A business partner is for life — not just for Christmas!
How to choose who to start a business with!
It’s easy to be caught up in the excitement of a new business venture, especially when you set out on this adventure with a business partner at your side. However, choosing the right person to join you in your venture is one of the most important decisions you will make. Much like getting married, there is a lot at stake if you get it wrong, but plenty to gain if you get it right.
Being friends is not enough. Generally, your friends are people just like you and sharing the same likes, dislikes, general interests and values is important. However, in a business relationship, making sure that you and your co-founder(s) bring different but complementary skills to the business is critical. Equally critical is a healthy respect for each other’s opinions and being able to discuss issues in an open and constructive way.
Here are some questions you need to ask yourself before selecting your founding team:
Are you more suited to running an operation independently or would you benefit from sharing the responsibility and input? Most investors I speak to say that they would not invest in a business that is run by a solo founder. They know that it’s impossible to grow a really big business on your own and it’s a high risk investment for them to back a solo founder. It’s better to share the responsibilities, the ups and the downs and the major challenges with a co-founder.
How much time are you both prepared to commit to the business; does one of you value work / life balance more than the other? Is your potential partner as committed as you to succeed? Most co-founder problems start when one of the co-founders feels that the other is not pulling his or her own weight in the business. Be clear at the very start of your venture about each other’s roles and responsibilities and feel free to challenge progress in a constructive way. Also, make sure that you have strong founders’ contracts and legal agreements in place in the event of a breakdown of the relationship.
Are you both making a financial commitment? Personal investment and taking risk makes a partner less likely to leave. If only one of you is making a financial commitment, the split in equity should reflect that higher risk that you are taking.
Are your skills and personal attributes complementary? Are they the skills the business needs? A good business needs to have founders with a mix of complementary skills and attributes. So, for example, one founder will generally take the lead as the technology expert whilst the other may be better suited to sales or operations roles. If you’re starting a tech business and none of the founders have a tech background, think about bringing a techie on board as a co-founder. Remember you will also need someone who has credibility with potential funders, investors and customers so don’t forget that critical sales and marketing ability.
Who is going to actually run the company? You need to elect one of your co-founders as CEO to run the company whilst the others take on other senior roles. It is disastrous for two or more co-founders to take on the role of ‘co-CEO’ as this confuses everybody and gives the impression that there is no one in charge of the company.
How is the business structured? Putting this in place is vital at the start together with any legal agreements. Water-tight founders agreements are critical at the start of the business. Agree at the start who owns the IP in your venture; what will you do if the relationship breaks down and one or more co-founders wish to leave the business? Who will decide how to agree the split? For all of this and more, seek advice from an experienced lawyer and be prepared to spend some money to get this right. It will probably be money well spent if the partnership breaks down in the future. Better to take time to get to know your potential partner and launch the company later.
Do background checks if you’re bringing in a third party co-founder. Ask your network about them and also ask for personal references. If you hear anything that sets alarm bells ringing. For example, if you hear that the person has walked away from several start-ups, don’t bring that person on as a co-founder. If you desperately need the skills, offer them a job with the option of co-founder status after a year or 18 months, all things being well.
Many early stage business partnerships flounder as soon as the business hits its first hurdles. Good partnerships where all parties have respect for each other, are clear about their roles and responsibilities and are willing to work towards a common goal generally survive these problems.
So where do you find your co-founder? Finding a co-founder can be stressful and takes up a lot of time. Make sure you network, attend meet-ups, ask friends, family and people in your wider professional network for introductions. Share your story. Think of people you’ve worked with in the past, check in with them and see what they’ve been up to. How excited are they by your business and you plans? What circles do you socialise in and what networks you are part of can you leverage? Your work and University alumni communities can also be a great source.
Starting a new business with a committed, dynamic co-founder who shares your vision can be an exciting journey for all potential entrepreneurs, but the success of your venture will ultimately be decided by how clearly you set out the founder agreements right at the start. Don’t leave it until problems start — being prepared is just good business sense!
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