Playing doubles

I’m curious, what’s the real value in a co-founder?

Many great companies have been built off the back of dynamic duos, trios or more (PayPal Mafia). Bill Gates and Paul Allen (Microsoft), Ben Cohen and Jerry Greenfield (Ben & Jerry's) and for the Aussies, my mate John Cornell and Paul Hogan (Crocodile Dundee).

But hang on: there are plenty of solo success stories too. Henry Ford launched Ford on his own and Jeff Bezos didn’t mind the lack of company when launching Amazon.

Co-founders can bring a raft of benefits, but do have shortcomings too. Below are some of my key considerations when making the decision:

Skills: Having the right skill sets on board is mission critical for any business. The critical question however, is how to acquire them?

Paying essentially means you have an employee, who is beholden to you for his or her livelihood. In this instance, the chain of command is clear and you’ll probably get their full focus on the tasks at hand. The flip side of course is it costs money and if you don’t pay enough, you risk the resource leaving for greener pastures.

A pure equity arrangement also presents challenges. Remember, in the absence of cash or contra, equity is earned with sweat. One assumption of shared ownership is it promotes goal congruence. However, if your resource doesn’t have savings or is unwilling to work without a wage, extracting the necessary output may be difficult. In other words, check first they have the capacity to earn it!

My advice? Think carefully about what’s important to the resource you’re trying to acquire. Offering cash or equity to someone that doesn’t want it, usually results in a fruitless transaction for both parties.

Credibility: A follow-on to having the right skills and experience partnered in the business is the credibility, or at least the perception of credibility it provides. A partner with strong technical skills, a public profile, or track record of success can signal a strong endorsement to customers and the market at large.

It’s unfortunate, but behavioral economics dictates most us behave like sheep, mimicking the actions (rational or irrational) of a larger group when choosing to support or hammer a business. I’ll admit, I do it myself from time to time; where I lack information I follow the herd, believing they possess information I do not. If you need positive public opinion, bringing on a partner with some form of cachet may be necessary to build that positive momentum.

Economics: For obvious reasons, the cashed up co-founder is not an uncommon occurrence. But remember capital almost invariably comes with strings attached. Before taking any, take time to understand your prospective co-founder’s intentions. The money man (or woman) will have a sense of entitlement to either exert influence or sit back in the big chair whilst you do all the work. To some degree they’re justified, but make sure you’re comfortable with their prerogative first. You may want help in your day-to-day dealings… or to be left undisturbed.

Support: A little on the esoteric side I know, but support is a big deal for me. Having someone in the trenches when things get tricky is something I personally find invaluable. Who do you turn to when there’s a big deal to close and your employees have all gone home, or when an important client order goes wrong in the middle of the night and the rest of the organisation is sleeping. The guy or girl that helps you bring the deal home or fix the pear shaped order is of course your co-founder.

The support doesn’t just stop at alleviating the workload either. Your co-founder can often be a great source of moral support too. They ride the same ups and downs, experience the same frustrations and are just as vested, meaning they won’t run for the door when things get tough. There have been countless times when I’ve felt the heat and looked to my co-founder for council and comfort, and they can rely on me for the same. Having someone there to celebrate the good times is important too. Some of my old business partners remain my best friends to this day. I remember there were days when we had mountains of stuff to do, but I loved being there because the friendship was strong!

Starting with a co-founder can bring opportunity and in some cases it’s a necessity. But above all else it’s about your preferences – weigh the above and make your decision.

Before signing off, I’d like to give a quick and shameless shout out to all my partners and employees at YBR, for delivering a maiden half year profit in 2017. Great work everyone!