Do you need a cofounder for your startup? Video Lecture | How to Start-Up your own Company (Video Course) - Entrepreneurship

hey everybody its Jason Calacanis and
this is startup basics brought to you by
my friends at WS gr you know the famous
law firm Wilson Sonsini and the way we
came up with this idea was we were
sitting having coffee and we're talking
about two of our shared passions which
is how do we help startups more and we
thought about all these folks who are
coming into the industry now inspired by
seeing all these great successes and we
very simply said to ourselves let's
answer let's try one more time to answer
those very basic questions people have
and what startups you know you hear the
same questions over and over again and
it changes over time so what was true
when I was starting in the internet
business in 93 and 94 was very different
than 99 and 2000 it changed radically in
2004 and it's changed again in 2014 so
I've seen these questions come up over
two decades in my career investing in 70
companies building 3 or 4 and hosting
podcasts for 500 episodes or so and
doing interviews with founders so this
question is one that you've heard a
million times which is how do I find a
co-founder and so I want to just back up
from the question of how do I find a
co-founder - why do you need a
co-founder what is the role of a
co-founder why do people feel like
success could be greater with a
co-founder well in the beginning when
you're starting a company if you have
two people working on it for free
you're gonna get twice as much work done
and you have two people who are hugely
vested hugely invested in making it
succeed in other words Steve Wozniak and
Steve Jobs Larry Page and Sergey Brin
both have everything at stake in
building that company so we've had this
sort of myth in our industry of you know
co-founders is how it's done now it
doesn't always work that way sometimes
you have multiple people on the team
sometimes you have one person on the
team and a couple of bit players the
reason most people think that you should
have a co-founder I believe is because
they've seen so many examples of
successful companies with them why do
you need a co-founder
can be very lonely to be a start-up
founder it's very isolating because you
hire a bunch of intelligent people they
come to you with how the business is
going every day hopefully and they bring
you sometimes all the good news because
people don't want to go to their boss
with bad news and so I see this all the
time people come to me oh boss this is
going great this is going great
oh the launch fest will has this many
people this and I have to stop and say
hey what's the bad news right now what
happens over time is you hire all if
you're a single co-founder you hire all
these smart people they bring you the
problems they can't solve
if you've trained them correctly and
created the right culture that they
bring you problems which is a whole
nother subject which we'll do in another
startup basics but then you have your
board and a lot of times the board's
invested their money in your company in
which case if things are really
problematic I see a lot of founders are
scared to tell the board because anyone
get fired or they want to put their best
foot forward and they don't want to tell
the team because I don't want the team
to think like oh my god everything's out
of control I might need to leave this
company when you have a co-founder you
can sit there drink beers and say wow we
are a moment away from going out of
business or this doesn't seem like it's
working and have like a real honest
co-founder discussion and so that
loneliness and that ability to vibe with
somebody who is on equal footing with
you is really valuable so I had that in
my second company which was called web
logs Inc where Brian Alvey who was an
employee of mine at the previous company
silicone on reporter became my partner
on web logs Inc which was a great great
success for us now you need to have a
complementary skill set when you're
doing co-founders or hopefully you do
what's complimentary
one person likes to go out and speak at
conferences one person likes to stay
home and work on the product
one flourish person likes to do sales
calls one person likes to do hiring
another person likes to raise money the
other person likes to build the deck
it's not always going to be perfect
but if you have two extroverted business
people they're going to be fighting for
the stage and who gets to do you know
the Fast Company interview versus who
gets to do the New York Times interview
and I see that frequently and that is
always problematic if you have two
technical people neither of them may
want to do
the press and either of them may want to
do the fundraising they may just you
know want to build the product together
so that can be pretty complimentary but
complementary skill sets are important
but most important is how many years
have you worked together or known each
other the larger the number of years
you've worked together and or gone to
school together and known each other as
friends the greater the chance of
success
so as far as I'm concerned if you
haven't known the person for over a year
or two and you haven't worked with them
becoming co-founders you need to be
prepared for it not working out just
like if you were to marry your college
you know sweetheart who you lived with
for two years and you dated in college
and you know he was really cute and you
spent a lot of time together whatever it
is you know getting married after eight
years together you you you might have a
greater chance of success and having
lived together and had a lot of mutual
experiences if you just met them on
OkCupid or tinder in the last three
months you might not want to rush into
that marriage right and people do talk
about being co-founders as a marriage
for good reason because you your fates
are tied and the only way to unwind
those is through legal uncomfortable
breakup proceedings just like a marriage
right like a divorce the divorces that
startups are brutal because you could
have people just disagree in the
businesses doing great and then one
person has vested a portion of the
shares the other one person hasn't and
you get this crazy you know people being
kicked out and moved up and board drama
which if you read the Twitter book it's
filled with hatching Twitter by Nicolas
Bolton so I think if you haven't
actually known each other for a long
time I would not become co-founders I
think it's a mistake to be totally
honest if you have known each other for
a long time by all means give it a shot
and you have to have this discussion
which is we're going it to be
co-founders we're both gonna invest our
shares over four years and you may
sometimes vest the first year because
you've been working on it for a year and
you convince your VCS or investors to do
that for those of you who don't know
what vesting is it means if we were
partners on the company and we gave 20%
to an investor and we gave 15% to the
employees and there was 65% less I'm
gave 5% to a key employee let's say we
had 60 points left we
have 30 points right Jason and Brian
that weblog sync we have two vests that
over four years which means we're gonna
get about seven and a half percent or
exactly seven and a half percent every
year so if after a year you decide hey
the business needs Jason not Brian or
Brian not Jason and Brian or Jason need
to go wow that person might lose 75% of
their stock options which means there
has to be a negotiation that occurs
because the board can unilaterally fire
them right if they have the voting power
a founder could be voted out and that's
where that board dynamic comes in now if
it gets to that point things are in
total disarray and the company might not
be worth anything but it does happen
sometimes the company's worth a heck of
a lot and this happens and then that's
when people hire lawyers and typically
what happened is in that situation let's
say two people with 30% one had vested
let's say 10% one-third of their shares
the board might say okay we'll let you
vest another five points in the business
over the next year as a board member or
as a consultant
they'll come to some reasonable
negotiation to keep the co-founders
happy but it is more fun to win together
now if you're older and you've got two
or three startups under your belt I
don't think it's a good idea to have a
co-founder unless you absolutely love
working with that person and you you
just it's what you want to do why it
doesn't make sense on an equity cap
table with all these talented people out
there to give away half at the start if
you're a Mark Pincus type right or
you're whoever you know jack from
Twitter or Evan Williams with medium you
see those folks tend to go out on their
own and then they hire their founding
team as it were so hiring a founding
team means you're giving them you know
half a point a point two points three
points five points maybe but not half of
all your equity and that's fair to you
and to everybody if you're not technical
and you're looking for a technical
co-founder we see that a lot I think you
need to really have a sugar ton of value
I was about to use the S word sugar ton
of value if you are the non-technical
founder so I am a non-technical cook I
mean I know technology very well but I'm
not coder right and so somewhere along
the lines basically because of why
comedy and text artists people got very
obsessed with technical founders
especially because of Zuckerberg success
as well
so the idea that you know a founder
who's technical is you know very
important and more important it's a bit
of a fallacy but it does reduce the risk
in the early stages when you know if you
lose developers and it's hard to find
developers the the product could get
lost so if you're a non-technical
founder you need to have some very
strong skills raising money getting
press hiring world-class people maybe
designing the product being a product
designer maybe sales and getting
partnerships and deals so I've seen all
those kind of co-founders out there
Peter Pham who did color calm and a
couple other companies he's just known
as a deal maker incredible deal machine
so he's a great co-founder to have if
you had a technology had a company and
you were a technical co-founder and so
let's move on to what some people who've
been on my program have said about this
very issue first up we're gonna hear a
clip from Gerry kelowna
and this is really about difficult
situations let's put the clip number
five avoiding difficult fearful or
challenging situations people or
conversations well it's like a client I
had who took two years to fire his
co-founder two years to two years not
one to two years not one two months two
years right two years two fires
everybody knew including both parties
but nobody dealt with it so I let him
vest for two years forget about the vast
thing you're yes you you immediately go
to that think about the damage that of
course the action organization crew
hundreds of people and there's the you
know what's Johnny doing over in the
corner nothing nothing we've given him
busy work what we're not talking about
it and we're not dealing with it hmm
yeah so this is an absolutely fantastic
you know anecdote from Gerry Kelowna
exactly how bad it can be because
keeping people in a start-up who are not
actually productive it leads to this
really bad situation where people resent
it and then they lose faith in the
management so I've had this problem in
the past where I have not acted quick
enough and when I was in my younger
years I used always think I could work
with somebody now you always think like
you know I'm a psycho
major and I know how to get in people's
heads so if this person is not
performing at the grade level I will try
to you know just be the master motivator
coach you know Phil Jackson from the
Lakers or Pat Riley from the Knicks and
Miami Heat
I'll get in their head and it never
works because it takes so much time even
if you are able to get to them and and
change them they might why not resenting
you because they feel like you're like
too involved in their head and so the
best thing to do is to cut it off quick
and to make sure people know listen it's
not working out it's nobody's fault
necessarily this happens all the time
this company needs to have a clear
direction and so like two pilots trying
to pilot the same plane will not result
in anything but death and despair and
crashes and loss of life and you know
all kinds of valuable things you need to
have one pilot in that seed find have Co
pilots but gosh you know get rid of the
co-founder if it's not working out and
treat them well that's the other thing
you know this is something you know I
used to get when I was younger a little
resentful like when firing people and I
was just like god this person didn't do
a good enough job for the last four
weeks and you know like we got to fire
them with prejudice you know like we
have to send a message and then I got
older and I was like you know what it's
part of startups you're gonna hire
people they're not going to be
productive and then you hire other
people are gonna be wildly productive
like I'm so blessed with the team I have
at launch or inside right now they're
all wildly productive so more than
probably I pay them for they're just
like driven people they put in a lot of
extra time so if you have somebody who's
a dud the way I look at it now is I got
four other people for every dud or
nine other people for every dud who are
crushing it and just paying huge
dividends for our shareholders I'm not
gonna sweat it I'm not gonna sweat the
person who we wasted eight weeks of
salary on or eight months of salary on
even let's cut my losses and move on and
not have that you know in my head space
alright and we have one more clip from
mr. mark Schuster's we play that what do
you think is the cause of most fighting
between co-founders well let's start
with a few basic things which is often
co-founders don't know each other that
well when they start right even the ones
who know that each other well let's say
it's a 10-year journey or seven-year
journey and let's say you all start when
you're 29 yep
29 to 36 what happens people fall in
love yeah people get married babies
people have a baby you find out and all
of this has happened to me in
experiences you find people who start
drinking too much you find depression
uh-huh you find people who don't come
into the office as much and you find
some people who have really high risk
tolerance I want to build a
billion-dollar company and other people
who think no I want to be conservative
if I could make 2 million dollars that
would change my life so your incentives
are not always aligned believe this
co-founder nonsense I think it gave me
so father's but do you know that I'm the
most public eye on this topic no I wrote
a blog post you should read it called
the co-founder mythology I went to
Stanford and I delivered a speech and
the hardest Silicon Valley same about
the co-founder mythology what I argue is
here's my argument Jason real quickly I
said no I want to hear you should hire
your co-founders and here's what I mean
that's what I do if you start with a
hundred percent yeah and let's say you
raise capital and give away 20% to your
cat fibula you can do whatever you want
you can bring in someone for 3% 5% 10%
40% right it's up to you but you're
still in charge you still control voting
you should treat them like a founder be
open with your financials and how much
equity you have how much they have of
them in decision making but if you ever
fall out of love you have a prenup right
right and stock the other thing I should
tell you is I talk to incredibly
talented people who are afraid of taking
risk they don't manifest that in their
own mind that way but they will gladly
join a company for 2% that has that I've
been D rest for 1% that has been D rest
means little capital you've got the idea
you've got the business plan the website
the prototype whatever so if I go to you
and say you know what Jason I've decided
to give you 10% I mean me who gives
10% to anybody right it doesn't happen
right it's a myth if you think it
happens but if you go in and you own the
majority of the company to begin with
you have that flexibility so there you
have it just you
two legendary legendary investors and
now wants a coach who were on this week
in startups and really address that
issue head-on you got some good
information to get started here open
communication take the relationship the
co-founder relationship dead serious and
invest in it as I tell people the teams
that break bread more often than the
teams that don't bill beretta products
and they last longer
so taking retreats having dinners taking
people out to lunch well that stuff
seems superfluous at times and I used to
actually be a little hardcore about that
like why wasn't having this kind of
stuff I always am as I then I realized
hey wait if I was the person working at
that company it would feel really
special for me to be able to have the
founders time at a dinner where at a
lunch or to do an off-site right it's
that attention and that caring to having
a deeper bond with everybody on the team
that matters and do that if your
co-founders make sure you've got plenty
of time on the calendar together on a
regular basis some additional resources
for you founder dating comm which is
like speed dating for co-founders lab
comm and accelerators like tech stars
really specialize in this in fact David
Cone brilliant brilliant accelerator
creator has a program where people can
come in and be just a tech stars tech
star you're just a great developer a
great marketer you go there you hang out
and you see the team's building stuff
and you go I want to be part of that
team and then that team says we want
that guy or that gal on our team and
they make you an offering so you can
join these accelerators sometimes just
as a gunslinger your skills matter make
sure you have great skills in life and
thank you to my friends at Wilson
Sonsini for partnering with me on this
very important series we hope that this
really helps founders be prepared for
the incredibly hard yet exciting journey
they're going to be on building their
startup we'll see you next time