Young Startup Edition: Building an Incredible Founding Team
Dec 8th, 2014
I recently wrote the below piece for Wharton Magazine Blog. Sharing it here since many of you have gone through, or are going through a similar search.
Building a business is hard because of all the known and unknown challenges that are sure to arise. It’s crucial for any business to have a solid foundation to meet these challenges – and it all begins with the right founding team.
Most successful companies have more than one founder, with an average of 2.4. According to Tom Tunguz’s Characteristics of Billion-Dollar Startup Founders, the median founding team in highly successful startups has two founders. This means, unless your crystal ball said you’re the next Jack Ma, sole founder of Alibaba, the most successful IPO in the world, you’re better off with finding co-founders.
When times get tough, it’s harder for two people to give up hope than it is any one individual. Since investors are aware of that fact, it’s harder for a solo founder to raise capital.
It’s a Marriage
You should, and will, look to your co-founders for inspiration, accountability, and compassion along with a thousand other things. If your venture is to be successful, you’ll be marrying this group for some time, so make sure you choose carefully. As with any marriage, ensure they feel the same way about you.
Not every marriage works out. In the direst of circumstances, read Venture Hack’s When to Fire Your Co-Founders, as it may serve a handy guide for warning signs.
What I Looked For (and You Should Too)
I co-founded EquityZen, a marketplace for trading equity in pre-IPO companies, with two hilarious and highly intelligent partners, Shri Bhashyam and Phil Haslett. Phil and I share close mutual friends, and Shri and I know each other from our school alumni network.
Admittedly, I don’t have experience with blind dating co-founders or using founder-matching services, such as FounderDating or CoFoundersLab. Truth be told, I’m biased against them. Several months before I began working on EquityZen, I challenged myself: if I couldn’t find one smart, driven individual within my network to quit their lucrative job and join me in starting the company, what does that say about the prospects of this business?
Fortunately, I found two, through trial and error, perseverance, and luck over several years.
500Startups’ founder, Dave McClure, suggests a holy trinity of “hacker, hustler, and designer” makes for the perfect formula. My founding team does not fit that mold; still, we were invited to and graduated from 500Startups. EquityZen is building a technology business in the heavily regulated industry of finance. So, the goal was to cover three main bases of our business: finance, law, and technology. Find the formula that is right for you.
Below are factors I considered while building EquityZen’s founding team:
· Determination: intelligence is table stakes. Determination is likely the single most important quality in a co-founder.
· Commitment: will they stick by you through thick and thin for a certain amount of time?
· Work Ethic: closely related to commitment. Will they pour in the hours, nights, and weekends?
· Humility: are they willing to roll up their sleeves? How will they react when you do the same?
· Conviction: how much do they believe in the vision?
· Trust: can you trust them? Do they trust you?
· Leap of faith: building startups requires taking leaps of faith. Do they have the stomach?
· Dependability: can you rely on them to do something they said they would?
· Personal compatibility: can you be friends? Do you share interests outside of the business?
· Rational compatibility: given a nuanced problem, how do you reason through solutions together? How do you handle disagreements?
· Technical compatibility: can you delegate work to each other, or will you have too many cooks in the kitchen?
· Leadership: will they lead?
· Willingness to learn: will they follow?
· Principles: will they act in a legal, ethical, and moral manner? If you toe the line, will they stop you from crossing it?
· Intelligence width: do they possess incredibly, ridiculously high-aptitude?
· Intelligence depth: are they smarter than almost anyone else in a one particular subject?
· Boldness: what Paul Graham calls “naughtiness.” Will they sometimes ask for forgiveness, rather than permission?
· Resolve: when they make one or five mistakes, will they get back up, shrug it off, and get back to the grind? (Note: don’t forget to remind them why you chose them.)
· Inspiration: when you make one or five mistakes, will they remind you why they chose you?
· Respect: have you earned their respect? Have they earned yours?
· Network: do you all have compatible personal and professional networks?
· Passion: It can’t be taught. Are they passionate about things (including non-business related)?
· Fun: do you have fun working together?
· Invincibility: do you feel invincible working alongside them?
Take your time and be picky. Expect – and hope – that your co-founders are picky, too.
Whether you’re considering starting a venture, in the process of building your founding team, or are evaluating your current one, you may find these resources helpful: Ben Horowitz’s book The Hard Thing About Hard Things, Mark Suster’s How to Configure Your Startup Team, Inc.com’s How to Build an Insanely Great Founding Team, and Steve Blank’s Building Great Founding Teams.
If you’ve found a good team, congratulations! Read about how to split equity on Quora.
Have thoughts or questions? Mention them in comments below or send me a note at firstname.lastname@example.org or @adavda.
Read the full piece on the Wharton Magazine Blog, where it was first published.