Recently, I participated in a panel discussion as part of Fern Mandelbaum’s class at Stanford’s Graduate School of Business, “Entrepreneurship from the Perspective of Women.” The seminar showcases successful entrepreneurs and their professional and personal journeys. For the panel on which I spoke, discussion focused on teams, partnerships, and co-founders. My co-panelists included Jana Rich, an independent Independent executive recruiter / team builder for startups; Elizabeth Weil, a partner at Andreessen Horowitz, formerly of Twitter; and James Nicholas, a restaurateur. All three shared valuable perspectives with an energetic roomful of business students eager to become entrepreneurs in their own right.
As part of this panel, Professor Mandelbaum asked us to share with her class how we think about choosing a founding team, determining the equity split, and attracting and maintaining a great team. In this post, I take on the question that always comes first for me: choosing a great founding team.
I’ve started several companies in my career, and I’ve always done it with partners. In general, it’s easier, more fun, and better to be in the trenches with others. Picking the right partners is key to making it a good experience and a successful company. How do you pick the right partner? That’s sort of like asking how to decide if someone is the right person to marry. You can date and date and date, yet sometimes surprises pop up when you start building a family together. It’s the same with building a company: you do your best to choose wisely, but nothing is guaranteed.
As I’ve chosen co-founders for the companies I’ve started, I’ve found four filters that can help. They are:
1. Shared backgrounds. Common threads like schools, industries, or prior companies automatically break down barriers. The importance of always keeping your network alive cannot be overstated. It’s best if your co-founders are people whom you know, like friends of friends. If you tap your close friends, you need to be aware that friends may have no idea how each other behaves professionally. As well, friends sometimes have unreasonable expectations of each other, and this can get in the way of making tough decisions. Once you start working together, co-founders will form close working relationships and will enjoy spending free time together, like on weekends and ski trips. New friendships will be born within the boundaries of the experience you’re sharing and may or may not grow into long-established friendships.
My co-panelists also offered some excellent points with regard to choosing — or not choosing — those with shared backgrounds as co-founders or employees. Elizabeth said that she looks for people who have interesting outside interests and pursuits. Fern noted that sometimes you have to look beyond your own background and network to make sure that you’ve accounted for diversity and inclusion in your company. And in James’ case, he looked very close to home for a founding partner; he co-founded his restaurant business with his wife, Anna. While James and Anna have clearly-defined roles and function well as a co-founding team and as husband and wife, from personal experience, I can say that’s not always the case. My takeaway from our panel discussion on co-founders’ backgrounds is that each situation will warrant unique and careful scrutiny, making sure that biases in all forms are checked along the way.
2. Clearly-defined roles. Not everyone can be CEO. Not everyone has the tech skills to run product. Roles and responsibilities need to be defined as part of your earliest discussions with your co-founders. You don’t want a founding team on which everyone wants to be CEO or in which everyone thinks they’re better at someone else’s job. As your co-founding team grows, you’ll work together to recruit other members, ones who can add to the conversation with expertise that complements your existing team and feels like a natural fit. Jana spoke of this growth as going far beyond recruiting and hiring; she prefers calling it “building leadership teams.” As important as it to have clearly-defined roles, it is equally important to make sure that your team functions well as a whole.
3. A feeling of empowerment. Make sure that all team members have the autonomy and authority to lead within their roles. It’s good to have robust discussions of strategy, but it’s unhelpful to have everyone second-guessing each other’s decisions on a daily basis. Selecting co-founders with complementary skillsets who are confident and competent at executing their own roles is imperative. Trusting each other’s abilities and believing that everyone has the best interests of the company at heart is an important part of empowerment.
4. Clear communication. You have to communicate a clear vision in order to attract co-founders and early employees. It’s essential to do this swiftly, succinctly and orally. You need a fundraising deck, but that’s not what’s going to make great people want to work with you. You’re selling yourself as a partner while also selling the vision for your company. Thus, your elevator pitch has to be conversational and convincing but not polished. Your ability to convey your big ideas clearly and with conviction is part of how you will attract talent to your company. In early days, every time you pitch your vision, you are testing yourself and learning from the feedback. People who you want to join you are not those who accept your vision without asking questions, and even challenging your vision, but, in the end, they have to totally buy in.
There are, of course, many other factors to consider when choosing a founding team for a company. These are big decisions, as you’re selecting people to whom you’ll feel like you’re married for years to come. Take time to make good decisions by using these filters, and, of course, listen to your gut.