It’s a fact that professional investors back teams not individuals. Friends and family may back you as an individual, but professional investors want to see a wide variety of skills and experience committed to the success of your new business. At the heart of the team are the founders. Some partnerships between founders last forever, some breakdown within months – how can you decide whether your founder team will last?
A new business requires a huge commitment of time and you will spend more time with your co-founder than with your romantic partner. There is no clear way to decide what makes a long-term business partnership in the same way that it is hard to predict whether a marriage will last. There are some clear patterns but no simple answers.
The more professional skills the founder team has, the easier it is to avoid serious mistakes and to cover gaps in the skills of the rest of the team. For this reason, founders usually have different professional skills but there are some notable exceptions.
Hewlett Packard (HP) is considered to be the company which defined Silicon Valley. HP was founded by Bill Hewlett and David Packard, both electrical engineers who met while studying at Stanford University. The fact that they both came out of an engineering culture gave them a huge respect for engineers and the innovations they created which evolved into The HP Way – the corporate culture of HP and many other people-oriented businesses. It’s not a coincidence that two engineers would care deeply about how to create an environment in which engineers could thrive.
Google (now Alphabet) is a similar story. The founders of Google, Larry Page and Sergey Brin, were both computer scientists who met at Stanford. Google has developed with a culture which is based upon excellence in computer science and engineering in everything it does.
Mix of skills and work ethic
The most common mix of professional skills within the founder team is one engineer and one commercial promoter. This combination works best in existing markets where the idea is to fill a niche in an existing market. The commercial founder can gather market intelligence while the engineer works with the team to develop the new product. In the Apple co-founding team, Jobs/Wozniak, the former was more of a sales-minded, while the latter was an electronics guru. This combination of skill sets worked out well for Apple’s co-founders.
In addition to the mix of professional skills, there are several other factors that make for a long-term team. Work ethic is an important consideration. If one founder wants to work 70 hours a week and the co-founder will only work 40 hours per week, the difference in work ethic will lead to recriminations and a feeling that the partnership is not fair. A new business is not mature enough to accommodate founders wanting to contribute significantly different amounts of time. It is known that Gates & Allen, co-founders of Microsoft has some arguments about how unproductive Allen was and how Gates wanted to dilute Allen’s ownership in Microsoft.
A similar factor is risk appetite. Two young founders who have not made significant amounts of money before can be equally driven to achieve long term financial success. If one founder has already been a successful entrepreneur, they may be less willing to take risks the second time around. Some founders are motivated by building a great business for the very long term, others are driven by the attraction of retiring early or giving back to the community. The ice cream brand, Ben&Jerry was founded by two friends, Ben and Jerry. They were best friends who built a successful business thanks to a joint passion for food and a desire to do more than just profit. The pair are resolute about giving back to the community and this resonates with their customers.
It’s important to discuss your long-term objectives. For example, by turning a business into a public company, by listing its shares on a stock exchange, one founder can develop the business for the long term while the other founder can sell the public shares as they wish. Other differences can be harder to manage. It’s rare to see a successful business where one founder is a risk-taking entrepreneur, and the other is a cautious penny pincher because one founder inhibits the other.
Respect is essential
The type of relationship between the founders doesn’t seem to matter as long as they can tolerate each other’s company and view each other with mutual respect. The relationship can be equal and interchangeable partners, sometimes even sharing the CEO title. Or the relationship can be obviously hierarchical – mentor and mentee, for example – especially if the founders have very different amounts of experience. Another common example is Dreamer and Doer – one founder has an ambitious vison of the future; the other founder makes it happen operationally.
The relationship can even be wife and husband. The relationship between the board members needs to be balanced but the relationship between a romantic couple is usually more permanent than any business relationship within the board. The director appointed by the professional investor may feel that they are dealing with a united couple who it is hard to influence. Lesley and Nigel Eccles founded the fantasy sports betting site FanDuel in 2009. Despite several legal challenges and investor pressure, their bond stayed strong and the company was acquired by Flutter Entertainment for $4.2B in December 2020. After that, they both started new ventures due to the intense scrutiny and pressure from investors. They think they worked really well together as they complemented each other.
There are other clear examples of success of start-ups founded by married couples. Eventbrite wife and husband co-founders, Julia and Kevin Hartz co-founded Eventbrite, which went public on the New York Stock Exchange in 2018. Married couple Diane Greene and Mendel Rosenblum were on the co-founding team of VMware, which sold to Dell in 2015.
Choosing a co-founder for your business is not an easy task and shouldn’t be taken lightly. As with any sports, even if your founding team is made up of first-class players, there is no guarantee that your team will succeed. The most important thing is how well the team can work together.
CATEGORY: MARKETING, COMMUNICATION AND MANAGEMENT
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