Opinions expressed by Entrepreneur contributors are their own.
Should you go it alone or hire co-founders? If you do hire co-founders, should they be friends, colleagues or family?
When starting your business, these are the right questions to be asking. The number one reason startups fail or succeed has to do with the founding/management team (not the product), so getting the right people in the right roles has a profound impact on the rest of your life (no pressure!). Sixty-five percent of startups fail because of management issues, largely attributed to simply not having the right team in place, according to Harvard Business School professor, Noam Wasserman.
Related: Thinking of Going Solo? 7 Reasons You Need a Co-Founder.
All dramatics aside, founders of startups are facing a whole new world as they build their business, which is why Wasserman offered a “Three Rs” framework that can be used when determining who may be the right fit for your founding team. Still, this framework is only useful when we have a clear picture of what roles need to be filled. While history shows it’s possible to have a company that raises money and exits with just one founder, most high-gross startup companies have co-founders.
I am attuned to the plethora of content out there encouraging startup founders to just run with it and attempting to debunk myths that you need co-founders. The reality is, those who decided to go it alone, more often than not, say they wish they had a co-founder to split work, empathize through the experience and provide support. But, you should choose those co-founders simply for emotional support?
It’s attractive to choose friends, peers and family as co-founders, because they share a passion, are trustworthy, and you know them. There’s a warmth and comfort when selecting people you know, but it comes at a cost. We know there is a higher rate of failure for startups who choose friends and family founders, usually due to the tension around needing to make critical decisions while maintaining your relationships. More often than not, the relationship is prioritized, and decisions that are best for your business are sacrificed. What’s best for the business, then, will likely be to build a team from scratch, fulfilling specific expertise that is critical for early-stage planning. So, who should that be?
Depending on your industry and the type of startup you’re launching, there will be different needs and expertise required. You’ll also want to consider which roles you’re prioritizing when bringing on founders, because with each new hire comes a reduction in available equity, which may have an impact on fundraising later on down the road. So, planning that hiring roadmap before kicking off, and getting the right founding team in place is key. Knowing that your specific founding team may need a different composition, my goal is to offer a generalized way of thinking about the three roles that should be prioritized for your founding team from the start.
Related: 7 Qualities Every Entrepreneur Should Look for in a Co-Founder
You’ll need a driver who is also a jack of all trades. When you interact with other businesses, potential investors, and even internally, people will expect that you have a CEO to help drive conversations and keep progress and planning on track. Even though decision-making internally may be shared, a CEO can guide final decisions and execution. They also play an integral role in problem-solving, hiring, planning and building a culture from the onset. For a while, the CEO may also fill the COO role, but this should be short-lived and re-balanced as your startup grows.
The CTO isn’t just someone who understands technology. They’re someone who has a strategic mindset with sales and business acumen. At the onset, the CTO should be prepared to get their hands dirty, particularly if you’re a tech startup. At the beginning stages, the CTO may have 80% tactical responsibilities building and 20% strategic roles, spanning strategic planning and fundraising, which may evolve over time to 20% tactical and 80% strategic. Still, they need to be capable of making strategic technical and operational decisions, while being available and agile enough to carry out much of the tactical work through early-stage development.
In some cases, you may want a third co-founder on your team who can spearhead growth initiatives from the onset. While fractional CMOs join startups all the time and are certainly a critical first hire, it’s not always the case that they are officially part of the founding team. With a CMO as part of your founding team, you’ll expand your purview of strategic opportunity, which can impact your ability to reach investors and potential customers, as well as generate the brand-building buzz you need before you launch. Many startups make the mistake of waiting to market themselves and their company when they’re ready to go live, which is lost time to build things like backlinks, credibility and established connections.
It’s worth emphasizing that your company and product offering can influence what type of founding team you’re looking to build. That’s why I take the time to work with my clients and understand what gaps we need to fill and build that strategic growth plan for hires and co-founding members based on their vision. Whatever the case, not winging it from the beginning will make all the difference in your success.
Related: How to Choose Members of a Founding Team
Key success reminders:
Have a clear division of labor, and consider how this plays into equity, while remaining agile enough to re-balance responsibilities if needed. It’s dangerous to forward movement and alignment if there is an overlap between roles, so clarifying roles and responsibilities and being able to directly draw that line to potential impact on revenue/growth will be valuable in the short-term and in the long-term funding strategy .
Consider how decision-making is being navigated. How are people making the decisions in the company? Do you have a voting approach or need consensus? Who has the final say? Considering the clear decision structure and what happens if the team starts to break apart will keep you grounded as you navigate the twists and turns of getting your startup off the ground. Unequal Equality is one approach to solving this, where everyone has equal positions, but you can assign a decision to one or a few individuals to push forward.
Legal is arguably an advisory role, but is nonetheless critical to your founding team as early as you’re able to afford. Most see this person as valuable for contracts, fundraising and establishing the legal entity alone. What is easily overlooked is the substantial intellectual property that may need protected. Additionally, not having the right structures built up-front can leave you in a non-lucrative position down the road, which FanDuel’s acquisition years ago gave a great reminder of.
A CFO should also be one of your first hires, although he doesn’t necessarily need to be part of your founding team. Particularly, as you begin raising funds, your CFO can work closely with your founding teams and Legal Counsel to ensure proper financial planning around cash flow, fundraising and projections.