I’ve been involved in multiple startups over the last few years. One of the key lessons I’ve learned is to ensure that the co-founding team works well together. Your team can make or break the startup. A recent Fortune article indicates this is the third top reason why startups fail. In my experience, at least 50% of the startups I’ve been a part of didn’t go beyond the initial brainstorming phase for this reason. The co-founding team couldn’t agree on issues, had different goals or just didn’t work well together. In the end, the business collapsed in only a few weeks.
So what does “works well together” mean? Well a lot of things. I’ll talk about 3 issues that I’ve found to be critically important.
Alignment of Goals and Timelines
Why do you want to start a company? Why are you passionate about this idea? What do you want to get out of this experience? What’s your short-term and long-term goals? Think about the answers to these questions and then find people who are also aligned with you. It’s ok if you’re not perfectly aligned as long as everyone is in agreement on the long-term goals of the business. When the long-term is aligned, you’ll be able to resolve most team conflicts just by reminding everyone why they’re working on this startup.
In addition to understanding everyone’s goals, make sure everyone is aligned on the timeline of the startup. Some people may want to take an aggressive, full-time approach and launch ASAP. Others may want to take the conservative approach and use an organic growth strategy while working at a full-time job. This should be discussed and agreed upon in the beginning as this affects how each person makes decisions. You’ll find disagreements can occur because each person sees the issue differently from a time perspective.
Having said this, you also don’t want a team of “yes-men”. You want to find the right balance between aligned goals and maintaining each person’s unique perspective. You want enough differences to inspire innovation while not being a victim of groupthink. No one said this would be easy!
Make sure you know your own strengths and weaknesses. Then look for someone who can fill in for your gaps. Anyone else you bring on should continue to fill some weakness for the team as a whole. This ensures that each member of the core team has a critical role to play and is contributing something meaningful to the team to help its success. This also ensures accountability since any lack of progress in a specific area can be attributed to the person leading the effort.
Time Commitment, Bootstrapping, and Equity
Time, money, and equity are probably the 3 biggest topics that need to be discussed early on within the core team. Some co-founders may be working full-time at a job, so how much time can they truly dedicate to the startup? If you’re working full-time on the startup, then how much money can you spare to help bootstrap the company in addition to covering your own living expenses? Finally what is a fair equity split amongst co-founders given the differences in contributions by members of the team? What happens if someone doesn’t deliver?
Personally, I’ve found that startups have a higher chance of success when everyone is going full-time on the startup. If this is not possible, then the equity split should be divided in such a way that the full-time individuals have more control and are able make decisions without being slowed down by the part-time individuals. Equity should also be milestone-based for each individual: once someone accomplishes a milestone, they are granted additional equity associated with that milestone. This ensures that everyone knows what they need to do and everyone does their part to move the company forward. For individuals working on the startup part-time, this strategy also incentivizes them to purposefully allocate time to work on the startup. Inc has a great article that goes into more details about this form of equity grant in more detail.
On the topic of bootstrap capital, first figure out how much money you need to get started. I won’t go over that here, but will mention to make sure to include a buffer in the budget for unexpected costs. Once you have an estimate, I’ve found that using an inverse ratio strategy works well: the more time you contribute to the startup, the less money you put in. So if you’re working full-time on the startup, you’ll put in less money. Everyone should still put in something, but the part-time contributors will put in more money to balance the lack of time contributed. This makes sense as time is money!
While there are many more topics to consider when finding co-founders, I’ve found these are the core issues that break up many startups. One thing for certain, the team needs to be open and honest with each other. Have these tough conversations in the beginning rather than later to save yourself much headache and time!