In an effort to continue my mini series on startup mistakes I would like to share my take on another really important topic that can also go terribly wrong: picking the right co-founders. I have experienced the importance of this in my own career as well as having seen it in companies that I consulted.
My take on it boils down to some very simple decision making criteria when selecting co-founders:
1) You really have to like these other persons
If you are not good friends already there should not be anything that would keep you from becoming true friends (in the very honest, traditional sense). Test this, ask yourself the true question if you would like to hang out with these people even after you have spent 12 hours working together. If you are so-so friends and kinda like the other guys, then it seriously degrades the way your communicate and especially the depth of your communication. I have experienced this in my first company and looking back it was probably really my fault that I was not available enough to my co-founder to talk. We were getting along well and became friends, but I’ve never let him into my true inner circle of friends – sincere apologies if you are ever reading this.
I also saw the same in a startup I was tech-consulting back in 2000. The company was made of some extremely smart and very professional people. I think the majority of them had met at the same company or they were colleagues via some further degree of separation. So they had this brilliant idea to found an eCommerce Internet startup and went on doing it quitting their day jobs, lending money from friends and family, etc. Unfortunately after some time, the co-founders true characters became more and more visible. Not that anyone would have a better character than the other, it is only that it became more visible that they did not really harmonize that well. Then there was jealousy coming up when one part of the senior management was throwing expensive parties and went off to exclusive dinners while the others were really busy building the product – tension developed. I would not say that this destroyed the company in the end, there we just too many things coming together. However it was certainly not doing them good.
2) Your must absolutely share the same ambition and have 100% aligned goals
This is a really obvious one and you can still go so wrong on this. When the daily business is keeping your busy, you may not realize that your ambitions and expectations misalign. Every entrepreneur will spend long hours questioning if he or she is doing the right thing, wasting all these nights for so little pay chasing that big dream. If you do not have your co-founders to cheer you up, put your thinking back on track and simply reassure you once in a while, you are all by yourself keeping up that intrinsic motivation. And this is bloody hard.
What happened to us in our second company was that right after celebrating having delivered the biggest project we ever did for the biggest customer we ever had is that we sat together on what you could call a strategic discussion on where to go next. Funny enough that meeting uncovered that all three of us had developed totally different ideas on where to take the business. Eventually we split up in good friendship and divided the pot between us. It turned out well for all of us so this was the right thing to do back then. Thinking back on this I am still amazed how we managed not to notice.
3) All your partners have to really want it
Running a business is hard. It really is. There is no shortcut it is just a lot of hard work, and then more hard work. Some people may be lucky to make a lot with a little investment – this is not the norm.
I can only advise anybody to very very carefully think about going into business with a colleague or basically anybody that works as an employee and has never been self employed before. You may have a lot of corridor/kitchen discussions with your colleagues that go along the lines of “we should really start a business together”, “we could build a company to do that”, etc. Think carefully, then probe, then think again.
What I have seen in my career is that out of all the people who dream about becoming an entrepreneur only maybe 0.5% really have what it takes to do it. Once things get closer to decision making they realize that they will not continue to have a 8000€ paycheck each month and that they need to seriously cut down on expenses. Maybe they have kids or simply did not explain the consequences well to their partners at home. Most people pull out when faced with this tough choice.
Another thing that can happen is that your new partners start to really enjoy their new found “freedom” (note: there is no such thing, you are always dependent on someone else: employer, investor, customer, etc). They may come to work very late and leave really early, take vacations that other people would classify as sabaticals or overspend on company expenses when not necessary (think Porsche). If you all really really want it, you will not waste your precious working time doing long holidays ;-))
4) You and your co-founders have to be top-notch professionals
This also goes without saying in a way and is probably your number one problem when it comes to hiring. However you really do not know how good someone is at his job until he works into you – be it a project or in a line management kind of way. Over the years I have seen many occasions of this. People (and yes, this may be more of a corporate phenomenon) create an impression of themselves and their skills. Because the human brain tries to optimize workload, you will tend to believe this impression. Once they work for you, this picture can change 180° if you are unlucky. In the worst case you will have to do a lot of compensation work. You got that co-founder in because you thought you knew he is going to be so good at creating top notch sales pitches and then you come to realize he always had them done by his junior sales rep. – the quality he comes up with is anything but what you expected and need. You have a very expensive employee now that does not get his job done and you can not fire him. Even worse – getting a replacement/compensation means that you cannot spend that money somewhere else. And even more worse – you may have to spend your precious time supervising both of them.
So if you only remember one thing then I would like to remind your that you can not (or not easily) get rid of your co-founders. So test/check/think really carefully here, you only get one shot.