Tuesday, September 25, 2012

Choosing the Right Cofounders

I was fortunate enough to choose two amazing co-founders for my startup Dasient, Neil Daswani and Shariq Rizvi. When people ask me what the most important decision was from my startup experience, I think that the choice of cofounders ranks as probably one of the most important (along with choice of market and maybe choice of investors -- more on this later).

Your cofounders will be like your family for the next few years. You may in fact spend a lot more time with them than with your real family. Like with any family, you will go through ups and downs. You will disagree with each other. You will have fights. You will face difficult decisions together. But at the end of the day, if you can still work together and pull through the "downs," you will have a much higher chance of success. 

So one question I often get is, "How do I choose a cofounder?"

1. Choose someone you know well and trust.

First, I believe that you are better off choosing someone you know well. This is going to be someone you have to trust implicitly, so having known them well for a long time helps. Think back to people with whom you have studied in college, or even better worked with in a professional capacity. I had worked with Neil in a company called Yodlee for two years about 6 years before we decided to start Dasient together. And I knew Shariq from my grad school days at Berkeley-- he was working on his PhD in computer science and I was working on my MBA. We had a history together, which helped to start with a foundation of trust. Plus, with both Neil and Shariq, we had a lot of common friends and acquaintances, which further increased the level of trust. It wasn't as if we had found each other by posting a "co-founder wanted" ad on a job board. 

2. Make sure that you work well together.

Second, screen for how well you actually work well together, and for each person's level of commitment. Although you may have known someone for a while, unless you have actually worked on a project, you don't know how well you work together. We did a bunch of "warm up exercises" to see how well we worked together. In 2007-2008, I worked with Neil and Shariq separately on a bunch of Facebook applications. These did not end up as ideas that we built our business around, but they were extremely helpful warm ups for us to get to know each other's working style. Did each of us take on a fair share of responsibility, and did we deliver on commitments to each other? Were we willing to roll up our sleeves and do whatever it took to build the product? Were we able to solve problems together? Did we have the commitment to spend nights and weekends working on a side project? What was our philosophy about building a company together? We learned the answers to each of these questions by working on the "warm up" Facebook apps together over the course of several months. 

In their book "Getting Real," the 37Signals team have a chapter called "Kick the Tires." Here is a direct quote from the book: "Work with prospective employees on a test-basis first. It's one thing to look at a portfolio, résumé, code example, or previous work. It's another thing to actually work with someone. Whenever possible, take potential new team members out for a 'test drive.'" I think that this advice makes a lot of sense, and I would even extend the advice to "work with prospective cofounders on a test-basis first." (BTW, "Getting Real" is a really awesome read. If you haven't read it yet, check it out.)

3. Find cofounders who are complementary. 

Third, make sure you find cofounders that are complementary to you and that can add value on day 1. One of the big mistakes that I see a lot of MBA-types make is that they find other MBAs to be their partners in a startup venture. Then you have a bunch of cofounders with a very similar skill set, and not enough cofounders with the skill set that is most needed when first starting a venture: the ability to write code. 

When you're first getting started, you definitely don't need more "business cofounders" than technical cofounders. Depending on the type of startup, you're better off with 1-2 technical cofounders and 1 business cofounder. Nowadays it has become easier for even fairly non-technical people to at least make prototypes, if not write fully functional code. Get the business cofounder to contribute to the actual product development by creating mockups/wireframes, or writing some of the front-end code. What you don't need in a business cofounder is someone who is only focused on "strategy," "business plan," or "partnerships." The business cofounder can take primary responsibility for strategy and fundraising, but should also actively contribute to the product development. 

On the flip side, I have seen many really talented engineers who don't appreciate the value of having a business cofounder. These same engineers will often pursue a startup opportunity for the wrong reasons-- it seems cool and sexy, or it's something that that they are excited about, for example. (Being excited about an opportunity is, of course, really important, but should not be the sole reason for pursuing a startup.) At the end of the day, though, does the opportunity represent a large enough market opportunity? This is where having a business/product cofounder can help. The business cofounder can help identify customer pain points, size the market opportunity, ensure that the positioning is correct. These skills are probably more important for B2B tech opportunities than consumer. 

My point is that each confounding team should have cofounders whose skill sets are unique and complementary. So when looking for cofounders, make sure you don't find clones of yourself.

In a future post, I will share some stories about how having good cofounders made a big difference in my startup experience, and how having bad cofounders can destroy startups. 

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