Finding a Co-Founder
Founding a business on your own is a brave move, but bravery isn’t always rewarded, or necessarily the right move. NDRC’s portfolio of companies sees those with multiple founders performing higher than those with sole founders. Alan Costello, venture leader at NDRC, discusses some elements you may want to consider when finding a person to set up shop with.
Step 1: Identify who you are
What is your sectoral/domain knowledge? How good is your contact base? What are your technical skills? Could you write a specification document for them?
Step 2: Identify what you are not
What skills and are you missing? Get advice, be open and reflective. You can’t be an island. What skills do you need to make a founding team? Get help to write an outline of the skills, services and needs you have. Writing this down makes it easier for the next stage and focuses the mind — serendipity might even help!
Step 3: Go looking
Knowing the skills or sector knowledge that you need makes it easier to look around on LinkedIn: your extended network, the groups that are relevant. Target your search, save 100 profiles and eliminate 80 per cent of them to get a medium-length list. Go back to your advisors. Think about a checklist — is the person available, skilled, experienced, wanting to join a startup etc. Don’t waste time.
Check out founder and startup events, but relevant ones. Be open to talking about your idea (execution beats keeping it private). Use your network — ask people do they know anyone with the skills you are looking for. This is far more effective than asking people, ‘Do you know anyone who wants to be a founder?’
The more open you are, the more you are likely to bump into someone. Engage them with your enthusiasm, passion and vision, and then start a process of engagement.
Step 4: 1st coffee
Talk about your idea, who you are, but then stop. Ask them about what they are interested in, what they like, what they would improve. Finding a Founder also involves meeting someone you might enjoy spending time with for the next eight years. You don’t have to love them, but you will have to trust your life and your business with them. Talk about this Find a Founder process — set expectations.
Step 5: Testing stage
Give them a task. Something in their skills area that should take them about three hours. Set a deadline to get a result. It could be a wireframe design, a market research exercise, their version of your value proposition. Review it together and set a high standard and expectations.
Give them a second task, one that should take about 10 hours to achieve. Give them a deadline of no more than four days away, or a single weekend. Review as before.
Keep working on things as your personal and professional relationship develops. This overall Finding a Founder process is going to be 4–12 weeks, testing for a long-term relationship of good and tough days. You’re going to date before you marry.
Step 6: What have you forgotten?
This is not a one-way street — the other person must be giving you exactly the same type of tests — they are reviewing you also.
Step 7: The ‘grown up’ cup of coffee
You need to have a grown up conversation together about future vision, ambition, time commitment for the next year, salary requirements, equity sharing and how you will resolve serious disputes. You probably don’t need a full shareholder agreement at this stage — a simple joint review in a Word.doc, agreed until you raise funding, which is when you formalise this.
Step 8: Vesting
A significant part of the grown up conversation is vesting, the process by which you earn your shares over a three to five-year period. This applies to all founders and simply says that, ‘if we agree to a 50:50 split of shares, that’s what we will have at the end of the vesting period, but not fully committed on Day One’. This protects you from good/bad leavers within the founder team and all the things you can’t know about in advance. Critically, it protects the business and the value you’ll ideally create together. It is a necessary thing for all founders. Investors will make you do it anyway.
The core principle to consider with respect to sharing equity is that your idea isn’t worth anything now — it becomes valuable when you share equity and create value together, more than you ever could on your own. You will dilute your own perceived 100 per cent share to 80 per cent or 50 per cent, and then again by 20 per cent, per round of funding. This is normal and is often referred to as the owning 100 per cent of a nothing pie, versus owning 20 per cent of a €100 million pie: Your choice!