The Co-Founder Mythology - Mark Suster(ecorner.stanford.edu)
ecorner.stanford.edu
The Co-Founder Mythology - Mark Suster
http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2522
10 comments
Tobi, you guys have done very well, what was the early story for you?
why is 50/50 the dumbest way to start a company?
because it pretends that 2 people of exactly the same value to the company. What are the odds of that?
Hah! 50/50 of a new company is ZERO. If you are negotiating your "future value" (aggressively) with the person you are partnering with (and betting that they will pour their blood into to build the initial value), you probably have the wrong priorities to begin with.
Just taking the risk, starting at zero and pushing through the early phases is HUGELY valuable. That's why VCs don't start companies
(This advice changes a bit for well known, serial founders)
Just taking the risk, starting at zero and pushing through the early phases is HUGELY valuable. That's why VCs don't start companies
(This advice changes a bit for well known, serial founders)
That is looking at it from a valuation standpoint, from my perspective 51/49 is much better than 50/50. When push comes to shove, and you are 50/50, you are at a stalemate.
If push comes to shove in a 2 person company, the company is already dead, regardless of the equity split.
I agree and would add that even in a 20 person company it is better (much better) to get agreement rather than trying to make a decision stick because you have 51% ownership. I have done that in the past, and it is amazing how long people can hold onto their dislike of your decision and try to 'get back' at you later. Forcing your will because you have majority is not good for anything. Companies need to have a clear leader, and leadership does not come from a 2% difference. This is from my previous company of 20 people where I had majority interest.
Listening to Suster, I'd evaluate a bigger differential so that control can better survive dilution. For example, at 65/35 a single person could maintain control through 20% dilution. For YC a split of 57/43 would guarantee control through their investment.
The problem is that while 50/50 can work, it rarely does, and it's nearly impossible to tell at the beginning whether it will, unless you have already had such an arrangement with someone and it worked well with them.
Sometimes it works well for a number of years, and then, at some later point, priorities change or differences emerge, or a culture clash happens, and the partners can have their own 'camps' of people, who sometimes don't get along.
In most cases it is better to have one person set the culture and long-term objectives of the company. However, they can and should start with other partners, who can have significant influence on both of those aims; with a good CEO it can even at times appear undifferentiable from equality, but at the end of the day one person should have the ability to call the decision to eliminate stalemates.
Sometimes it works well for a number of years, and then, at some later point, priorities change or differences emerge, or a culture clash happens, and the partners can have their own 'camps' of people, who sometimes don't get along.
In most cases it is better to have one person set the culture and long-term objectives of the company. However, they can and should start with other partners, who can have significant influence on both of those aims; with a good CEO it can even at times appear undifferentiable from equality, but at the end of the day one person should have the ability to call the decision to eliminate stalemates.
This is really similar to the argument that it is foolish to bicker over seed valuation. It is difficult to compare skill set value during the first week of a product launch and when the company has critical mass or momentum. There are a ton of mitigating factors that push a company out of founding stage that arent product, code, marketing, relationship or related to traditional skill.
Its an imperfect science and an abstract distraction at a time when it is not a top priority.
Its an imperfect science and an abstract distraction at a time when it is not a top priority.
It's not. Sometimes it works wonderfully.
Co-founding is often spoken of as if it's a binary state as Mark points out, it's not. A cofounder who's not 50% committed is a more expensive and less use than a 100% committed first employee. First employees take salary though which takes investment and investors require co-founders.
It's a shame that the data on this is going to become more and more sparse over the next few years as investors locks in on multiple co-founders and single founders become more and more rare.
It's a shame that the data on this is going to become more and more sparse over the next few years as investors locks in on multiple co-founders and single founders become more and more rare.
Couldn't agree more. Stated this in a previous comment but I would much rather a salary taking (and potentially equity holding) first employee than a co-founder just for the sake of having a co-founder.
From my experience you don't need 'cofounders' as much as you need capabilities like design, engineerings, marketing, the optimist, the networking machine, etc... Some people have only one of these skills and need to make up for the others with employees or cofounders. Others have more than 1 skill and can push a product farther along.
So I am a single-founder. For me, and it is worth nothing that I have a sum total of 28 users on my site, it is not that I feel that I need a co-founder or even a partner. What I need is a collaborator!
Everyone, everyone, everyone says to me 'oh, your a single-founder. When are you going to get a co-founder?' I feel like a handmaiden sometimes.
All I really want, desperately need, is a collaborator, a mentor, a sounding board. If that person is co-founder so be it. Funding should be dependent on team and 'team' is not always a 'founder'.
...sorry I know that was slightly outside the scope of the topic, /rantoff.
Everyone, everyone, everyone says to me 'oh, your a single-founder. When are you going to get a co-founder?' I feel like a handmaiden sometimes.
All I really want, desperately need, is a collaborator, a mentor, a sounding board. If that person is co-founder so be it. Funding should be dependent on team and 'team' is not always a 'founder'.
...sorry I know that was slightly outside the scope of the topic, /rantoff.
I think your product relies on mass adoption. Rather then trying the shotgun approach (try to sign up millions of people so you have enough people to 'hang with'" a facebook app where a person can schedule a number of events they are going to that others can join in on then tie that data back to your main site.
Thanks for the feedback! Second time someone has mentioned doing a FB app. I had not considered that previously. I can see how doing that would give us a deep reach. Tying the data back to the site is also interesting. Thanks again for the feedback!
He says, "I'm not telling you don't do it... [but if you have a cofounder] make sure you have founder vesting."
I just saw the entire talk, and its very interesting from start to end.
I would recommend it to anyone that feels the 'entepreneurial tickles'.
Also, in my opinion, the lean startup and fail fast chapters give really good advice.
Thanks for posting this
I would recommend it to anyone that feels the 'entepreneurial tickles'.
Also, in my opinion, the lean startup and fail fast chapters give really good advice.
Thanks for posting this
aside: odd he didn't mention Hewlett and Packard, Woz and Jobs, Gates and Allen, Warnock and Geschke (Adobe), the intel founders, oracle founders. Most (not all) seem to fall into tech vs. biz roles, with overlapping abilities.
I would have thought the most important benefit of co-founders is someone to bounce-n-build ideas. But the dual tech/biz roles really suggest it's based either on abilities for different tasks; or on modularizing the complexity of dealing with those different tasks.
As an example of the latter: I've recently experienced of this as a one-founder in that when negotiating a large and complex contract, I simply don't have any of that extra spark of intelligence/gumption/whatever left over to overcome the complex technical obstacles that regularly come up.
I would have thought the most important benefit of co-founders is someone to bounce-n-build ideas. But the dual tech/biz roles really suggest it's based either on abilities for different tasks; or on modularizing the complexity of dealing with those different tasks.
As an example of the latter: I've recently experienced of this as a one-founder in that when negotiating a large and complex contract, I simply don't have any of that extra spark of intelligence/gumption/whatever left over to overcome the complex technical obstacles that regularly come up.
Why editorialize a submission title?
What editorial? Co-founder mythology is the title of the clip.
Are you referring to the part about singles watching the video? It's a recommendation. Doesn't favour either side of the debate.
Are you referring to the part about singles watching the video? It's a recommendation. Doesn't favour either side of the debate.
"Single founders need to see this" is unwanted editorializing, especially the emotional-heightening 'need' word.
The mere fact that it's been submitted (or upvoted) is a recommendation to view. If it has special relevance for single founders, that can be included matter-of-factly: "The Co-Founder Mythology - a defense of single founders".
(And to further quibble: it's not self-confident single founders who 'need' to see this -- they already know cofounder risks! It's those who are biased against single-founder startups.)
The mere fact that it's been submitted (or upvoted) is a recommendation to view. If it has special relevance for single founders, that can be included matter-of-factly: "The Co-Founder Mythology - a defense of single founders".
(And to further quibble: it's not self-confident single founders who 'need' to see this -- they already know cofounder risks! It's those who are biased against single-founder startups.)
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hey matt mireles, why isn't speakertext powering this site?
Working on it, bro.
Amazing things happen in a great partnership, but it's as rare as breakaway success companies, and probably highly correlated.
Get the founder vesting, also forget about 50%/50% it's the dumbest way to start the company.