Five Co-Founder Scenarios, Five Different Results

Feb 14 2014, 9:10am CST | by

Five Co-Founder Scenarios, Five Different Results

By Pablo Villalba, founder, 8fit.com.

I started Teambox, my collaboration software company, as a sole founder. Because of this, I have been able to keep a relatively high percentage of the company (over a quarter even after our $7 million funding round). That’s huge financially. But even with that, I don’t feel real ownership of the cap table.

I have since realized that it’s not all about equity — so I decided to start my fitness app 8fit with co-founders because I want to work closely with people who feel real ownership of the business.

When I built my first few companies, I tried several different approaches to the co-founder question, all of which failed. Here are the five scenarios I went through so you can learn from my mistakes:

1. No Alignment

In my first company, there were three founders, who all had equal parts. We had clear divisions of responsibilities, but also very different visions of what the company should be. One imagined it as a little incubator with lots of mini companies, while I saw it as a consulting firm.

Eventually, only one SaaS project took off, which I decided to lead. As it built some revenue I had to buy off my partners’ equity to reclaim full ownership. The revenue got to covering a salary and — after stagnating for some months — I decided to sell it for just a few thousand dollars.

Lesson learned: If the visions of the founders don’t match, you’ll feel like you’re working alone.

2. No Ownership

Next I tried to launch something more ambitious: we’d manufacture quadracopters to deploy power lines across the country in a clean and efficient way. It involved heavy research and development, legislation, and selling to large energy companies. I brought in partners from each industry and we invested a tens of thousands in the project. I had barely one-eighth of the company, and we hadn’t even looked for outside investors.

As difficulties arose, nobody had a real sense of ownership over the project – it felt like a part-time job to all of us. Because of my inexperience and our funding, legal and technical problems, we simply let the project die.

Lesson learned: Building a company takes all of your creative energy. Look for enough ownership to make you feel a part of it.

3. No Added Value

I was still dying to build a real SaaS company, so I jumped into the first opportunity I found: 49-51 percent partnership with someone who would work for and fund it equally.

I put my life into the project, putting 10-hour days into my first attempts at coding. My co-founder followed it from a distance while keeping his day job and never contributed anything beyond a few forecast spreadsheets. Eventually the project got traction, and I moved to full-time status to raise funds and work on the company. To me, his decision to stay at his job already meant that he was completely out. Soon after that, we closed the company down and I moved on.

Lesson learned: Choose co-founders by the value they add to the company, not just the funding.

4. No Co-Founders At All

Teambox will always be a single-founder company.

My real partners were the early investors and employees who joined us. They got great returns, I kept a high percentage of ownership, and everything worked out well. It’s been a great, fair and financially appealing experience.

However, it’s hard to align people who have different interests. Sometimes I felt alone, or that I missed a certain point of view.

Lesson learned: For support in the early days, employees can often be as good as co-founders.

5. No Investor Majority

It is my personal dream to help others lose weight and get fit, so for 8fit, my goal is to surround myself with people who think of this mission as their own. I want partners who are better than I am. I want to build a billion-dollar company with a small team and high revenue per employee, or fail trying to get there.

I want a close connection to our customers and for the company’s spirit to be embodied by the founders.

Lesson learned: There is no right answer. Funding and co-founders can go hand in hand.

Wrapping Up

Your early choices will make up the DNA of your company. Co-founders can be amazing support, but they’re not indispensable. Avoid working with someone who doesn’t fit your vision just because you need their skills — it will backfire.

Look for cultural fit, talent, involvement and ownership, and don’t worry too much about which form it takes. Happy founding!

Pablo Villalba is the founder of 8fit.com. Previously, he was the founder of @Teambox_app/@RedboothHQ ($7M raised, millions in revenue).

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

Source: Forbes Business

 
 

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