How to compose a co-founder team

September 02, 2015

The number one reason why investors write checks to fund an early-stage startup is because of the team; most specifically, because of the CEO.

Your startup will look very different in the not-so-distant future, so the insane people who give you money are really betting on you. They are betting on your ability to do three things:

  1. Continually cast a compelling vision for your company
  2. Build and empower a high-functioning team
  3. Never run out of money

Fred Wilson wrote about this exact trio in his famous post, What A CEO Does, quoting a former board member of his:

A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.

Are YOU the right fit?

Seriously, think about it. Are you the kind of person who enjoys taking risks? I'm not talking about taking risks in order to arrive at some outcome (e.g. fame, fortune, etc…), but are you actually a happier person while taking risks? What would your close friends and family say?

Don't fake it. If you're not wired this way, you and your team will pay for it later when stress levels sky-rocket. An entrepreneur should be someone who knows she/he is jumping onto a ship that will most likely sink, but is crazy enough to convince themselves and others that the ship can be turned into a rocket and launch into space.

If you're after the money (or fame, etc…), it's relatively easy to jump on a ship that's already been converted to a rocket and is making good progress toward space. Your startup community needs you, so take a good look at what's going on around you and consider joining another team before you consider spinning up one of your own.

Are you the CEO?

I'm not just talking about titles here; are you going to be the one actually in charge? Every team has this person (even if titles make things ambiguous), so be sure to “know thyself” and ask whether you can be the one to cast a compelling vision, recruit & manage the team, and ensure you always have cash in the bank.

If you are not this person, that's OK. Your next move is to work toward recruiting a co-founder who will be your CEO. Who do you know that would excel at this job? Do you know someone who has done it before? Start there. If you're the kind of person who is already feeling your stress level lowering while thinking about someone else in the CEO seat, then that's a good clue it shouldn't be you.

That being said, for the rest of this article I'm going to assume you are the CEO, so let's talk about your next recruit.

Who is your co-founder?

There are plenty of different ways to slice up skill sets, but every startup needs a team with these collective skills (in no particular order):

Let's be honest, you are not good at all these things. No one is. Your co-founder then, should be someone who compliments your skills so collectively you cover as much area as possible.

How many co-founders should you have?

You can be successful with various team compositions, but in general the following advice from Naval Ravikant (Angel List Co-founder/CEO) is worth considering:

Picking a co-founder is your most important decision. It's more important than your product, market, and investors.

The ideal founding team is two individuals, with a history of working together, of similar age and financial standing, with mutual respect. One is good at building products and the other is good at selling them.

The power of two

Two is the right number — avoid the three-body problem. Think Jobs and Wozniak, Allen and Gates, Ellison and Lane, Hewlett and Packard, Larry and Sergei, Yang and Filo, Omidyar and Skoll.

One founder companies can work, against the odds (hello, Mark Zuckerberg). So can three founder companies (hello, @biz, @ev, and @jack). In three founder companies, the politics can be tough — gang-up votes, jockeying for board seats, etc. — but it's manageable. Four is an extremely unstable configuration and five is right out. When 4–5 founder companies work, it's because two founders dominate.

Two founders works because unanimity is possible, there are no founder politics, interests can easily align, and founder stakes are high post-financing.

If you must have more than three co-founders…

…then extreme clarity is needed around ownership percentages, role expectations, and timeline for who goes full-time (and when). As Naval said above, what usually happens is two founders end up dominating.

In many ways, however, as long as the communication and expectations are clear, the approach of having a larger team can work out great. Spread out the skill sets as much as possible. When things start moving quickly and you need all hands on deck, it's helpful to have multiple stakeholders ready to jump in and help.

Don't outsource

While your local development, creative, and/or marketing agency will be happy to take your money, the better approach is to “sell” your idea to a co-founder than can compliment your skills. Too many eager founders with a savings account and/or a rich relative have burned through insane amounts of cash with agencies as their functional co-founders. Avoid this trap. If you can't find a co-founder, you may want to take a step back and consider if this is really the right time to start your venture.

Produce world-class visual design

Too many startups have a vacuum on the product side of their skill-sets as it relates to visually communicating the brand. Yes, you can get away with a small amount of outsourcing to get a logo and a decent-looking template, but if you're missing the person who is constantly arguing for a better visual experience across the board, you are going to have trouble competing in today's market.

At the end of the day, it's about execution

Can you and your co-founder(s) ship a well-tested and well-validated product, get feedback quickly, and keep iterating in rapid cycles? Are you acquiring customers? If yes, then you probably have the right team.

In other words, if you're a software developer who can optimize operations and oversee company finances, then find an outgoing visual designer who can bring your brand alive and sell it to anyone. If you're a business manager with a background in traditional marketing, find a mobile developer who rocks at data science and growth hacking. If you're an electrical engineer who has invented the next awesome widget, find a wild-eyed MBA who is experienced with Kickstarter campaigns and has a background in product manufacturing and distribution. You get the idea. If you can't find a perfect match, bring in an additional co-founder to complete the set and never stop communicating, as clearly as possible, role expectations and your company's vision.

Author's note: this post originally appeared on my personal site here as part of a series of articles outlining an operational framework for building and launching web products. Feel free to subscribe to my newsletter and I'll let you know when I publish new content. Thanks!

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