The Value of Co-Founders

Most venture-backed companies are founded by two or more co-founders.  With good reason. 

When you are creating a startup, fundamentally, you are building a company to address an unmet need that is worth solving.  Since any opportunity worth building a company for is inherently hard (otherwise, anyone could do it!), it will require a broad mix of skills to solve. No one has all the necessary expertise and experience, therefore, a team of people is best suited to bring the essential set of skills to bear. 

This is where the concept of co-founders comes in. While the myth of a single founder conquering all the problems persists, the reality is that teams build successful startups. One is not enough. Two can be good.  Three or more can be better. Sometimes co-founders have worked together previously.  Demonstrated successful history is a plus.  Key benefits of a co-founding team include:

• Different co-founders can contribute complementary skill sets, increasing the chances that the startup has enough skills to tackle the initial problems. A high potential startup often needs a combination of domain, business building, and technical expertise.
• Different perspectives, problem-solving styles, experiences, and networks allow teams to reap the benefits of collaborative problem-solving among partners.
• Potential investors know the benefits of a broader skillset, see that several people are willing to fully commit to the endeavor, and develop increased confidence in the startup’s potential success.

Over the years, I have worked to convene multiple founding teams.  Sometimes we successfully launched companies.  Sometimes we started to work together, and then we parted ways.

In the earliest pre-founding phase, beyond the specific opportunity, it is essential to develop relationships among the potential co-founders to see if we can work well together. More than once, I have walked away from an otherwise attractive opportunity because something did not gel in the potential co-founding team. However, when it did work, and I found and partnered with a strong collaborative technologist(s), I have never been the core investor or technologist, even though all my startups are based on innovative technologies. I am an organization builder, fundraiser, business strategist, and salesperson. When partnered with the right technologist(s), we formed the foundation of a strong, fundable co-founding team.

Here are three of my experiences of forming a founding team:

• I co-founded two companies with a Ph.D. electrical engineer who was an incredible inventor and solver of difficult technical problems over the decade we were partners. Before we founded our first company together, we had worked together for 15 months in another startup. We already knew that our skills were complementary and that we were a capable team. After we both independently left the other startup, we reconnected and began looking for worthwhile problems to solve and the seeds of the technological innovations to solve them.  With my extroverted nature and business background, I enjoyed reaching out to perfect strangers to talk about their problems and get feedback on the concepts we thought might solve them. My partner preferred to focus on the technical problems.  We worked at my co-founder’s kitchen table as we explored different opportunities and crafted business and technology plans to address them.  Ultimately, we decided to form first one, and then later a second company together to build organizations to address the unmet needs we identified together.  Our complementary personalities, experiences, and problem-solving approaches helped us get our companies off-the-ground, enabled us to recruit team members, and gave us the critical mass to secure initial funding.
• Here is an unsuccessful launch example. A former colleague connected me to a medical doctor domain expert and his student who thought they were interested in fundraising for their company.  Potential investors were balking at the lack of a businessperson in the mix. I vetted the opportunity and their solution. Both seemed to have merit. However, as we had continuing discussions, it became apparent that the three of us could not come into alignment on the path forward.  I thought we could make the opportunity into a high-potential company, raise equity funding to scale the team, and move quickly along the path to market.  The domain expert and other co-founder were inclined to take a slower path leveraging small amounts of grant funding. Ultimately, this led to a mismatch of goals between us.  The grant-funded path would not support me in devoting full-time effort to the endeavor nor, in my opinion, would it allow us to hit the competitive window.  We talked it through, and once we realized that we had different visions for tackling the opportunity, we parted ways on good terms.  I still believe that opportunity can turn into something – and I hope that it does because the world will be better for having that innovation available commercially.
• More recently, as I was searching for my next opportunity, I discovered some remarkable technology developed at the University of Michigan along with a strong technical team who were eager to see it commercialized. While university research is often the source for new ideas, it is unusual that the university-based inventors want to leave their research careers to take a chance on founding a startup.  In this case, we started working together on a business plan. Once I vetted the opportunity, I formed a Delaware C-Corp to begin license negotiations with the university and seed fundraising. As a group, we agreed that once initial funds were in hand, the three technologists (a computer scientist and two Ph.D. data scientists) would leave the university to join me and my CFO from a prior startup to form our five-person co-founding team.  That is how we hit the ground running with a capable founding team.

If you are considering forming a startup, in my opinion, finding complementary co-founder(s) is critical vetting step that dramatically increases your chances of success.

Stay tuned.  My next post will be about one of the essential safeguards when forming a founding team.