By Thomas Hong
Startup companies usually start with several entrepreneurs (co-founders) who know each other and share the vision for a new business. Although it is very beneficial for the co-founders to know each other well and to all share the passion of the vision, there are some very important parameters to consider when starting a new business with a team of co-founders.
I have advised many hi-tech CEOs in Silicon Valley and have seen some experiences that I like to share for new startup companies. Several companies have experienced significant problems with their initial founding team members once the company grew bigger. It is very difficult to fix the problems of a company associated with co-founders; it is much easier to avoid future problems with co-founders by being very careful in the selection of the initial founding team.
Important Don’ts for Founding team:
- Don’t start a company with spouse or close relative as a major partner, co-founder in an executive position. Spouse or close relative may work out in a lesser position in the company, usually not at the VP level.
- Don’t start a company with 3 co-founders who are all technical people; they tend to be too similar in experience, knowledge and contribution potential.
- Don’t start a company where the 3 or 4 co-founders are very close friends and there is no clear leader who would be the CEO.
- Don’t start a company with equal partners, people are unequal in experience, knowledge, ambition, passion, energy, leadership qualities, and ability to contribute.
- Don’t start a company with co-CEO or co-Partners. Business is like war, there has to be one leader who must make the final decision when consensus decision cannot be obtained.
Founding Team Strategy:
- CEO must be the clear leader respected by co-founders to have superior leadership skills, passion, energy and ability to acquire quality people, raise funding and bring in key clients.
- The co-founding team should not have duplicate experience and knowledge but complementary experience and knowledge in technology, product design, marketing, sales, and manufacturing. Financial expertise is usually not critical in the early stage of a startup company, financial expertise can be retained on part-time basis initially.
- It is desirable for the co-founders to know each other well and a benefit if they have worked together for several years in different disciplines.
- Passion and dedication is important for co-founders, the CEO should make sure that the other co-founders possess these characteristics during the formation stage by obtaining from the co-founders commitment to invest certain amount of money and time to the new business.