A brief history of founders and co-founders

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.

  • James Penman

    Hi Nic,

    Where are you finding your solo-founders? Are these always people with previous entrepreneurial experience or do you go back a few steps to, say, people leaving uni?

    Cheers, James.

  • Stuart Brameld

    Hi Nic – I just finished listening to Seth Godin’s startup school podcast series (which is brilliant). He describes the goal of the MVP as being able to make a sales call, and that this very rarely means you need a working product. Whilst this obviously depends on the business and has limitations, I think in the early stages of customer development a non-technical founder can get further and faster with a telephone and powerpoint, than a technical co-founder can get with Github and Sublime (Lexoo is perhaps a great example here). I also think having too much of a tech focus early on can be really dangerous, despite everyone talking about lean I still see way too much startups executing the ‘build it and they will come’ approach without realising it.

  • dwanguard

    I always looked that as a team issue. In the end one person will have to run the show anyhow.
    The difference is how many people contributed to genuine part of the effort. From that POV there could be more than one person that deserve larger share or not.

  • Keshav Malani

    “Entrepreneurs we back pair with our developers to quickly launch product and iterate cheaply, and then find a co-founder.”

    This is one of the best offerings I have seen from Forward Partners. In my experience, it is quite difficult these days to find a technical co-founder early on especially in the UK. People are still not willing to take the risk.

  • http://www.theequitykicker.com brisbourne

    Hi James – we hold events, including our upcoming solo founders office hours and we are pushing out the word, especially to influencers in order to generate referrals.

    Ideally we like to see deep domain knowledge and experience at a startup, but it’s not essential.

  • http://www.theequitykicker.com brisbourne

    Hi Stuart – yes – many startups think about what would work as a minimal viable feature set and come to the correct conclusion that it needs to be reasonably chunky to be heard above the noise and generate any learning, which ends up looking like an old school build and hope. You still need some tech early on though. The tools aren’t yet good enough that a decent looking site and form without some knowledge of code. The first version of Lexoo was built in Node.js.

    I haven’t listened to Seth Godin’s startup school podcast series. I will check it out.

    tks

  • Stuart Brameld

    Thanks Nic.

    Check out https://webflow.com – should allow a non-tech founder to create a site like Lexoo without needing to write any code.

    I think they’re really changing the game in terms of front-end web development.

  • http://www.theequitykicker.com brisbourne

    Thanks for the validation!

  • http://dpetz.com/ Daniel Petz

    Interesting. I believe there is more than one side to a coin though…

    For a VC, it makes sense to back solo-founders with deep domain expertise, professional network and the necessary entrepreneurial mindset. You get the opportunity to invest into something with a relatively low capital investment (very low ticket price) and even have the opportunity to form the founding team of your backed start-up. I would assume the relationship is quite different between teams and the VC fund where the team was largely assembled by the VC.

    From a start-up perspective, you give away a significant share of the equity at a very early stage because your negotiation power is not very strong. Getting a technical co-founder is very tough, but if you make and you find someone great your bargaining power will dramatically increase such as the ticket price for investing VCs… Or am I missing something here?

  • http://www.theequitykicker.com brisbourne

    Hi Daniel – we’ve seen that founders looking for co-founders with an already established business behind them are able to attract high quality candidates for much less equity than when they try and pair up on day 1. You can think of it this way – rather than the co-founder take all the risk up front and the VC take less risk later, we take all the risk up front and the co-founder takes it later. Hence there’s an equity shift which reflects the risk shift. For many founders this is the better route because they end up with a stronger co-founder and a better equity position.

  • http://dpetz.com/ Daniel Petz

    Nic, I fully agree with your point.

    I guess this question has two parts.
    1, Do you want to find a technical co-founder on day 1 or when you already have an established business?
    2, Do you want to find your technical co-founder via your own connections or via a VC fund? Your post, I believe, is trying to address this second question.

    The real question for the founder: Is NPV (increased chance of finding the right technical co-founder via VC) >= NPV (Equity dilution by involving a VC fund as a solo-founder) ?

    If the founder feels that he would be in a better position taking your help (decreased risk, easier to attract a technical co-founder, but also lower equity) then it makes perfect sense. However, if he would be able to find a technical co-founder without VC help then his position could be considerably stronger when he raises his first round…

  • http://www.theequitykicker.com brisbourne

    Hi Daniel – don’t forget that finding a co-founder after month three usually means you give them less equity. Also – it’s a small point, but the founder is still finding the co-founder herself or himself, just with our help. We’re not making the selection.

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  • Lukasz Marek Sielski

    One of interesting things I have found, is that many companies say they don’t need technical co-founder, because they don’t consider themselves as technical startups. Even if they use technology to solve not technical challenge – still they see often themselves in their niche. Often technical people are being seen there only as hammers or other tools to make job done.

  • http://www.theequitykicker.com brisbourne

    The ideal skill profile for a co-founder is an interesting question. The default is usually technical because that way companies are able to get their sites built well and cheaply, but it shouldn’t be a foregone conclusion.

  • Lukasz Marek Sielski

    Sorry, if I was not precise. Fully agree. Pity is that many companies still don’t see need to have technical co-founder and they advocate that by saying: we don’t do software as a product, we just deliver service and websites etc. is just a part of it. If I understand co-founder take part of responsibility but also decision powers. Thanks to that can ensure software made for company is good and is what they need. Often where is no technical co-founder company fail because lack of skills to drive that part of company.

  • http://www.theequitykicker.com brisbourne

    Yes, that I agree with. Companies with no technical talent in house have to outsource and the results are rarely good.

  • http://www.firewerks.co/ Richard Hughes-Jones

    I can’t believe I’ve just read this Stuart 😉

  • Stuart Brameld

    I just came across a quote that felt relevant here: “Only write code when you can’t think of any other way to validate your hypothesis.” – Mark Randall, Chief Strategist, VP Creativity at Adobe

  • http://www.theequitykicker.com brisbourne

    I like that. Thank you!