At some point in the last few years it became conventional wisdom that co-founding teams are better, so much so in fact that when Paul Graham stepped down as president of YC recently his number one tip to entrepreneurs was ‘get a co-founder‘. Similarly Dave McClure talks about the ideal founding team comprising a ‘a hacker, a hustler and a designer‘.
Today I got to thinking why that might be, and I think it is down to the fact that startups are now hugely capital efficient.
To be clear I’m a big believer in the power of teams, but we’ve had some success here backing solo-founders and then helping them find a co-founder shortly after that. Having had some success we are looking to rinse and repeat, and that has led us to think about the whole co-founder question in more detail.
It seems to me that having a technical co-founder is critical now for startups because they have to release product and prove traction before they can raise enough money to hire a team. Having a technical co-founder is the most reliable way to quickly and cheaply build and iterate a product. The alternatives open to most entrepreneurs are unattractive – hiring a full time developer is expensive and requires taking on employment commitments and outsourcing to an agency typically doesn’t allow for fast iterations.
Back in the days when companies would raise £2-5m before releasing a product they would hire a team of developers and didn’t face these problems.
I think that’s why having co-founders has become more important recently.
Accelerators have sprung to prominence since Y C was founded in 2005 because for the first time companies can do something meaningful with the small amounts of money they invest. The whole point of accelerators is that companies get advice and iterate multiple times within a three month programme. However, that simply isn’t possible without a developer on the founding team. That’s why Paul Graham and Dave McClure have observed that having a co-founder is so important and why accelerators around the world have contributed strongly to the co-founder meme.
I’ve written about this before, so apologies for repeating myself, but Forward Partners offers another way. Entrepreneurs we back pair with our developers to quickly launch product and iterate cheaply, and then find a co-founder.
Mark Suster wrote a good post on this topic back in 2011. He talks about the importance of having a partner in your business, but cautions against the risks of equal partnerships. In his view it’s better to start a company and then look for a partner. Lots of great people will join a startup for 20-30% equity, or even less.