Turning Strangers into Cofounders: A Q&A with Fractal Operating Partner Luke Maloney
Once a month, we’ll be featuring a Q&A with one of our vertical SaaS experts. This week’s interview is with Fractal Operating Partner Luke Maloney.
Before joining Fractal, Luke was the Senior Director of Business Development at Wunderkind. In this interview, Luke offers his perspectives on cofounder matching, including useful frameworks for evaluating a cofounder, what really matters when it comes to building a company, and the advantages of cofounding a company with a near stranger.
There’s a persistent myth that cofounders need to have a pre-existing relationship to be successful. Why do you think this myth persists?
Luke: People are naturally comfortable with people that they know and so they think that’s the only way to form a company. And they think because they know and trust that person that they also know what they’re good at and what they’re not good at. It’s hard to make long term commitments to build a company with someone that you don’t feel like you’ve known for an equivalently long amount of time. They basically equate it to dating, marriage, or friendships where you build trust and credibility with someone over time. It’s hard to imagine forming that kind of relationship with someone in a short amount of time.
Fractal’s model is based on the idea that two strangers can build effective companies together after only knowing each other for a few weeks — sometimes even days. Why does this model work?
At its core, it works because we have an incredibly high bar for the caliber of people we bring into the EIR program. When people come in here and we set the expectation of matching with a cofounder in a month, we often get the question of, ‘How am I going to do that in a month?’ First, we just cut out months of vetting how talented a person is for you. Second, you could spend eight hours over the course of a month doing this or you could spend 40. The most important thing is the amount of time they actively spend working on finding a cofounder and the reality is every job decision they’ve ever made in their life is probably with even less information that they’re going to have in this situation.
Are there distinct advantages of forming a company with someone you may have only met a few days prior?
One of the hardest parts about starting something with someone you do have a personal relationship with is that you have all these preconceived notions about them. You think you know what their shortcomings are and what they’re good at just because you’ve known them for a long time. I think that lack of openness to what somebody might be good or not good at actually can be a shortcoming of starting a business with someone you know. Oftentimes we give them too much professional credit just because we know them. The way we perceive people is the narrative that we’ve created around them, but with Fractal a person can meet potential cofounders without that narrative and start from that blank slate. I think it can be like a very beautiful thing to really start from square one.
Another advantage of Fractal’s model is timing. People tend to underestimate how difficult it is to find someone who is not only a good fit for a cofounder but is ready to become a founder at the same time you are. Everyone kind of has this fantasy in their head of starting something with their friends or a coworker. They throw ideas around and know they’ll start something one day. If you work in the industry, you’ve probably done that. But when push comes to shove, they need to ask themselves how they will actually do that. How do you convince your friend to quit their job and start a company with you? You may be at different points in your life — one of you is single, the other is married. Ultimately this is much more than just a business decision, much more than a question of having a good idea. It’s a life decision, but people so often overlook this. It is so rare for multiple people in your life to be willing to take that leap and found a company at the same time.
What sort of frameworks should a person use when trying to identify if someone they’ve only recently met might make a good cofounder?
There are 3 main things I encourage our founders to think about: do you have shared values, a similar idea of what success looks like, and similar work ethic. So in terms of values and what success looks like, they should be asking themselves about whether they have the same motivation for building a company, how they treat people, and what the value they want to bring to the world. As for the work ethic component, I can’t overstate how important this is. This isn’t to say that there’s only one way to build a company — some people are going to work 100 hours a week and some people might have families so they can only work 50 hours a week. The important thing is that the cofounders’ work ethic is complementary. Not necessarily perfectly matching, but fitting together like puzzle pieces. Cofounders really need to explicitly talk about this, otherwise it can create a lot of animosity. Our companies aren’t going to struggle because they can’t agree on an MVP strategy or they argue over hire or they lose a customer. It’s more like, “hey, stop calling me at midnight on a Saturday because I told you this is the time with my family.” So they need to talk about that up front and be real about it.
Entrepreneurs coming into Fractal’s program only have a few weeks to match with a cofounder — are there best practices for how they can maximize that time and make the best decision?
I think social activities are incredibly important. It’s kind of like the airplane test: can I hang out with this person for five hours and talk to them and feel like I don’t want the conversation to end? A lot of people come into the program with very complex frameworks for how they’re going to choose a cofounder, but that’s a gut feeling and I think it’s very important. When they get to the end of the cofounder matching process, every person might have two or three people they’re torn between, but everyone knows in their gut who they really want to be their cofounder. So I encourage them to trust those instincts. It’s like dating. We all have flaws and trying to find the perfect person is a crazy goal. You will never find somebody that perfectly aligns with everything that you want. But if you can find a lot of those things in a person and if your gut is telling you that you could build a business with this person for 10 years, you have to trust that.
Are there any tactics for understanding what it will be like for two cofounders to build a company together?
Simulate real working environments during the matching process. That’s a key part of our process. The founders will come in and spend six hours together in a conference room with a whiteboard. The key is to not think of those working sessions as fake. The CEO will already have chosen a vertical so there’s real content and depth to their research and their ideas about the business they’re going to build. So they can simulate real working sessions around questions like what their MVP would look like. The advice I always give is to find out what happens when you disagree because if you’re in one of those sessions with a cofounder you’re excited about, those sessions are going to naturally be very agreeable. So play devil’s advocate and take the other side just to see how it goes when there is conflict. The other piece of advice is to give weight to the little things. How do they communicate? Are they showing that same drive and commitment to this that you are? It’s great if you had an amazing working session, but if you know that you’re the type of person that wants to get things done the same day and the other person is taking five days to get back to you about setting up the next meeting, you should put real weight on that because that’s going to be as close to a real work environment as you can possibly get during the process.
