Building a Startup #1: The Co-Founder Equation - The Startup Founder’s Formula to Finding the One

✨ Hi, I’m Sara! In this newsletter, I share my musings at the intersection of tech, product, and human tinkering, with the aim of navigating business and life in the Technology Era with purpose.

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Hey friends 👋, as announced in my previous newsletter, I've decided to take the plunge and build my own startup. This is a big deal because I have only 10 weeks to find a co-founder, build an MVP, and pitch to investors. Otherwise, I'll need to find a job to avoid running out of funds.

As promised, I'm going to document my entire journey. This is the first article in an upcoming series on building a startup, presented as a step-by-step guide written while I navigate the process.

As I am currently in the process of finding my co-founder, today's issue is centered around this topic. Why start from the co-founder process rather than how to find a business idea?

Because both Antler, the accelerator I am attending, and Y Combinator advocate for a "people over ideas" philosophy. This means being flexible about your business ideas, not getting overly attached to them, and instead, prioritizing the assessment of the people around you and your compatibility with them.

In this article, we will discuss three main points:

1. Qualities to consider while searching for a co-founder.

2. Places to look for potential co-founders.

3. How to determine when you have found the right person for the role

4. All the templates I am using to to help me find my co-founder, including a list of 40 questions, a checklist to assess potential candidates, and a partner-up agreement to test founder’s fit.

But first things first:

Do you even need a co-founder?

This question is tricky. The short answer is, you probably do if you aim for a VC-backed startup and lack a previous track record. For instance, at Y-Combinator, only about 10% of the startups they admit are run by solo founders.

However, an analysis of thousands of startups on CrunchBase reveals a different story. More than half of startups with an exit (either through acquisition or IPO) did so with just a single founder. The average is 1.72 founders.

For startups that have raised more than $10 million in funding, more than half did so with a solo founder. Just one-third of the companies had two founders, and less than 20 percent had three or more founders. The average number of founders is 1.85 per startup.

That is to illustrate that, if you can't find a co-founder, there is no need to lose hope. However, there are plenty of very good reasons why finding a co-founder is highly desirable.

In general, these include:

• Complementary functional and personal skills: Building a startup requires a vast array of skills and knowledge, difficult to find in a single person.

• Moral & emotional support: This includes accountability and mutual morale support when facing challenges.

• Division of responsibility: So you're not burdened with thinking about everything.

• Raising capital: Having a team increases your chances of gaining the trust of VCs, especially without a proven track record of building a company.

In my case for example, I know I won't build a company alone. As a first-time founder, I recognize that I lack the comprehensive skills and emotional stamina needed to build something of this scale alone.
I already run a podcast and newsletter by myself, and while it's incredibly rewarding, it's also challenging to rely solely on myself to manage everything. Building a startup is an entirely different challenge, magnified a hundred times over what I experience with the podcast.

Where to find a co-founder

Ask your network: The first place to look is within your direct network. Are there any friends with whom you'd like to build a startup? Make a list of people you're closest to who you think would be great co-founders. Start from the top, invite each person for a coffee chat, and ask if they're interested in starting a company with you as your co-founder. If they decline, that's perfectly okay. Just say you understand and move on.

The network of your network is your friend: The second place is the network of your network. Even if you don't personally know someone who would be a great fit to build a company with, maybe someone in your network does. Talk openly about your search and idea, making sure to clearly communicate what you're looking for. Ask your friends, "If you were starting a company, who would be your top three or four co-founders that you'd try to convince to join you?" Then, ask for an introduction to each of these individuals.

Attend events in your area: If you live in a city that frequently hosts startup events, go there and try to meet as many people as possible.

Participate in hackathons: This is an amazing way to find a potential co-founder, especially because you can immediately see how this person works and operates, and whether you connect with them.

Y Combinator founder matching: this is an international database, where you can find like-minded people to build a company with.

Online forums: Places such as Indie Hackers are great for connecting with potential co-founders.

Joining accelerator programs: This is what I did when I decided to join Antler. I was attracted to the selection and vetting process performed by the team, which saved me time by eliminating the need for my own due diligence.

What to look for in a co-founder

Finding a co-founder is akin to getting married; you'll spend more time with them than with your friends and family.

There are five critical elements to consider in a potential co-founder, each essential for a successful partnership.

Let's start with the base of the pyramid: Chemistry.

Chemistry is crucial when building a company with someone, yet it's challenging to define as it varies from person to person. My approach is to listen to my body's reactions when I meet someone. Does your body tense up or relax? Do you feel excitement or annoyance? Your body is a 24/7 compass, providing signals like stomach tension or shoulder relaxation, and the overall energy after interacting. Trust these cues, even if everything else seems perfect on paper.

The second element is values.

It's vital to know your values clearly. To discover them, ask yourself: "What do I value most in..." (insert situation)? For instance, "What do I value most in a co-founder relationship?" or "What do I value most about the idea of building a company?" Your values and vision, reflecting your aspirations and how you see and wish to change the world, must align closely with those of your co-founder for the partnership to thrive.

For example, if your ambition is to build a high-growth, venture-backed company aiming for a public offering, and your co-founder prefers a gradual, risk-averse approach, focusing on steady growth and comfortable revenue, this mismatch in motivations could lead to conflict.

Personality can be similar or different; both scenarios have their advantages.

Complementary personalities ease collaboration, but differing ones can balance each other out, provided there's mutual respect and understanding. To assess personalities, taking a free test like the one available on 16personalities.com can offer insights into decision-making styles and general preferences.

Lastly, skills should be diverse.

Pairing with someone who shares your exact skill set is less beneficial than teaming up with someone whose skills and experiences complement yours. The necessary skills depend on the business type. For instance, a fintech startup might best be served by a team comprising a business generalist with banking experience and a software developer.

The Co-Founder Questionnaire

I have compiled a list of 40 questions inspired by Y Combinator and First Round to help you clarify your priorities and perspective when it comes to building a company. Both you and your potential co-founder should answer all the questions, compare, and rate your level of agreement.

The questions are classified as follows:

• Values & Vision

• Working style and preferences

• Commitment

• Motivation & Ambition

• Conflict management and decision-making processes

• Company & Culture

• Roles & responsibilities

• Finance & Equity

• Startup Ideas

Not all questions are created equal. Here are some of the deal breaker questions:

Working Style and Preferences

• Commitment: Gauge your willingness to dedicate hours, including weekends and personal time. How many hours a day are you prepared to work? Are you open to sacrificing parts of your social life for the success of your startup?

• Location and Collaboration: Do you prefer working in the same space as your co-founder, or are you comfortable with remote collaboration? Discuss the challenges and benefits of each setup. For example, remote collaboration, especially in the early stages, can be challenging. In-person interactions allow for spontaneous discussions, while remote work requires scheduled meetings.

Managing Conflict and Decision Making

• Conflict Resolution: What protocols do you have in place for resolving disputes? It's essential to establish a clear process for decision-making, including how final decisions are made and by whom.

• Decision-Making Style: Will decisions be unanimous, or is there a structure for making decisions in case of disagreement?

Roles and Responsibilities

• Titles and Roles: Consider what titles are important to you. Do you want to be CEO? What role do you envision for yourself within the company? What responsibilities are you willing to take on, and which would you prefer to outsource?

Equity Split and Fundraising

• Financial Transparency: Openly discuss your financial situations. What is your financial runway, and how soon do you need the company to generate income for personal stability?

• Salary Expectations: If funding is secured, discuss the necessity and timing of salary distributions for yourselves.

• Equity Distribution: Antler suggests starting with a 50-50 equity split but recommends considering a "working backwards" method for fairness. Look ahead 7-10 years and evaluate who will have contributed more significantly. Consider factors such as seniority, investments (both financial and network-based), and level of commitment (full-time vs. part-time).

How Do You Know You've Found the Right Co-founder?

Here is a two-step approach to assess if you have found the right person.

Step 1: Answer the co-founder questionnaire and complete the checklist

After answering the 40 questions and verifying that there are no deal breakers, it's time to move on to the final co-founder checklist. This checklist is designed as a last step verification process and includes assessing key elements such as skill sets, vision, and trust.

Step 2: Allocate a 'Track Out' Period

Agree to a set period where you work together on a project. To that, you will set up a partner-up agreement, which involves announcing your collaboration on idea X, setting a deadline for achieving a tangible outcome (like an MVP or prototype), and pitching to potential customers. This period is about actively testing the partnership through real work scenarios. At the end of this time, have an honest discussion to decide if you enjoyed working together and if you're both willing to commit further. If not, it's honest and respectful to part ways and explore other partnerships.

This two-steps approach is what I am going to follow to find my own co-founder. Will I find him/her? I will let you know in the next issue!

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