The co-founder factor
3 questions to answer and 3 steps to take
Whatever venture I embark on, whether it be a company or a non-profit, I prefer to built it with partners.
Every Steve Wozniak needs a Steve Jobs and vice versa. I co-founded my first startup with 2 other guys when I was 23 years old. I was co-producer of an entertainment company and a front man for it’s first musical project. Both became massively profitable, winning all kinds of awards and generating other projects even more successful than the first one. Unfortunately, I parted ways with my co-founders a few years later, which I think was a loss for all of us not in the long run. We’re good friends now, but the business dimension suffered as a result of unhealthy co-founder dynamics. Together, we could have done so much more than what we achieved.
Fast forward to the co founding of Third Drive - with my wife Deb and Brandon Knicely in 2013. By then we had all learned some of the secrets of co-founder dynamics which gave us a very different foundation to build on. If I were to point to my favorite dimension in building Third Drive as a venture development company, it’s that I get to build companies I care about with people I love. It’s that simple.
It seems to me, that one of the reasons why the concept of solo partners is so persistent, is our very human tendency to mythologize business heroes. In a famous essay entitled 18 Mistakes that Kill Startups by Paul Graham, the #1 mistake on the list is - Single Founder. So why is the myth so persistent? Bazos, Zukkerberg, Musk, Gates, Branson, Jobs. These names, larger than life titans of entrepreneurship mesmerize us, but humans tend to work better in pairs or groups.
In my experience great success stories are rarely single hero stories.
Multi-hero success stories are actually more of the norm in real life, and most of the companies we associate with a single founder, actually have more than one. It has been said that a startup is more like a sports team than a family because performance plays a key role in being part of one and staying on. This is true, and, if employees in a startup are a team, then co-founders are most definitely a family. An average commitment for a founder in startups is 7-10 years. This is a longer commitment than the average marriage in the US.
This is really sad for marriages in the US, but you get the point.
Co-founders are effectively in a business marriage, and successful marriages require hard work and intentionality. Over the decades of building, I’ve developed some questions I try to answer when considering a partnership.
Question #1 - How will this relationship survive some intense storms?
Anytime you want to build something good in life - resistance and the testing of your effort are absolutely guaranteed. They’re are an integral part of the journey. When you build a company - you’re responsible for building a long list of good things. A product or service, a team, a strategy, a story, a community all of which will define the journey, culture and ultimate success or failure of your company.
Did I mention 9 out of 10 startups fail? Yeah. There will be storms.
Note that the question is not wether the company will survive a serious storm but will the relationship survive it? In the case of our company, Third Drive, which I co-founded with my wife and best friend, I have no interest in winning in business and losing either of these very important people in my life. This is why asking this question over and over again in crucial. Business history is littered with examples of both friendships and marriages failing in the pursuit of business success.
So rather than becoming another statistic or having a starring role in a co-founder soap opera, work on being a success story. Set yourself up to not just survive but to thrive as co-founders and friends.
One great success story is the story of Dave Gilboa, Neil Blumenthal, Jeff Raider and Andrew Hunt, the four founders of the glasses company Warby Parker - valued at $1.7B. These four friends started WB after investing all of their life savings into it. They also made a commitment to being friends first and business partners second. When asked if this was hard to accomplish, their answer is that fundamentally not. Neil Blumenthal says explained it this way in an interview “We all know how one should treat friends, right?’ You should be honest, and direct at times, transparent, fair with one another, and that’s what we’ve always done”.
I would say it’s uncomplicated, but it’s actually pretty hard too keep that healthy dynamic going - Friends first and business partners second. It is definitely worth the effort and intentionality. A major part of they joy of building something, is sharing the hardships and the victories with the people you build it with.
Question #2 - What’s the primary motivation: Money or Vision?
There’s nothing wrong with being primarily motivated by money in pursuing a professional path if you’re an employee. A co-founder has to be motivated by vision first. This is crucial because it’s rare for money to become abundant early on. During cash strapped times, a vision-driven founder will keep going when a money-driven founder won’t.
Truth is, being a co-founder almost always comes with significant financial sacrifices. A vision for what a product or service can be to add maximum value long term, often involves choosing less money in the short term. Sometimes it means saying no to bad capital, to investors who may end up dragging your venture away from it’s true purpose. If the core team is motivated by money before vision, it’s practically guaranteed to make short-sighted decisions that will hurt their company.
A great tech company we invested in some time ago was eventually acquired for, in our estimation - 1/5th of it’s true value, because the core team simply did not have the vision or grit to build it out for another 6-12 months. It was, in essence a money over vision decision. The venture was an overall commercial success, but millions were left on the table as a result.
If your potential co-founder’s motivation is primarily money - wait until you can hire him or her as an employee and they’ll do better in the long run. So will your company. The problem with actually answering these difficult question well - is that deeper motivation is hard to figure out in a person. We’ll get to that in a minute.
Question #3 - Will you be able to combine diversity of competence with unity of vision?
Every valuable new effort is new and valuable because it ultimately solves an existing problem in a new way. Great Co-founders are unusually effective at helping each other accomplish this all the way from idea to execution.
The super power being that true innovation requires a diversity of competence in the core team, producing healthy conflict, that if held together by a sense of unity of vision, synthesizes something truly valuable.
The founder of the beer brand Samuel Adams, Jim Koch had more than enough expertise coming from five generations of brewers but the secret co-founder ingredient for the new venture was his 23 year old assistant Rhonda Kallman. Jim asked Rhonda to be his co-founder because they had a unique synergy, their complimentary strengths made them better together. The company was profitable from its first month.
If you look closely, the business leaders who have gained mythical status in the business world invariably have a co-founder or core team to also thank for their early success. Bill Gates credits Paul Allen as that person for Microsoft. Steve Jobs in an event with Warren Buffet, said Apple would not have happened without Steve Wozniak. Warren Buffet responded that his partnership with Charlie Munger was the catalyst for the success story of Berkshire Hathaway.
Co founders who develop a combination of mutual devotion, trust and ability to listen to each other’s perspectives is perhaps the single most important secret ingredient for innovation. Iconic brands known around the world carry that truth. Ben & Jerry, Hewlett and Packard, Harley and Davidson, Procter and Gamble, Wells and Fargo, Dolce & Gabbana. The list goes on. The magic of combining the strengths of founders is a secret sauce, perhaps above and beyond the product, service or unique business model.
That mysterious combination of nature and nurture that produce things like talent, creativity, resilience, emotional intelligence, grit, motivation, drive and mastery uniquely combined in the founders DNA, those are the true building blocks of innovation.
I believe answering these three questions well can mean the difference between success and failure of a venture. It can also mean a higher or lower chance of getting funded, because good investors are not just good at reading the market, they are also good at reading people.
So how does an entrepreneur set him or herself up for success? I suggest these three steps: 1. Trust your gut. 2. Decide in community 3. Date before you marry.
Let me unpack these.
Trust your gut. Like in a marriage, ultimately, there must be chemistry between co-founders. A sense of alignement on a core level that can only be described as intuitive. If you’re considering going on a long, difficult journey with someone, discuss in as much detail as possible the nuances of the journey, ask the uncomfortable questions I listed. Ask many more uncomfortable questions. Be brutally honest and vulnerable. Then contemplate, meditate, and pray for a deep sense of clarity.
Trust the process and what comes out of it will be a powerful connection between that inner knowledge and factual understanding.
Decide in community. I believe that my trajectory as a human being and proffessional will ultimately correlate to the five people I hang out with most. So I try to surround myself with people that are smarter and wiser than I am. As they say, if you’re the smartest person in the room, you’re probably in the wrong room.
When you’re deciding to embark on a venture, have your closest advisors meet your potential partner and ask for their honest opinion. Get to know his or her advisors as well.
Plans go wrong for lack of advice;
many advisers bring success.
- Proverbs 15:22
The Collective wisdom of competent and connected friends is almost always better than our personal and limited view of things.
Date before you marry. If a business partnership is, in essence, a business marriage, then do it right. Don’t jump into it. Give it some time and engage in honest communication. With more time to explore, you will learn things about each other you would have not predicted otherwise. The process will help calibrate the relationship and set you up for success. Or save you from the agony of failure years later.
When Brandon Knicely and I were considering joining forces in Third Drive, we spent a few months “business dating”, getting to know each other and actually had a entrepreneur friend meet with us regularly to offer objective input on how we would fit together. That one move laid the foundation for a successful business and friendship. We are much better together than we are apart and we really enjoy each others company.
Ultimately, there are few things in life that are more important than doing meaningful work with people we love.
Aligning these two core values in every journey we take, is one of the great ingredients of a happy life.