How to Test Your Business Partnership with Potential Co-Founders
While it's certainly possible to start a company all by yourself, the truth is that having a co-founder makes the process so much easier. But before you automatically recruit your best friend from college or close colleague or significant other as a co-founder for your idea, keep in mind that finding the right person to spend years building a company with is a time-consuming and intricate process. Luckily, this blog post outlines everything you need to ensure that you and your co-founder have what it takes to launch an amazing startup.
First, Evaluate Yourself to Find What You Need in a Co-Founder
Finding the right co-founder is similar to getting married, as you must share the same values with the person you plan on spending considerable time with. Prior to beginning your search for a co-founder, you must first evaluate yourself by asking these questions:
What are my greatest strengths?
Professional strengths may include: sales, marketing, product management, engineering, etc.
Personal strengths may include: leadership, listening, friendship, patience, drive, etc.
What am I superior in?
Most people are outstanding at one, maybe two things. Ask your friends, family members, and colleagues what you’re best at. Also, find the one item that you are best at from the previous section.
What am I bad at?
Be brutally honest here. Failing to do so will only hurt your prospects in identifying a great co-founder.
What traits do I value the most in people around me?
Start by identifying the high level qualities you value most: integrity, trust, intelligence, etc. Then, dig deeper into these traits. For example, one might admire how under times of severe stress, their co-worker is able to maintain their composure and still get the job done.
What bothers you most about other people?
Be very personal here. For example, do you have a hard time getting along with people with different political views from you? It will be impossible to avoid these types of issues because you and your co-founder will be together 24/7, possibly for years at a time.
How do I make my best decisions?
Think back to a decision you made that had a terrific outcome. What process did you follow to reach that decision, and how can you apply that same process to launching a startup?
What characteristics do my friends have in common?
You are the average of the five people you spend the most time with. Note common characteristics among your closest friends, as this will help you identify what to look for in a co-founder.
Next, Get Out There to Find Potential Co-Founders
After identifying the core activities and needs for your business, you are ready to develop a process for recruiting and retaining a co-founder. A co-founder sets the vision and direction of the business, sharing between 30 - 49% of the total equity.
Based on the Core Activities and Needs analysis you completed in the previous section develop a list of required expertise for a co-founder.
Create a spreadsheet to track your interactions with various prospects. Include the following columns: Name, Expertise, Date, Relationship, Comments.
Scout your close personal network to determine if anyone fits the expertise you require for your business. Add potential prospects to the spreadsheet as you continue to expand your network.
Search LinkedIn for local 2nd degree connections who may be a good fit. Add those to whom you have a strong mutual connection to your spreadsheet.
Contact professors, previous managers, personal advisors, and co-workers. Find out if they know someone who is a good fit for your company.
Go to startup events on topics matching the expertise you seek in a co-founder. Arrive early and stay late. You’re going there for the networking rather than the talks. We recommend you click here to learn more about how to network effectively.
If you are building a software company and are either a designer or an engineer, it’s a good idea to regularly attend hackathons.
1. Rank your prospects by potential match. 1 = outstanding match, 2 = potential match, need more info, 3 = probably not a good match.
2. Create an email template to use for setting up initial meetings. You need to constantly test and refine this message. Here is a sample:
We met at the last Palo Alto iOS Developer MeetUp. You mentioned that you recently added the HealthKit framework to MyHealthApp. I’d love to get your advice on integrating HealthKit.
Are you available to grab coffee next week or the week after?
3. Create an email template to use when asking for introductions. Here is a sample:
Hope you are well. I noticed that you are connected to Amy on LinkedIn. Do you know her well enough to make an intro? I’m in the process of designing a new website and I’d love to get her advice on a navigation issue we’ve encountered.
4. Set up coffee meetings with your #3 prospects first so that you can practice.
5. Meet with #3 prospects. The meeting should be brief. Ask open-ended questions about the problem. If you feel the prospect has the potential to be a good match try to set up a follow-up meeting or call.
6. Repeat steps 4. & 5. with your #2 & #1 prospects
7. After meeting a prospect 5+ times invite them to a hackathon or to work on a small joint project.
8. Repeat 7 until both you and the prospect mutually agree to evaluate a founding relationship.
Evaluate Your Potential Co-Founder to See if it's a Match
1. Choose a business objective that you can achieve in 60 days.
2. Clearly define the project. Every project should have 4 components:
Overview: This describes the project and the purpose. An example is: “Develop an MVP and reach 50% day 10 retention with 40 beta testers."
Deliverables:This describes the expected deliverables that the candidate is expected to produce in a specific way that allows for creative contributions. An example is: “Please have 40 new beta testers with an iPhone 6s download our MVP by Monday, February 16th 2016."
Timing:This describes the timetable to complete the project. An example is: “The goal is to have you deliver our MVP by 5:00 PM on Wednesday, March 15th, 2016, to discuss with our Advisors."
Communication:This describes the communication procedures to complete and deliver the project. An example is: “Please do not hesitate to call me with questions or ideas, and let’s plan to speak daily at 5:00 PM."
3. Mutually commit to achieving the deliverables in 60 days.
4. As you work through through the objective ask yourself:
Do I have a company without this person?
Can this person keep giving? In other words will this person scale?
Do they match my values?
Do they share the company vision and objectives?
How does this person fight, and how do they resolve conflicts?
How does this person work? Do they work as hard as you do?
How do they deal with stress?
5. After the milestone-based project is successfully completed by the candidate and you enjoy working together, a next step is to complete a final offer, which may be delivered in multiple parts.
Make Your Offer
Determine the equity split. Download the Co-Founder Equity Split Spreadsheet. Read How to Split Equity with Cofounders, A Guide to Startup Employee Equity and The only wrong answer is 50/50: Calculating the co-founder equity split.
Include a vesting schedule. This means that the co-founder will earn the shares over time and protects you and the company if that co-founder leaves the company or doesn’t pull their weight. The standard vesting period is four years, with monthly vesting of shares. Unvested Shares should be subject to re-purchase by the company if the co-founder leaves the company.
Protect your intellectual property. You can address this issue by relying on patents, trademarks, copyrights, and trade secrets to protect your valuable IP. Another step you can take is requiring all co-founders and any third-party developers to assign their rights in IP to the company. Doing this will help prevent trouble if a co-founder leaves the company and takes a crucial patent with them.
Work to clearly understand the legal agreements so that you can answer any questions that will come up.
Present the offer to the prospect.
Establish Your Company’s Vision and Objectives to Strengthen Your Partnership
Prior to determining if there is an alignment between you and a potential co-founder, you must have a clear understanding of your vision and objectives for the business. Maintaining an unshakable faith in your vision despite the inevitable setbacks that your startup will face is what will enable you to persevere.
To lay the foundation for a strong business partnership, you and your co-founder should come up with brutally honest and uncompromising answers to the following questions:
Why are you building this company?
You might be building this company because you think you’re the only one who can solve a widespread problem and think that the alternatives are poor. Or perhaps you are building this company because of an opportunity to capitalize on a growing market. Whatever your reasons are for launching a company, it’s important to establish that both of you are in this venture for the same reasons.
What does success look like for your company?
Think of the long term goals of your startup, and take the time to list them out. Perhaps you define success for your company ambitiously like curing cancer, putting a person on Mars, or eliminating car traffic. Maybe you want to build a legendary company that will live on past your lifetime. Remember, depending on how big and impactful you want your company to be, who you pick as your co-founder is essential; the type of co-founder you build the next Tesla with is different than the co-founder you build a bike shop with.
What are your company’s values and philosophy?
The values and philosophy you pick for your startup will greatly influence its public image, as well as how it operates internally. Slack believes that having a diverse team is critical to achieve their mission. Treehouse strongly believes in work-life balance and therefore they have 4 day work weeks. Uber looks for people with qualities such as grit, resourcefulness and a “do whatever it takes to win attitude” like their founder Travis Kalanick.
This article is originally published in Founders Institute website.