Building the founding team is by far the most important part of building a startup. The founding team sets the vision, builds the rest of the team, builds the prototypes, and brings in the initial customers. Once you have one or two people that want to work on a startup, there can be a tendency to ‘just get going’ without putting enough emphasis on ensuring that you have the right team in place, which leads to a lot of failure scenarios.
I’ve lived through nearly 10 startups as a founder, and seen hundreds more through my experiences as an investor or friend of the founders. The past five years, I’ve been incubating startups, which lead me to reflect systematically on building founding teams and early stage leadership teams. I talked to as many founders and VCs as I could, including all the incubators and accelerators. I read all the best blogs I could find on building founding teams and have done my best to distill those as well. I hope this is the most useful and comprehensive guide to building founding teams, complete with symptoms to identify antipatterns, advice to avoid common mistakes, and recommendations for how to do things right.
I’ve broken the article up into three sections that each represents a major theme in building founding teams; Balanced Capabilities, Startup Credibility, and Founding Timeline. Each theme starts with a set of identifiable antipatterns with symptoms, a story, and advice. Then each theme ends with suggested patterns for how to do things right.
The Balanced Capabilities theme talks about how to identify the skills required to build your specific startup. The Startup Credibility theme gets into what having proper ‘startup DNA’ really means, and what VCs, founders, and early employees should be watching out for as signs that a startup isn’t credible. Lastly, the Founding Timeline theme lays out the tactics for how to get started, and how to avoid both getting stuck or being too hasty.
What follows is meant to be the most comprehensive available guide to building a founding team with specific examples of what to do and what not to do. It’s intended to be useful to both first time founders and experienced entrepreneurs.
Balanced Capabilities
Antipattern: the ‘anyone could be CEO’ team
Symptoms
Many times you see a team with very little startup experience, and they don’t yet know who is going to be the CEO. They think it could be any of them. Being a CEO is a very difficult job that requires some real skills, and when people don’t know who it is yet, or think it could be anyone, it’s normally a sign that they neither have a CEO onboard, nor do they have any idea how to get one in place. They are probably going to fight each other and go down in flames.
“A very, very common source of co-founder friction we see at Y Combinator is where two people really want to be the CEO. Right. And this can sort of…we can see this in Y Combinator interviews, where you end up with two people who kind of talk over each other, they interrupt each other, they can look at each other with a little bit of content when the other person’s answering.” — Harj at YC
This almost never happens, but if you had such an exceptional team that multiple people could play the CEO role, then the founders will naturally understand how to divide up roles and responsibilities. They’ll understand if it makes sense for them to work together or if there’s not enough space for that much leadership firepower in one startup. If it’s uncomfortable to talk about this stuff, then something’s wrong, and you probably have too many cooks in the kitchen, and they probably aren’t even CEO caliber cooks — “ it’s actually, I think, a bit of a red flag if it is uncomfortable conversation.” — harj from YC
When the startup doesn’t have someone who can play the CEO role effectively, you start to see clear signs in lack of focus and staying stuck in a slow-growing local optimum for many years. The vision and product aren’t clear enough, and they aren’t growing fast enough, but they also aren’t self-reflecting and changing, they just keep speeding towards a brick wall.
Story
I remember being asked to advise a team that had three technical co-founders, who all thought that two of them could be CEO. The result was that they weren’t able to make progress or get funding without a new CEO, and it was ultimately a VC who ended up selecting the CEO they wanted to see in place before agreeing to fund the company. The startup is still around but not going anywhere. I guess the moral of the story is that if you don’t know who the CEO is, or you think anyone could be the CEO, then you either aren’t going to get funded or whoever funds you is going to pick your CEO. Might as well own up to this up front and pick your own CEO instead of playing make believe.
Advise
Early on when it’s just the founders, there’s enough work to go around it can seem unimportant who has the CEO title, but this is mostly an illusion. As soon as you are talking to customers, investors, and trying to hire a team, everyone wants to see clarity about who the CEO is and ensure they have the skills to be the CEO. Product vision and commercial skills are more important than the tech.
“The founding CEO is the first among equals in the founding team. Ironically they are almost never the most intelligent or technically astute person on the team. They deal with the daily crisis of product development and acquiring early customers. And as the reality of product development and customer input collide, the facts change so rapidly that the original well-thought-out product plan becomes irrelevant. While the rest of the team is focused on their specific jobs, the founding CEO is trying to solve a complicated equation where almost all the variables are unknown – unknown customers, unknown features that will make those customers buy, unknown pricing, unknown demand creation activities that will get them into your sales channel, etc. They’re biased for action and they don’t wait around for someone else to tell them what to do. Great founding CEO’s live for these moments.” — steve blank
If you want to be a CEO, you should be reading bios of the great historical CEOs, and talking to as many CEOs as you can. It’s a hard job and one that you can only learn on the job. Ask yourself if you really understand markets and products that well, or if you’d be better off to pair up with someone who is even stronger than you. If you have multiple people thinking they are peer level skills and can be CEO, they is most likely that either none of you can, or that you have too many cooks in the kitchen and someone needs to go build a different kitchen.
Antipattern: The ‘just need someone on the business side’ team
Symptoms
It’s common to have a technical team that views themselves as exceptional and thinks they have some solution that should manifest as a startup. Trouble is, the solution is often looking for a problem rather than the other way around. They say they ‘just need someone on the business side,’ but what they really need is a CEO. When they say ‘the business side’ they really mean figure out the product, raise money, hire the team, and do all the sales and marketing. What’s worse, is they want you to figure out a product that’s constrained to whatever solution they already have in mind that hasn’t been tested out with any customers yet.
Story
I remember two different startups that I met around the same time, both founded by really smart machine learning teams, and both unclear about who should be the CEO. One of the teams ended up with a technical founder taking on the CEO role and bringing in the standard ‘old BD guy on the business side,’ and the other ended up working with an investor who helped the team bring in a CEO. In both cases, the startups were focused too much on their tech and too little on finding big problems that were aligned with how talented the teams were technically. The results have been that both startups seem to be still alive after many years, but aren’t really growing. When you start with the tech and downplay the importance of the CEO, you get weak vision, mediocre product, and slow growth. Sometimes you get faster failure, but I’ve often seen these kinds of startups tend to drag out a really long time before people realize it’s not going anywhere.
Advise
There are a lot of cases where cool tech enables new products and businesses to be built, but there are many more cases where the tech ends up being a hammer looking for a nail. This is why, when you have a strong technical core, you need to be sure that i) the tech is actually required by the product, and ii) the CEO understands the tech but is product and business oriented.
The easiest way to avoid this problem entirely is to start from the problem and work backwards to the solution; work outside-in, not inside-out. Test with customers every step of the way. This will humble you early, and it’ll help the founders see what kind of founding team they need.
Lastly, founders should study what a startup CEO really needs to do, even if they don’t want to be a CEO. Leading a team to product/market fit is one of the most challenging things in all of business, and it’s taken way too lightly by many teams that don’t understand enough about markets, product, marketing and sales.
Antipattern: The ‘just need someone to build it’ team aka the ‘idea man’
Symptoms
Just as often as you see a tech team with a hammer looking for a nail, you see someone who fancies themselves as having lots of great ideas but can’t build any of them. They don’t have any background in product or engineering, and it’s not even clear they can sell, market, hire, or manage. Whether they have a technical background or not, they are more of a mad scientist inventor type that jumps from idea to idea and never manfists anything. Not an evil genius mad scientist type that poses any danger though, but more like a self-proclaimed genius whose inventions never work, like Wile E Coyote trying to catch the Road Runner.
Story
Everyone in the startup community has endless examples of the ‘idea man’ wandering around looking for people to build unclear stuff that they are certain will put them in the history books alongside Steve Jobs and Bill Gates. These are sad and forgettable people — so forgettable that I don’t even remember something interesting enough for a specific story. Their ideas are so bad and this antipattern is so commonplace that nothing even comes to mind.
Advise
If you’re excited about a new product or business, and you don’t have a background in product or tech to start building anything yourself, then you need to clarify what you bring to the table. You need to be the visionary and learn enough about product and tech to form a team with the right cofounders and build product. You also probably need to understand the market, and how to run sales and marketing to get traction in that market.
The person who is driving the central ideas should really be a ‘product person’ and ideally the visionary CEO. There are much less common cases where someone else can be the keeper of the initial vision. It could be a technical visionary if the tech is the product. In rare cases, it can even be someone who is fractional time rather than full time, such as an important professor or doctor who is generating core IP in biotech, or a very experienced fractional co-founder injecting vision, building the founding team, and working with the founding team on early product, like Keith Rabos did by incubating Open Door.
Antipattern: The Mediocre CEO with 100% ownership
Symptoms
You often see the one-person-show CEO who owns the entire company, and has the attitude that people just give them money, and they will magically make the company worth a lot, after which point they will move on to executive hiring with way smaller amounts of equity, because they ‘don’t want to give too much up in the early stage.’
Story
I once tried to help a guy who had been funded as a solo founder CEO who was way out of his depth, and ultimately isn’t CEO caliber. He had no cofounders, no team members, and was making abysmally slow progress. Meanwhile, he was sitting on top of an actually quite good opportunity. His attitude was that he would be able to hit some trivial initial milestone, and then suddenly investor cash would pour in, and between the perceived traction and cash infusion, he’d be able to ‘hire a professional CEO without giving up that much equity.’
Advise
Good CEOs are mindful of building founding teams, executive teams, and having large employee pools to attract top talent. They are busy trying to get talented people in *before* they get to the next stage, not after, so that they can experience that bump in valuation right out of the gates.
While it’s possible to be a solo founder, it’s rare and you need to be incredibly skilled in a number of areas — in particular you need to be able to build and sell. You need strong product and/or engineering skills, marketing and sales skills, you need to be able to product manage, and you and you neeed to be able to recruit and raise money — all by yourself. You also need to have a tremendous amount of energy and persistence.
“A single founder is like one hand clapping. The sweet spot is somewhere between two and four. Unless you’re 100% certain you’re that outlier who can go it alone (and willing to risk the chance you’re not), the co-founder search is worth it.” — Steve Blank
If you want to be a founding CEO, then you need to be able to attract a strong team of co-founders, and you need to be thinking long term and seeing the monumental effort ahead and the support you need, rather than thinking short term and being greedy about equity.
Pattern: Balance founder capabilities, ideally among two or more founders
Most successful startups have two or more founders, 2.4 on average according to some studies. Other studies show that solo founders can take 3.6 times longer to scale. Some outlier solo founders can set vision, raise money, bring in customers, direct product/tech, and build the team, but these are rare.
“Two is the right number. Think Jobs and Wozniak, Allen and Gates, Ellison and Lane, Hewlett and Packard, Larry and Sergei, Yang and Filo, Omidyar and Skoll, Julia and Kevin Hartz from Eventbrite, Jennifer Hyman and Jennifer Fleiss from Rent the Runway. In three founder companies, the politics can be tough. Four is an extremely unstable configuration and five is right out.” — venture hacks
Three reasons why VCs are so strongly in favor of having more than one co founder; “1) Productivity: you get more work done with more people, and better work done if they have complementary skills, 2) Moral support: you have someone you can lean on during inevitable tough times. You can pick each other up when down, and keep each other grounded if getting high on your own supply, 3) Pattern matching: many of the most successful startups like Apple, Facebook, Google, Microsoft, all had co-founders when they started — it’s not always true, but its true enough that investors and many other groups important to your startup will be using this as a pattern to match against.” — Harj at YC
Be curious to learn enough about the other functions outside your background so you can be informed about who makes awesome co-founders or leaders for your startup. Steve Blank talks about identifying the capabilities you need to support your key activities, and the gap between what you’re going to need and what you bring to the table reveals the expertise you need to find in your co-founder. Ideally someone who you can also see delivering what you need today and also scaling with the startup as it grows.
“Learn enough of the other side to have an informed opinion. Business founders who don’t code use bad proxies for picking technical co-founders (“10 years with Java!”). Technical founders who don’t sell also use bad proxies (“Harvard MBA!”). One builds, one sells — The best builders can prototype and perhaps even build the entire product, end-to-end. The best sellers can sell to customers, partners, investors, and employees.” — venture hacks
“One of the biggest mistakes in assembling a founding team is not thinking through the need for skills but instead settling for who’s around. When you’re considering bringing on a co-founder, look closely at your Activities. Who do you need to accomplish them, and are they missing from your existing team? Your first thought when vetting a co-founder should be: Does this person have skills and knowledge that are essential to the success of my business from day one? Do I need them to get this thing off the ground? Your next question is: Can this person keep giving?” — Steve Blank
“So if you’re really great at sales, talking to users, getting customers, ideally, you’d have a co-founder who’s really great at building product, and writing code, and building software, because the two of you can divide and conquer and get a lot done. I don’t think it’s one you should overly fixate, more important than anything is just working with someone that you like working with and you trust. And so if sort of the person best fits that description doesn’t necessarily have the perfect set of complementary skills, tools, I think that’s fine. then you can start hiring people as you need, and make enough progress in the company to get investment, you can hire people to kind of fill in the skills gaps, and that’s okay.” Harj at YC
I’m going to write a separate article just on founder equity split, but it’s worth stating here that you want equity to flow to impact, and balance of equity flowing to balance of core skills. Not everything needs to be covered by a founder, but you need a bigger pool reserved the less you have things covered by founders.
“I would really encourage you to do is not optimize for the short term, right. So just because you made a little bit of progress and the idea by yourself, and you have a great co-founder, and you’re sort of thinking, “Hey, maybe I should take 70% interest, just leave them 30%,” because you’ve made progress in the last 6 months, I would encourage you not to do that. Startups are a really long-term game.” — Harj at YC.
Now, this view may be somewhat controversial, but I’ve been a founding CEO and CTO, and CEO is a vastly harder job. It’s OK to have a strong CEO figure with more equity if they are truly impressive and likely to stick around to drive the company well into the future, especially if you are counting o them to do product, marketing, sales, fundraising, and recruiting — that’s a lot. The CEO role is the hardest, most time-consuming, and highest pressure job as the company grows, so letting the CEO have a bit more to keep them in the game longer term is totally fair imho.
Startup DNA
Antipattern: The high pedigree team aka big names from big institutions
Symptoms
A common pattern involves trying to impress everyone with a slide deck of important faces. It could be niche-famous people within a particular industry, a set of folks from a management consulting shop, friends from the graduating class of a top university, or a set of folks who were at a big name tech company.
They’ve got the pedigree, but do they have the startup DNA? Oftentimes, the more impressive everyone looks, the more the team has been optimized for optics than execution.
Watch out for folks that have already been successful and haven’t faced that much risk or adversity, or folks that have no history of tinkering with projects and trying to start things. Check out how much people have read startup blogs, bios of great entrepreneurs, and generally seem to be geeky about building startups. Are they only making carefully controlled bets, or taking serious risk to try bold things?
You can see this come out the most with failure — proper startup people face failure immediately, and want to learn from many small failures because they are paranoid of bigger existential company-killing failures. High pedigree people that haven’t failed at anything in their lives don’t even respect the risk of startup failure, as they feel entitled to some kind of an outcome, and will ignore clear signs that things aren’t working.
Story
I’ll share a few examples that are pretty common. One involves a set of really talented folks coming out of Stanford, another was a team coming out of Google, the third example is a couple CEOs that came from top management consulting shops, and the last example comes from some big-name experienced industry guys.
The Stanford team came out guns blazing with a big press release after getting funded without a clear product. Direction was pretty murky from the early days as they continued to focus on buzz over product. Ultimately ended up getting a pretty good acqui-hire deal with a big tech company. Pretty good outcome for the founders, but not so much for the investors, and definitely not an example of building a successful startup. This has become a very common model for AI teams, when over the years the acquisition market has been really strong and folks have been able to get acqui-hired, so teams are leaving big tech companies to start startups and get re-aqui-hired by the big tech companies with some extra stock.
I’ve also seen a team that came out of Google that were incredibly talented technically and even had strong PMs, but really weren’t well suited to the early product-market fit stage. They could optimize the hell out of a working product, but couldn’t really see how to build a differentiated product in their market — they sort of just copied clear patterns for their kind of app, and tried to optimize it before they had anything differentiated enough that anyone wanted to switch to it. They ended up getting acqui-hired by a big tech company to optimize one of their products.
I’ve known guys over the past 5 years or so that left top three management consulting firms to become startup CEOs and in both cases the startups didn’t work out and they both went back to their management consulting roles.
In three of my startups I’ve tried to hire big-name executives from the top industry players. In both cases the executives failed very badly within the first 6 months and shipwrecked the companies because they engaged in the wrong activities — spending time and money on building out teams and operational infrastructure that really weren’t needed at that stage, meanwhile massively under investing in the core product, marketing, and sales.
Advise
Entrepreneurship is a skill. It’s a mistake to think that the functional skills engaged in building larger companies are the same as those engaged in building early-stage startups. It’s Important to take the time to identify what skills you’re searching for in your early stage startup, and not to identify the skills that seem to be needed in that industry in general, or even for later stage startups in your industry. Startups are very stressful; they need to make remarkable progress very quickly. That’s stress and pace just doesn’t work for some people. Harj from YC talks about selecting for those who can handle the stress “the single most important thing to know about someone before you start a company with them is how do they handle stress. Sort of second most important is how well are they going to help you handle stress.”
“Select for the Startup Mindset (i.e. Love of Chaos). You also need to consider whether your prospective co-founder is, simply put, a match for startup life. You want someone who exhibits intense focus in chaotic situations, keen decision-making skills when faced with little data, relentlessness, agility, and curiosity.” Blank pictures a sort of spectrum of professional types, starting with founding CEO on one side and the employee who will perform best at a multi-billion-dollar corporation on the other. He encourages founders to haul out the whiteboard and start understanding those distinctions for themselves: What general skills or sensibilities does a founder or co-founder of a startup need? What’s the difference between that and being a later employee at that startup? And how are they all different from someone working at a large company? When I became an entrepreneur, the behemoth was IBM,” Blank says. “The conventional wisdom was that you didn’t want to hire someone out of IBM. You waited until some other startup hired and fired them, and then you snatched them up.” Of course, that’s not to say that a co-founder fresh out of a larger, more established company isn’t the right fit, it’s just another big factor worth considering.” — Steve Blank on startup mindset.
Make sure you focus on outcomes over optics — take bets on people who you think can execute and handle the pressure to grow fast enough, not the people who look most impressive in a slide deck.
Antipattern: The Potemkin village
Symptoms
A more nefarious version of the high pedigree team is the Potemkin village. Here everything has been optimized for optics, presenting an external façade without any real intent to build something.
When you scratch below the surface you see that there isn’t really even a real startup. The product is out-sourced, they don’t have engineering in house, and they have a bunch of people doing corporate strategy and finance stuff when they don’t even have a decent product yet.
When you talk to executives everything seems to be stuck at a high-level and you can’t get low-level operating plans out of anyone like marketing campaigns or product roadmaps.
Story
One of my startups was considering acquisition interest from a much later stage start-up which had raised a ton of money. As I dug in, I couldn’t understand where the traction was coming from that had validated all this capital they’d raised. It seemed like they had some fishy deals that were essentially very large-scale consulting engagements with very long terms on them which allowed them to announce big things to press and investors. There was no technical co-founder and there was really only one engineering lead internally who ran everything, using 100% outsource consultants to build everything. Meanwhile the founder CEO was telling me crazy stuff about how famous people like Johnny IVe were going to come work for their company. Also, the process for talking to us became increasingly opaque, and the executives being brought on board seemed very corporate and not results-oriented. There were tons of weird corporate strategy and finance people involved in these discussions, and we’d never seen a product, product demo, or spoken to a product person. Ultimately we disengaged, and the one or two people who did seem competent during the discussions ended up leaving the company within 6 months.
Advise
When you’re out looking for co-founders or startups to join up with, be on the lookout for the Potemkin Village. Focus on people who optimize for outcomes over optics. You can tell this by doing your due diligence. You want people who go straight to the product and traction — let’s see a demo, let’s talk about customer needs, let’s talk about how we’re marketing and selling. When people want to talk about vague strategy matters and engage in name dropping, that’s when it’s time to pull the ripcord and bail out.
Antipattern: Failing to know the game you’re playing — the Flippers vs the Founders
Symptoms
It’s totally okay to start companies with the intent of selling them quickly. It’s also totally okay to start companies with the intent of not scaling them to be very large. Neither one of these two approaches is a classical “venture backable” startup though. A startup is meant to have a big vision that you manifest over decades and can rapidly scale based on invested capital being spent on growth activities. So if you want to start a company and sell it quickly, or build a company that can grow slowly without the pressure to be very big very fast, then bootstrap it or raise money from alternative sources, don’t go out and raise venture capital.
You often see founding teams that aren’t really committed to a long-term vision or don’t really understand what it means for their idea to be scalable enough to make sense for venture capital.
These teams will be evolving very slowly, investing in small incremental changes that are low-risk and don’t really have the opportunity to create the kind of growth a proper startup needs. You also see these teams over focus on optics, getting engaged with the tech press, and taking inbound corporate development calls from potential acquirers instead of focusing on product. These companies engineer themselves for early acquisition or slow growth.
“Aligned motives required. If one founder wants to build a cool product, another one wants to make money, and yet another wants to be famous, it won’t work. Pay close attention — true motivations are revealed, not declared.” — venture hacks The second thing I think you really want to look for is understanding the goals and values someone has for starting a company or wanting to do a startup. why they want to do a startup, what are they hoping for? And the kinds of things that can come out are avoiding conflicting goals, right. — Harj at YC
Story
I recently made the mistake of hiring a bunch of executives that had experience at larger stage startup-ish tech companies. These midsized organizations didn’t have the growth goals that startups do, and these leaders created tremendous frustration for everyone on the team that had startup DNA, including myself. I remember 1:1’s with two of my favorite people from those teams saying; “I’m not even sure she knows what game we’re playing” and “your biggest weakness is that your leadership is great but your approach is allergic for B-players.” I was hiring the wrong kinds of leaders that were not suited to building startups — they didn’t even understand the game we were playing, how fast we needed to grow, and that *we* were the team that had to create the growth.
Advise
When you’re finding co-founders and early executives for a startup, make sure that you’re carefully examining people’s goals and experience. A lot of people think they want to do startups but they don’t actually understand what the growth pressure really means. A lot of people think they have done startups, but they’ve really been working on small to midsized businesses. Venture capital-backed startups have the specific characteristic that they can take in high-risk high-return seeking capital and generate rapid growth. Many times people will say that they want to do this or they think they have done it in the past, but you need to dig below the surface and see if they really understand what they’re saying. What experience do they have that they think is like a startup? How fast do they think a startup needs to grow its revenue every year? What’s been their most recent traction goals and how fast did they grow traction? When’s the last time they haven’t been growing fast enough and had to make some major changes?
The bottom line is that startups need to grow as fast each month as what most people think is a startup grows each year. So maybe one early stage company is growing 50% each year, but a successful startup is growing maybe 20-50% each month — or 10x to 100x a year rather than 50% a year. People that think about growth on this scale act differently, have different work habits, and think about different ideas — once that can10x change not ones that can make 50% change.
Antipattern: The ‘good enough for now’ or ‘pretty good’ team
Symptoms
When you are bitten by the startup bug you often just want to get going. You’re excited about the idea you see, the timing, and why it has to happen now and you don’t care if everything is in place perfectly because you want to have a bias for action. All these things are good.
The problem is that, as we move forward, we’ll also need to understand that it’s a team effort to build a startup and it’s the right founding team that makes it more likely we’ll succeed than anything else. So if we just proceed with what’s convenient based on who’s around us we’re really unlikely to have the best foundation for building a startup. We’ll need to iterate a ton on the product, and how we market and sell it, and its arrogant of us to think we can just dive in and figure these things out with a mediocre supporting cast rather than a strong founding team.
We’ll see mediocre execution — a product that isn’t great, maybe it crashes and has a lot of bugs, marketing isn’t clever enough to rise above the noise and doesn’t help anyone understand the product, sales efforts don’t close deals fast enough to show meaningful growth.
Story
At the late stage of this current tech cycle, people have become far more aggressive about building startups even if they might not have adequate skills or experience. This is especially problematic when there isn’t a clear CEO. That’s really the biggest problem. I’ve seen a couple teams recently with some very smart folks I’ve worked with or observed pretty closely where the founders aren’t making much progress. If the founders just kept searching to find a great CEO to work with, then they’d be working on much more important and scalable ideas and be making much faster progress towards traction and product manifestation. The excitement of building stuff and seeing so much money around in startup ecosystem is luring people into starting things with whoever around them seems smart. They aren’t reflecting to see who is really going to be the CEO and what kind of progress they actually need to make in the first couple of years.
Advise
Startups are by definition trying to do something nearly impossible, and let’s remember that most startups fail. If we expect extraordinary outcomes then we should assume we need extraordinary people.
“Don’t settle; has to be smartest and fastest people you know that have the persistence, humility and integrity to stick through the journey. If it doesn’t feel right, keep looking. If you’re compromising, keep looking. A company’s DNA is set by the founders, and its culture is an extension of the founders’ personalities.” — venture hacks
Pattern: Build exceptional teams well suited to the problem, and focus on startup credibility not pedigree
In startups good enough just isn’t good enough, we need to be the best at what we do if we think we’re going to build a billion dollar business that transforms an important problem. The company needs to be the best at what it does, and we all need to be the best at our individual jobs in orer to maek that happen. It’s not about the best school, the best big-name company, the best network etc. What makes people credible for startups is really the job skills and ability to deal with the ambiguity of finding product/market fit, and the stress of the growth expectations that startups are under.
Paul Graham has a few suggestions as to what makes for credible founders;
“1) Determination. This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. As long as you’re over a certain threshold of intelligence, what matters most is determination. 2) Flexibility. You do not however want the sort of determination implied by phrases like “don’t give up on your dreams.” The world of startups is so unpredictable that you need to be able to modify your dreams on the fly. 3) Imagination. Intelligence does matter a lot of course. It seems like the type that matters most is imagination. It’s not so important to be able to solve predefined problems quickly as to be able to come up with surprising new ideas.” — Paul Graham
Determination, flexibility and imagination are traits that make up a large part of what’s often called ‘startup DNA’ — note that none of these have anything to do with perceived pedigree or intelligence. As Paul says in the post, most people in the startup world are really smart, so being smart enough is OK, and beyond that its more about these other startup DNA traits than it is being the absolute smartest. Also notice that nobody names how connected or knowledgeable someone is within a particular industry — great founders will navigate through ambiguity in fields they don’t even know, remaining humble and finding hte right teammates and advisors to help.
I’d add a couple final traits which are execution firepower and bias for action. Startups need to move very fast, and you need people who think and work very fast. Some people are very smart and get stuck in analysis paralysis, or they jump around all over the place with a new initiative practically every day. Startups need people that can stay focused and persistent — they need to be able tp stay organized and project manage themselves. Startups also need peopel that just work very fast — I’d rather have the fastest engineer as a technical co-founder rather than the one who is smartest and going to create tons of frameworks. I’d rather have someone who is going to market and sell fast as the CEO rather than someone who has the best connections in the target industry — over time the speed will overcome the connections.
Founding Timeline
Antipattern: The ‘we just met each other outside but everything is fine’ team
Symptoms
Some founders haven’t worked together before, and haven’t even tried to test out working together for a while before starting a company. The blowup risk here is enormous. The same risk applies when a solo founder tries to make progress, get seed funding, then bring in leadership using executive search or recruiting through their network. The seed stage of a startup is just much too stressful and crazy for normal hiring to work out well when it comes to hiring leaders. Your strong initial leaders need to be the founders and have founder level equity.
These startups often fall apart in the early years when the invariable slow down and growth or failure to ship something on time happens and the co-founders chance come together and get through it instead one of them on more quits or gets fired.
Story
I’ve personally jumped into a startup as a co-founder without getting to know people or working on it as a project for a while first, and I’ve also screwed up pretty badly by trying to get startups going without cofounders then hiring in executives.
When I jumped into a startup that was already running a bit before its seed funding, I didn’t know what the other co-founders interests were, and our motivations didn’t end up being aligned. I really wanted to go for something very big, and the other co-founders ultimately wanted to go for a quick acquisition. so when our first product stopped growing after an early push my co-founders wanted to sell the company and I ended up being surprised and starting to work on something new so that I didn’t need to go with the acquisition.
In the case where I’ve had a few things I tried to run through seed funding and then hire executives into rather than having founders at the inception of the seed stage, I always failed to find the right kind of executives, because basically you’re searching for a founder at what’s pretty much still a founding stage of the business, but you are trying to pretend its later stage and so you land with later stage executives that might be fine once you have product/market fit and start scaling, but wind up performing pretty poorly when you’re still hunting for product market fit and defining all the product, marketing and sales playbooks.
Advise
Pretty much everyone tries to advice to work with someone that you already know. “Go for someone you have history with” — Venture Hacks. Paul Graham says “Empirically it seems to be hard to start a startup with just one founder. Most of the big successes have two or three. And the relationship between the founders has to be strong. They must genuinely like one another, and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.”
It’s okay if you don’t have the perfect co-founder already in your network, you can go out and find them and run a trial. Working together. Steve Blank has thoughts about founder trial periods To get to the bottom of these core traits, he advises that any prospective co-founders “date first.” Start with a hack weekend, or some other period of intense activity that requires plenty of decision-making. Follow that up with, at a minimum, a provisional 30-day working period.“Agree on whatever terms make sense — you both get to keep the code, for example — but give yourselves some time before you fully commit. You’re about to get married and have kids, and the consequences of divorce here can sink the entire venture,” Blank says.
“you really don’t want to start a company with someone that you don’t know particularly well. you don’t really have insight into how they’re going to respond to pressure and stress.So the best people to start companies with are always people that you’ve got some sort of personal experiences, where you kind of know the character and how they’re going to respond to those tough situations. So once you found a potential co-founder, how do you test out and know for sure that you both want to start a company together before making the final commitment?one way to de-risk it is to allocate a chunk of time where you agreed to kind of work together. And set yourself a deadline by which time you want to have ideally, like a MVP, or a prototype of something built, or you at least want to have gone out and try it out, pitching some customers and convincing them to pay you if you did build a particular product. These are all things you’d usually do when you’re signing up with a new company or testing out new idea anyhow. And do that together, and agree that at the end of the time that you’ve set aside, that you both have an honest conversation, decide.” — Harj at YC
Antipattern: The ‘we’ll bring someone in after the next milestone’ team
Symptoms
Some founders are too arrogant or too humble, and both sides lead to the same unfortunate fail pattern — not getting the help the company needs to succeed in the founding phase. The overly humble founder doesn’t think they are worthy of getting more people into the company until they hit some milestones that make it very attractive — trouble is that they need exactly the people they are thinking of in order to get to those milestones, so its a catch 22. The arrogant founder thinks they can weasel out of having more founders by holding on to as much of the equity as they can and ‘hiring in leaders’ after they hit critical traction milestones. There’s an arrogant greed here in thinking they can get even higher caliber leaders for less equity.
A variant of this one is the heads down team. Everyone is no BS, get stuff done, and feels really hardcore always working on building product, tech and talking to customers. This is all great but they’re missing the most important part which is making sure the founding team actually has the skills that it needs to be able to execute. For example maybe you have two technical co-founders and neither is very good at the external-facing activities like business development, recruiting, or raising money. Their convrosations with customers aren’t really getting them into a clear product direction, so they aren’t building something people want. They would be better off to focus on finding a co-founder who could maybe play a CEO or head of sales and marketing who can sell to customers, recruits, and investors.
Story
On the overly humble side, there was a time I was incubating a few VC-backed startups and made the grave mistake of thinking they weren’t going to be compelling enough to get founding leadership until we got some early product and traction to show. Once I started to think systematically about CEOs, and I got the first founder into one of the startups and they took over as CEO, it was very clear that I’d made a huge mistake by not focusing mostly on building founding teams from inception. By not getting the right founding DNA in place that could take the startups from zero to one, I couldn’t raise more funding, because we didn’t have the right teams, and the leaders I was able to get in palace later on weren’t good enough to make the kind of product and commercial progress that I’d expect from founders or early execs leaders.
On the overly arrogant side, I’ve recently seen a founder who is making very little progress with his startup. Checking in 6 months later, I find the founder in the same place. Rather than see the obvious missing skills and need for help, the founder remains in a fantasy world thinking that they’re going to hit some Milestone that suddenly makes investors want to come in. At this mystical point in the future when the cash flows in, they think they can do executive search to find new leadership for the company, even including a CEO search. In reality this company won’t get off the ground unless the CEO reflects and understands the immediate need for a well-rounded founding team in order to execute and raise money.
Notice that in both stories the motivation for deferring the build out of a proper founding team is different, but the results were the same. I was thinking I wasn’t worthy to get people in yet so didn’t look, the other CEO thinks he doesn’t need it yet, but in both cases the startups got stuck without enough traction and team in place to raise further capital.
Advise
Founders need to be aware of what they need in order to get to the milestone of raising their first money from investors and getting initial traction from customers. Usually you need a mix of skills and resources around the table — probably either some funding from your own cash or the ability to work for free for some time to get the company off the ground. You have to be honest with yourself about what investors, customers, potential partners are going to want to see from your company before they will engage. If you can’t get to that point by yourself then you need to make it a top priority to build a founding team before you try to achieve those milestones. Don’t trick yourself into thinking that you can achieve those milestones and then go out and raise money and hire people. You won’t hit the milestones, and investors will pattern match you out because the team looks weak.
For the love of the start-up gods don’t let over-optimizing on equity or over-expecting progress be the thing that makes you delay this decision. Founding equity needs to be allocated among an awesome team that can get to product-market fit and lead the business. The right founders for your startup actually *want* to be the ones that get you to those key traction milestones you have in mind, not the people that you bring in right after you hit them. Founders want the risk, they want the big chunk of equity, and they want the blank slate that they can be a part of filling in. This kind of proactive ownership mindset is critical to embed into your startup DNA, and you want a core team to do it, not just one person.
Antipattern: The chicken and egg aka the ‘can’t start until we have the team’
Symptoms
Sometimes you see a friend always talking about starting a startup but it never gets off the ground. Usually they don’t feel like they can start until they have the team in place or investors in place or whatever. Another common refrain is the people think they don’t have time to get the start-up started or that they can’t do it unless they quit their full-time job and focus on it entirely to raise money and get it off the ground.
Story
I’ve had many really smart friends that would make great founders but haven’t taken the jump yet. There’s a few groups of friends that I’ve worked with before that have tried to work on similar startups that I’ve done — applied machine learning stuff. They always seem to be distracted by other projects that they’re working, either within a services business, or within another company. They don’t have the right idea or team in mind to really risk the time money and energy on a startup. Maybe at most they make a half-heared and under-resourced effort that they nurse for a while and eventually die — normally this never even gets off the ground beyond maybe incorporation or a V1 at most. As the years go by they never really take the plunge and take the risk. The value of those short-term project distractions keeps on increasing and startup bets look riskier. The longer time goes by, the more it seems they’re stuck and maybe won’t ever start a startup.
Advise
Perfect is the enemy of the good. At some point you just need to get going. Check out the rolling close model outlined below which explains how you can still be thoughtful about building out the founding team before you go to raise money from VCs. You can still take your time to make sure you’re working with the right people while you’re talking to customers and building prototypes.
Pattern: The rolling close — building the founding team if you don’t have everyone from day one
Based on my experience, you should only present yourself to investors once you have a complete founding team in place. Even if you have a clear vision and you’ve made some progress towards early traction and a prototype, you’re going to have a tough time without co-founders, even at the seed stage. Even if you are experienced and have a clear plan to build out a leadership team plus a realistic idea about the amount of equity you need to grant, you’re just still going to be up against decades of VC pattern matching that’s looking for the right kind of balanced founding team.
It’s fine to start having customer discussions and start working on a demo well you’re hunting for co-founders. In fact making concrete progress is always a great selling point to a potential co-founder who would like to see some customers lined up or see a demo — it shows the train is leaving the station.It’s okay to talk to prospective investors you might know already if you’re looking for founders some of them might help you point you to some people that they’ve heard about, but just be careful about presenting yourself to them as a fully formed startup until you actually have the founding team in place.
The founding CEO or the product/technical visionary is usually the prime mover — the one driving the initial push to build the founding team. Imagine rolling a snowball up a hill, it gets bigger and harder as you go up. Once you crest the top it starts rolling down and gets bigger and faster as it goes down, and it’s easier for you. There are two phases like this in startups, building founding teams and then getting to product market fit. So don’t be afraid to treat building the founding team as a phase — it shouldn’t block you from getting started talking to customers and building stuff.
Lastly, an important detail that I missed until building probably my 7th founding team, is that the ability to sell an idea to different constituencies probably matters about the same. You want to be able to sell the idea 360 degrees to co-founders, customers, investors, any partners you need to deliver your product or service, and so on. You kinda want to derisk the entire business as much as you can before taking outside capital, because once you do, it creates quite a bit of inertia towards a particular direction.
Pattern: the project that mutates into a startup
A great way to find co-founders organically is just to work on a bunch of projects with people for fun in areas that you’re interested in and might want to build startups. It’s totally normal for one of these fun projects to turn in to a proper startup, Google and Facebook are examples of this. It’s equally normal for the people that you work on those projects with to become co-founders in the startup.
Rather than sort of trying to pick a startup idea, and go and find co-founders to work on with it, I would suggest that I just look for people to do projects with. the other thing that’s great about projects is you can work on different projects with different people and you can start developing a taste for who do you like? Well, what kinds of personalities? Like what kinds of skills are you actually good at as opposed to what you might think you’re good at? And so what kind of complementary skills might you look for in a co-founder. Projects that you work on in your spare time often tend to be some of the greatest sources for actually finding great startup ideas and building huge companies. This advice also applies if you’re not in college or school, maybe if you’re working at a company, like look at your coworkers, keep a list of people that you think are particularly smart, particularly capable, who impresses you, and start getting to know them better. And ask them if they’re up for working on things in the evenings or weekends. The kind of person who is interested in working on evening and weekend projects is the kind of person that’s likely to make a great co-founder. — Harj at YC
You can get started finding such projects by just socializing with people that might be interested in the same kinds of things that you are.
“I actually remember years ago at Y Combinator startup school, we had Phil Libin, the founder of Evernote. And he kind of gave a somewhat extreme version of his advice; he would only make friends with people that he thought could someday be a co-founder. I think this is kind of the thing where if you make this of a conscious effort well before you start a company, it’ll probably the best bet for finding a great co-founder. make a list of the people that you know, you’re closest to that you think would be great co-founders, and start from top to bottom, and ask every single person there to go grab a coffee and talk to them, and ask them if they’ll start a company with you and be your co-founder. If they say no, that’s totally fine. Say you understand. But like, who would they start a company with and make it very specific. Ask them, “If you were starting a company, who would be sort of your top three or four co-founders that you want to try and convince to work with you?” And ask them for an introduction to each of those people. So your list keeps growing now. Right, it kind of sounds a little bit just like how to have a social life. just find people who are interested in the kinds of things you’re interested in.” —Harj at YC.
Bias for Action
This guide is intended to serve as a tool to help you build founding teams. Go put the patterns into practice and watch out for the antipatterns. Find founders who have built startups before and go ask them to be your advisors. If you want further advice from me, then hit me up on twitter, linkedin, or email.