Jaime Medina
In the first entry of this series, we talked about the importance of a solid cap table. Now, let’s move on to one of the most critical elements of a startup: the team. As we all know, if your team isn’t perfectly structured and incentivized, your startup is unlikely to succeed.
The first question every founder faces is: do I go it alone, or do I bring in co-founders? Many studies show that startups are more likely to succeed with more than one founder, but, like everything else, there are plenty of exceptions.
A common scenario is the search for a technical co-founder by a business founder, or vice versa. But often, these early matches aren’t ideal. It’s vital to dedicate enough time to find the right co-founder match rather than rushing into a partnership that could be a compatibility or focus issue down the line.
A very important aspect when building a founding team is equity distribution. It’s tempting to go for an equal split, as it might avoid conflicts in the short term. However, this approach only makes sense in very few cases. The equity split should be based on the importance of each person’s role and how essential they are to the business. The percentage each co-founder holds should reflect this. Also, if you want someone who will stay up at night worrying about the same things you do, they should have a similar equity stake to yours. But if you’re hiring someone who is only motivated by the project because you can’t yet pay them their market value, their equity should be much smaller.
Additionally, giving a large share to a co-founder who later leaves the project can cause irreversible damage, as we mentioned in the previous article.
Another common mistake is having co-founders with too similar backgrounds or, on the flip side, too junior profiles. Similar backgrounds often occur when co-founders come from the same work environment or have similar expertise, but it raises the question: what different value does each bring to the table? If two people have the same skill set and background, it’s likely that they’ll both excel in the same function, and there’s no need for two people leading the same area.
On the other hand, selecting junior profiles as co-founders just because they’re enthusiastic about joining the project is also risky. Will they be able to build and lead a senior team in the future? It’s important to think about whether they have the skills to recruit and lead a team when scaling.
Of course, there are exceptions, but these are critical questions to consider when choosing the right co-founder.
At the end of the day, it all comes down to common sense. Your founding team should be well-balanced, professional, and aligned with the project’s goals. At least one of your co-founders should have enough industry or technical knowledge to demonstrate that they can really solve the problem your startup aims to address.
