companies is, “Why add co-founders?� While there are many reasons to add them to your team, I’ve listed five of them below.
These are not the end-all and be-all of reasons…. However, from my past experience, these are some top reasons why to add co-founders to your team.
Your knowledge is limited: It’s impossible for even the brightest individual to know everything. There is not one person in the business world who can speak at the highest degree about finance, human resources, marketing & advertising, strategy, public relations, technology, and other areas of the business. Academic professors, who study and research their entire life (and are extremely knowledgeable), focus on a single subject, or even on a single portion of an overall topic.
You don’t have friends everywhere: You were the social chair of your sorority, worked at the hottest PR firm, married to the Managing Director of the top investment bank, and your son is the Media Director at the top media agency in New York. Guess what? Even this person would still have trouble opening up all the doors that they need to succeed. Over time, I’ve learned that a large part about business is not just what you know, but also, who you know. If you’re a single founder in a startup, your network is limited to just your own contacts. Add another co-founder and your network has just multiplied.
Strengths and Weaknesses: What makes a powerful entrepreneur? Understanding his strengths and weaknesses and being able to admit to themselves and their team that they may or may not be knowledgeable enough to handle a given area of the company or a task. Personal example: People who travel in my circle or who work with me know that I’m not the strongest in finance or accounting. If you’re looking for someone to negotiate your term sheet, forecast your revenues, prepare for an audit, or analyze a balance sheet, I can certainly do so… but there are other people who can do it much better than I can. Everyone has strengths and weaknesses. It’s key to find a co-founder(s) who have strengths that make up for your weaknesses and vice versa. It’s good to create the foundation of a company with as much strength as possible, then add in additional over time. However, in an early stage company, you certainly want a team with strengths in finance, product development, and sales at a minimum.
Attracting others lends credibility: Many venture capitalists will tell you that if you cannot attract high quality employees or co-founders, why would they invest in your product or service? After all, your product and/or service should be so attractive that many people would want to work with it. Convincing others to come on board at your startup could be on of the hardest or easiest things you can do. It’s hard to attract others when you’re an unproven entrepreneur, treading into a highly competitive marketplace, or you haven’t showered in weeks and you smell. It’s easy to attract others when your idea is simple, makes sense, and you’ve proven yourself over time. Note: anyone can attract talent at anytime… it’s just how you go about doing it. The more passionate you are about your vision, the more addictive it will become. You want to hook potential co-founders or employees with your vision and essentially introduce them to a drug they become addicted to.
The initial startup costs: Any startup will incur costs when they are starting out. There are the simple costs such as incorporation, trademarks, provisional patents, and others, but then there are the variable costs such as prototypes, demos, consultants, lawyers, and accountants (as well, as, many others). Unless you are hot off the sale of a previous startup, won the lottery, have a nice inheritance, or have tucked away money over the years, these costs could add up to $30-100k+ and may be a lot for any one founder to handle. Look for co-founders who believe in the product or service enough that they want to put some skin into the game. Not every startup has founder’s money into the friends & family round or seed round, but I’ve found it becoming increasingly favorable as traditional moneymen such as venture capitalists is charging quite a bit for their early stage money. It’s always best to not give away the farm early in the companies’ existence and maintain your equity as long as you can.