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How to find and what to look for in a co-founder
We spoke to Paul Musters, founder at Fortify, to discuss how to find and what to look for in a co-founder.
DISCLAIMER: This interview was recorded and introduced as a lecture for our free online 10 week program, StartupLeap. It has been edited for clarity purposes. Watch the recording for the full conversation.
Over the years Musters went from a career as a triathlete to a venture partner at a venture capital firm. Now, as the founder of Fortify, he empowers founders to create a purpose-driven, high-performance company.
Do people actually need a co-founder?
“The short answer here, is ‘no’. A lot of investors are looking to de-risk their investment, so they will say ‘yes’, but first you need to ask yourself, do I want a co-founder? Someone in my company, who I will share a bigger part of my life with than with my partner at home. Do you need someone alongside of you to make your dream come true?”
If you think you need a co-founder, how do you define the right one?
“First, listen to your intuition. Even the first time you meet someone, really ask yourself, does this person give me energy? It’s a dark red flag is someone is costing you energy. Because you want to spend your energy on building your company, and not on the relationship or issues within the team.”
“So don’t make the decision to work with someone too quickly. First, have a couple of conversations and do something together. Something that is similar to building a startup together. Do a first project together or go to a first customer together and see how things evolve. It’s a great test to see someone talk to your potential customer, because at that moment, you’ll realize if that person has the same attitude and the same vision.”
Do you look for someone who can add value now or for someone who has potential?
“Hopefully both. But if you have to choose, it’s important to choose your co-founder based on the mindset. Skills can be useful, but find out if the person wants to grow with the company and if they want to grow into a position of leadership.”
“You might experience some pressure due to time constraints, but if you only like someone’s skills and not someone’s mindset, hire that person for a month or so, and invest time in expanding your search beyond this individual.”
Where do you find a co-founder?
“It could be anywhere. I just had a call with three co-founders who met at the university. One was having lunch and overheard the other two. Even though he didn’t feel like socializing at first, he eventually stood up and talked to them. Now, four years later, they are still working together.”
Would you suggest working with someone you know or someone you don’t know?
“I think it’s great if you already know each other. If not, spend time together. Work together. Get to know one another. One remark I have to make though is there’s a big risk when working with a friend or relative, because you have to ask yourself, am I willing to make tough decisions when it’s in the best interest of the company. Which might result in firing your co-founder and risking your friendship with this person.”
“In both situations, the tough decisions will be a lot easier when you’ve worked together before. Another red flag is when you’re having fights over the idea and the number of shares an idea is worth. Because an idea is worth nothing. And more importantly, you have to be able to trust each other. Because trust is already important when it’s just the two of you, but when you have 100 employees and you still don’t trust each other…”
What do you need to take care of when you do decide to work together?
“Well, first of all, don’t start with all the legal stuff. Again, trust is key. So discuss the basics, like how many hours per week will you spend on this project? And are all co-founders OK with this? Let’s say we start a business and you decide to spend 50, 60, or even 70 hours per week on this, and I can only help out two days a week, because I have bills to pay. At first, this might be OK, but will it still be in the long run?”
“If you don’t agree on this at the very beginning, you will end up in discussions that will actually not be about the topic itself, but about your relationship and how you communicated your expectations.”
Is there a formal methodology for dividing shares when you get to that point?
“There’s a nice methodology called ‘Slicing the pie’. It’s well-known because it lets you look at what factors will eventually decide who gets what amount of shares. When you want the division to feel good for all parties, you look at a large number of factors, like time invested, or someone’s experience or network. But then again, don’t rush this, because otherwise you’ll have fights over topics that will take your mind of your company.”
Looking at what you need in a co-founder as opposed to what you can do yourself. When would you add someone to the team?
“You and your co-founder have probably been going at it for a while. So adding a third co-founder will mean you’ll have to set expectations on being on the same level. You can say you’re on the same level, but it is highly unlikely that you are or ever will be.”
“And again, look at the skills and the mindset. And ask yourself, do I need this for the short term or the long term? If it’s only for the short term, wouldn’t it be easier to simply hire this person? A great signal is if someone’s been a founder before, because then it’ll be easier for her to be in this role again. And they probably want to be in this role again.”
“Basically, it all starts with writing down what your challenge is and who you need to solve this challenge. Because if you can find a person who is interested in the problem you’re trying to solve, she might be the right fit to become a co-founder. Writing down your challenge and talking to people about it, instead of asking around for a co-founder, will also prevent you from talking to people who want to be a co-founder for the wrong reasons. You don’t want someone who’s in it for the title, because it looks good on their LinkedIn profile. You want someone to help your prospects or make your idea successful.”
How do you divide tasks between co-founders?
“First, you look at what gives you the most amount of energy? And decide if you’re able to focus at least 80% of your time on that. As a founder, you’ll have to do a lot of things that’ll cost you energy, but that’s only sustainable for a short period of time. You know, a lot of people don’t like to think about the financials or the legal stuff in a startup. If it drains energy, find someone to do it for you. It is very likely that there’s someone out there who hates what you want to do and loves what you hate.”
What do investors look for in a team?
“Most investors look for complementary teams. You know, the holy trifecta: hipster, hustler, hacker. It would be great to have that. But also realize that your team will probably have some gaps. Just be aware of what those gaps are. Talk to several investors before you talk to the investors you really want, so that the first ones can give you feedback on what you’re missing.”
“Another reason why trial investors are useful is because investors who do larger rounds want you to be selective on who you work with. It shows when you’re not just working with anyone willing to simply provide you with a simple buck. The search for an investor is highly similar to the search for a co-founder and future investors will quickly find out if you’ve done a great job.”
What do founders need to consider with regards to diversity?
“Research states that diverse companies perform better. Especially in the long run. If you worry about not being able to attract opposites, go to places where they meet. Visit meetups. Even if you won’t find someone the first time, it will at least broaden your perspective. And maybe someone you’ve been talking to will know someone who fits the role you’re looking for.”
“Accept that you’re biased by your own views, keep looking, and take your time.”
To wrap things up
“Step 1: ask yourself, do you really want a co-founder. Step 2: go out and talk to people. Step 3: take the time you need to find the right co-founder. Spend at least 30% of your time on the search.”
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