Startup Co-Founder Roles: Find a Co-Founder- Episode 2

 

Paul: It’s Paul.

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Florin: It’s Florin. What are we grinding today?

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Paul: What do you think if today we’re grinding how to find a co-founder since we are two of us in this podcast.

Florin: Yeah, that sounds great. I guess a lot of people are asking themselves, how am I going to find a co-founder? Let’s explore the key startup co-founder roles.

Paul: Well, I can give you, for example, how I did it in the current startup that I’m involved with. So basically in the previous startup that we failed, we had some bills, a lot of bills to pay. There was the part in which we needed to get some money to pay them. Actually, I started to work for a client and I built two products for them.

Florin: You’ve had bills to pay and then you’ve started working alone or with your other co-founder, with other people to pay the bills?

Paul: With my other co founder, we work on this product, on these two products for this client. Then my previous co-founder got hired in a company. After two years of working for this client, they got a proposal for me to become the partner in their new startup.

Florin: Oh, wow. Who knew that was coming, right?

Paul: Yeah, actually, it was quite interesting because we started from a relationship with a client supplier, with contracts and everything in place, with some money paid in advance before starting to work because we were two strangers. We were connected through someone but still, we did not have any connections until then. And the interesting part was when they got this proposal. So what do you think about this? Like a client? This is a unique way to discover startup co-founder roles.

Florin: Well, this is definitely something new and I don’t think I’ve heard this a lot. I’m not sure if I’ve even heard it before. I know other cases that might be similar, but I don’t think that I’ve ever heard this case until now. But I guess it makes a lot of sense because they were good with sales, because we discussed this in the previous episode. And then they also had the knowledge and the clients and they needed the tech support, which is the perfect moment to try and find the technical co-founder, right? This is actually good.

Paul: Yeah, exactly. If you look a little bit, it’s a common scenario in which three people work together for three years and we see that we can actually work really well and each one is good on his part.

Florin: Yeah, and you were always respecting the terms of the agreements. Both sides were respecting the terms. Both sides were respecting deadlines, I guess. How was the collaboration? I mean, did you feel stressed? Did they feel stressed that they weren’t receiving anything from you? How did that all work out?

Paul: Actually, it worked quite well. The best answer to this was the funny part in which at some point we saw that they were paying the invoices for one of those products. Actually, the contract ended half a year ago. Actually, it was just… The trust between us grew naturally, which is crucial in defining startup co-founder roles.

Florin: It was just a relationship that kept going by itself and you didn’t need to pour any more water into it to make it.

Paul: It works. Yeah, the trust. We forgot about papers because in the beginning, we started with the papers because it’s important to have something written and the terms to be clear for everyone. And we got to the point in which that wasn’t necessary anymore.

Florin: That’s very nice. That’s actually so good. super cool. Did they come with this proposal or did you go to them with the proposal? How did it work?

Paul: Actually, they got it. Basically in this new startup in which they had a previous platform which wasn’t working correctly, they had an option of paying someone, so paying us again to build it and we just… To rebuild it. Exactly, to rebuild it. Or actually to take us on board, involving us more than just paying some hours of development. But it took some time to figure out the exact startup co-founder roles and how much equity each of us would get.

Florin: Nice. What did you say? Actually, what I want to know, and I guess everybody would like to know is, how much time did it take for you to give them a reply like, Yeah, guys, I’m in.

Paul: Actually, since I worked with them for the previous two years, it was on the spot.

Florin: Nice.

Paul: But.

Florin: That’s a good sign.

Paul: It was on the spot that I’m in. It took a little bit of time to decide what each of us brings to the table in order to decide how much equity each of one will take.

Florin: How did you decide on this? So were you like, Okay, so I’m just going to bring the code, or were you like, I’m going to bring the code and the UX and I’m going to bring the product knowledge, and then I need more equity, or did it matter, or was it a time involvement that you a thing, what was the scheme that you’ve used to decide how to split the equity?

Paul: I don’t know if it was the best one, the one we chose, but we look at the experience of each one, at how much time and money each one brought in the new startup. And based on that, we decided on that part. So if I look now, I think it was a good deal, even if, and this might sound strange, I had, and I still have a minority part in it, because a lot of founders run when they hear that they got minority in a startup.

Florin: But I guess in some cases it makes sense to run away. I mean, if I’m the lead singer in the band and you’re trying to give me 10 % or 20 %, then I’m definitely not going to take it. But if I’m like a support role and this doesn’t take a lot of my personal time, a lot of my brain, a lot of my energy, I don’t have to put a lot of energy to make this work, then it really makes sense for me to get a lot less out of the deal.

Paul: Because in the end it’s how much each one deserves based on the evolvement. Because I can be a part time co founder and I still want half of the income if you are the full time co founder.

Florin: Exactly. And I mean, if you’re doing that for a living, you’re doing that for a living. I’m doing this for fun and to see how it goes. It doesn’t really make sense for us to get the same amount of shares. 

Paul: Yeah, because I think you won’t be happy if we are two friends meeting out for coffee. I’m telling you that I have this awesome idea. You say, Okay, let’s build it. I said, Okay, let’s do it. Each of one takes half of the equity and then you’re committed half than I am.

Florin: Yeah, I agree. At the moment, you aren’t really committed, even a quarter of all of the commitment, right?

Paul: Yeah. And we made, I think, another mistake here because we said, Yeah, let’s build it. We didn’t stay to discuss what will be the responsibility of each of us.

Florin: Oh, I see. Yeah. That’s actually very common. So I keep seeing this in a lot of teams because they’re super excited to start out and try something. They never get to the part where they sit down, they draft a couple of notes and they say, Okay, so this is what seems fair from my side. Let’s see what seems fair from your side. And then let’s have this signed and make agreements. Like, if we’re ever going to change this, we’ll need to have a board meeting. I was doing a sound that you could only see in the video. And I was like, Goddamn it. I was showing quotation marks and I was like, Yeah, this is not going to work on the radio. Anyway, the idea is that…

Paul: I’m probably in a term sheet if you add quotes for the responsibilities of each one. You need to work and I quote work.

Florin: Yeah, I quote work. Then you have to agree and find procedures for how you’re going to change those documents and how you’re going to make decisions. Because even if it sounds purely bureaucratic, it will make a lot of sense and it will ease the pain of working together with other people. And it can help along the line not to lose all of the relationships that you’ve built over so many years. So that would really make sense not to lose those relationships. Because if I’ve worked with you for three years and then all of a sudden I make a certain decision, you’re going to be like, Hey, man, I’ve never agreed to the decision, but you’ve never actually told me before that you wouldn’t agree to such a decision, and we had no way to process decisions, so whatever I do should be correct. Because you’ve never specified that it wouldn’t be. And if you have this thing defined from the beginning, then you will never run into these weird scenarios where nobody can define who was right and who was wrong.

Paul: We’ll get to this because it’s interesting here to see how we can decide who is wrong and who is right. But you said something interesting that you might lose the relationship. Should I take it personally if we discuss something in the startup? So if you and I are co-founders and we don’t agree about, I don’t know, an episode or something on the podcast. Should I take it personally if you say something?

Florin: Well, I guess you should take it personally once we make millions of dollars from the podcast.

Paul: Yeah, we’re still waiting on buy me a coffee for those millions of coffees.

Florin: Yeah, we actually are because we keep buying coffee from square miles and you guys should start paying for that.

Paul: Yeah, actually they’re quite expensive but with great value. At least.

Florin: They’re.

Paul: Delicious. Yeah. So buy us a coffee when you have the time and while it’s recent to us.

Florin: Yeah, definitely go and check our links if you want to hear more episodes that are even better than this one. Then you’re going to get us motivated.

Paul: Actually, talking about the decisions, you were telling me a few days ago about an interesting method that you found and try to apply it in your startup.

Florin: Yeah, the one with the bureaucracy decision making mode.

Understanding and Defining Startup Co-Founder Roles

Paul: That one also. But there was another one in which, let’s say, we are the co-founders and I have a really good idea, you have a really good idea. Do you have a really good idea?

Florin: Yeah.

Paul: What’s the good idea from these two?

Florin: Especially if both co-founders are super smart and they both usually come with great ideas, each of them will say that, No, you know what? I’m really good at this and my idea will work. Yours won’t work as well as mine will. And it will eventually lead to an argument. And the biggest problem is that if, let’s say, Paul, we are going to go with your decision, your decision will fail somewhere along the line. Then I will come back and over and over again, I will repeat to you, you know what, Paul? We failed miserably only because we went with your idea. And if we stuck with my idea, which you haven’t allowed me to do, then with my idea, we would have won this and now we would have been a unicorn. But we’re not a unicorn because we went with your idea. And even though this may sound like a joke, it’s not. It happens in a lot of startups, in a lot of companies, especially when, as I said, both people have very smart ideas. So the smartest thing to do when everybody has great ideas is to actually A B test, create experiments, make it in such a way that you will try, in our case, Paul’s idea and Florence’s idea. And then we should make a test and let our users go through the user interfaces, the user experience, whatever we’re trying to do, go through the marketing funnels that we’ve built and see if your case was better or if my case was better. And then the user decides as they’re using the platform or the feature or entering the funnels, we will see which one of us brought the best results. And sometimes we can even see that both of the ideas are completely wrong. And then we can go back to the drawing board. And if we do this, we will never get angry at one another, and we will never have to say, My idea was better. You just couldn’t accept it. You will remove a lot of potential arguments from your lives. And then you could build much better relationships in time. And whenever you’re in doubt, just test it. And you will win a lot more by doing that than by thinking that you’re smarter than everybody else in every possible room.

Paul: Actually, regarding this part that you’re smarter than everyone in the room, I think a lot of founders that are looking for a co-founder are trying to search for a co-founder that is less smart than they are because they want to be the smartest guy in the room. I think this shouldn’t be done. I don’t know your idea, but me, for example, I would look for someone who’s smarter than me.

Florin: Yeah, I agree. Definitely. I would always try to get somebody who’s smarter than me to come and join my company. The ideal case is where I would be the stupidest, and I would just have leadership skills so that I could manage and help people overcome challenges and just basically turn into some coach for my team and to a cheerleader for my team and a supporter for my team and an enabler for my team. And then just let the smart people do the smart things that they can do and drive the company forward because it’s much better than me trying to look smart all the time and actually never getting results. Because most of the time, no matter how smart you are, your ideas will suck. Your ideas will be completely stupid. And it’s not something that you should be ashamed of. It’s not something that you should run away from because you need to reach a certain level. You have to be smart enough to know that you’re not smart enough. You really have to reach that point. And if you always believe that you’re smarter than everybody else, then just start A B testing stuff and you will see that most of the time users will not agree with you, the market will not agree with you. Then actually focus on becoming smart. Even if you bring smarter people on board, you should also make them A B test their decisions because no matter how smart they are, they could also have stupid ideas from time to time.

Paul: Yeah, regarding this, I think in the beginning in the relationship with the co-founder, you need to pay a lot of attention to how you present these expectations, the things that you don’t like, because in the end, all the decisions, as you said, need to be taken on data. And actually, it’s quite hard to learn how to say something without hurting the feelings of the other person because it’s like in a marriage. If we don’t agree on something at a certain point, it doesn’t mean that we divorce right now. We need to be open and to make things work. It’s like laying down the foundation for the startup co-founder roles to ensure everyone is on the same page.

Florin: Yeah. And you really need to focus on making things work because they will not work from the beginning. It’s like a process of getting to know each other. It’s a process of me saying, you know what? I can totally take all of the things that I don’t like about the way you work, the way you do certain things, and just accept that you’re very smart. And there was a reason why we got into this together and then just tried and make it work from there.

Paul: I’m also interested because, for example, me, in some situations, if I respect the person quite a lot, sometimes I tend to rush into it and to do the things quite fast without thinking a little bit. I know in most situations this is not the best. If you respect the person a lot, would you rush and make it instantly the co-founder?

Florin: No. I guess in no case would I ever make somebody instantly a co-founder. This lean idea that you get instead of building a very complex product with tons of features, you try to figure out an MVP that will work for some people. You should also do that with the people that you think might become your co founders and create a test, an experiment on how you would work with that person that you respect so much so that you can see that even though you respect that person, maybe even that person respects you, there can really be a working relationship happening between the two of you. So you should have a dedicated experiment. Okay, so we’re going to do this for the next two months. None of us are going to get paid. It’s usually best if you’re not going to get paid because then that will super stress you out and you can see how you can deal with the other person in conditions of extreme uncertainty and lack of payment, which is very important. And if in those two months we manage to reach our goals, reach all of our deadlines and see how we cope with each other’s problems, then maybe we can actually think about starting a company together. And you will have a lot of time in those two months to figure out how you can work together, what your dedication is, and how much you can base your decisions on the other person’s commitment to the startup.

Paul: You mentioned these two months and it came to mind that it came in my head, for example, startup weekend. What do you think about these events? How would you use such an event for finding a co-founder? Would you go on the stage and say, I need a technical co-founder. I don’t know if you saw my ad on Facebook, but I need a technical co-founder.

Florin: I honestly think that that will never work. So if you just want to go and say, I need a tech person to come and join me now because I have this awesome idea, it will never work because first you don’t know enough about the other person.

Paul: Sorry for interrupting you. Even if I have a slide with $1 billion market and will take 3 % of it, so you’ll make a lot of money off it.

Florin: Especially then. And there’s another problem here. So especially because I will go and say that I will be in a three gazillion dollars market and I would be the father of unicorns. Everybody in the room will think that my presentation sucked, so I’m not going to get a co-founder because nobody will be interested because my presentation is really bad. And basically, when you go to startup weekends, usually your presentation is super bad in the beginning of the weekend because you don’t really have a very clear idea of what you’re trying to accomplish. And if you’re using that to attract somebody is like using a really bad car to attract another person, and that will never work out. So it’s like, Yeah, hello there. Look, this is my really awesome car. And it’s not. You will never get anybody, guy or girl, like that. That will never work out for you.

Paul: I agree with this. I’m riding a bicycle with the coach, but I totally agree with you on this. On the other hand, would you start up a weekend or these events for that experiment, for example? Yeah. Could it work?

Florin: Yeah, it could work. It’s actually worked for me… Let’s see, it’s worked for me once or twice. I can’t really remember, but I’m 100 % sure that it worked once because I had a couple of people in mind and I said, You know what we should do? We should totally build a startup together. We’re so cool at this stuff. We get along, we know each other, we have the same visions about what entrepreneurship should do in the world, about creating great stuff, about innovation. We should totally start something together. And then everybody’s super excited. Yeah, let’s do it. Let’s do it.

Paul: Let the money come in.

Florin: Yeah.

Paul: And the cars.

Florin: And the cars, of course. A lot of Lamborghinis, Aventador, and all of the Lamborghinis. And the Mazda XA, the least one. Let them come by. And you go to Startup Weekend with these people and you already know that you would want to work with them. So you get the idea, you start doing something at Startup Weekend, there’s going to be a lot of stress. A lot of people come and say, Hey, this idea is really bad. Don’t do it. You should try this. You should try that. And then you can see your other so called co founders, how they react to feedback from mentors, how desperate they are to get something done or to get approvals. You can actually test a lot of the emotions that they go through and a lot of the personality stuff related to them. And then you can figure out if they are a good match for the organization that you have in your mind. And then after Startup Weekend, what I’ve done was to actually get them to commit for, I guess in our case, it was three months, to actually starting the project that we’ve started during Startup Weekend. And the best part was that we’ve actually managed to do a lot of great stuff by working together. And after the third month, even though we’ve reached our objectives, we’ve realized that it’s not worth it for us to work together. And we’ve reached all of our objectives. Our results were super impressive. We’ve managed to build the crazy stuff that we wanted to build just by using a WordPress with Body Press and creating a couple of gamification elements that we’ve done over another weekend, not during Startup Weekend, but during another weekend. Then we’ve got tens of writers, professional writers who are published authors trying to join our literary platform. Then we had 2,000 people who wanted to get into our literary circle that we were building online. And we’ve had all of this great stuff. But after three months, we realized we would never truly work well together because one of them didn’t have the necessary commitment. The other one was being pressured from the outside to quit trying to be an entrepreneur. And the third person already had another startup. So there was always the thing that are you going to work on this startup or are you going to work on that startup? We were three people and it really didn’t work for us. We need three months to figure it out. With all the results, we knew that it’s not for us. It’s not worth trying then and there.

Paul: Do you think this would work if, for example, in the beginning, you would have discussed this and put the things on the table like, I can be involved only this amount of time?

Florin: No, because we didn’t understand how ample, how big the project would be. We wouldn’t understand how cool it would be. We wouldn’t understand how many authors felt the need for such a platform. We were like… Basically, we were kids back then. We were like 21 or 22, we were still figuring out a lot of stuff.

Paul: Suddenly, I don’t feel sold.

Florin: Without those three months, we wouldn’t have really known if this is really what we want to do with our lives in that period of time.

Paul: Yeah, on this part. On the other hand, I think this could work if, for example, we build a very niche product, a technical one in which we bring the skills of each on and we know that it’s for a short period of time with a clear exit in mind, building some good intellectual property there and selling it. It might work in these situations, but you know how it’s usually because it needs to extend. Once probably, at the beginning, we need to decide, okay, if after that deadline that we saw or the deadline that we see, if we want to order a project, this continues, what’s happening with the people that want to go out? Because it’s not something that you do in a lifetime.

Florin: Well, this is interesting. This is very good. I honestly have no idea because it’s not like a traditional environment where you would choose vesting. So you need to keep people for three or four years so that they can access their shares. All of their shares you do the first year with… You need to stay one year to get the first 25 %. If you don’t stay for one whole year, you will get nothing. And then after you’ve gotten your 25 %, it’s going to go pro rated until the four years of vesting actually end. So this is usually a really great case. But for what you said, it won’t work because you have a much smaller deadline to finish that product. So you would have to completely rethink how you would handle people leaving midterm.

Paul: You mentioned vesting. How would you do it? So would you force only the co-founder that comes in to vest his or her equity, or should both co-founders do it?

Florin: Every co-founder should do it.

Paul: Even if I’m the smart guy in the room, I have the idea I’m with everything and I brought you to the team.

Florin: Yeah.

Paul: Definitely.

Florin: Why? Because otherwise, I wouldn’t believe you. You would be a very horrible leader because you don’t do what you preach and you’d lose all credibility with the members of your team. And if you also do the best thing, then I know that I can trust you. I know that there’s going to be a clear plan and a clear layout if you are the one who is going to leave the organization, which can happen.

Paul: Yeah, I totally agree on this. I think both co-founders should invest their equity.

Florin: And by the time we started having some really good employees, we wanted to offer them shares, but we’ve also made them invest their shares. So that was a super smart decision and it worked really well for us.

Paul: Regarding this part with investing and since we’re still talking about equity, would you see the case of an employee actually becoming a co-founder in a business? If that employees can also grow into startup co-founder roles if they show the right level of commitment and leadership.

Florin: Yeah, I actually don’t see why not. It depends on how much that employee wants to become a leader in the organization. It depends on a couple of capital conditions, like if you already have a very clear revenue share, you’ve been doing this for years. You also have investors, you plan on raising further investments. There will be a limit to how many shares you could give the new co-founder. So that’s like the only drawback that I can see here. But otherwise, it would be a really good idea. It would be a really good idea, especially if the other person gets super involved, then it’s a very good thing to start thinking about the other person as a co-founder.

Paul: Do you think it might feel odd at some point because a few months ago you were giving orders to that employee? 

Florin: It depends on the type of organization you have. If you have a very relaxed organization like the Squirrly company has, then there’s no one actually giving orders or bossing other people around. Sometimes I do lose my cool and start doing stuff, but in our system it doesn’t really matter who is the one who yells the hardest. It’s mostly who is the one that convinces the others that their contribution is more important. So it’s all value based and not legacy based.

Paul: I hope that if people will buy us enough coffee, you will share this way of working with us because I see it brings quite some results.

Florin: I’m not sure it’s the best way to work with people. It’s like the thing that I was inspired to do due to Tony Shai from Zappos and his whole Delivering Happiness movement. I’ve seen that a lot of people have been loyal. They continue to be loyal to Squirly as a company. And some of them even want to come back to us because it’s a really great environment to be in where you can grow and learn. Even though at some point you will not feel compensated enough for your efforts because we’re not a unicorn, we’re.

Paul: Not there yet. Yeah, we’re in the startup community, so we should help ourselves. Since we’re talking about this part with the community environment and everything like that, and we are talking about finding a co-founder, how do you see the investor in this part? Could the investor have a role in it?

Florin: Yeah, I think that a very smart investor who really knows people and who cares about your wellbeing as a co-founder, because believe it or not, there are those types of investors in the market. And I guess it should really take their advice when they say, especially if you have a good relationship with that investor and you know that they’re not doing stuff for stuff’s sake and they really care about what they’re doing. They’re passionate about helping people. And if they say like, you know what? I have a really good co-founder for you, Paul. It’s this person. She’s very good at business development. She’s very good at marketing. I know she has a lot of great stuff that she can bring to the table. You guys should totally meet and you should start a company together. And you’re going to be like, it’s the perfect deal for you because the other person was already interviewed, already verified. The credentials were checked by somebody that you already trust. So basically they cut out a lot of work that you would have to do and then you just have to work with the other person for a while and get to know the other person to decide if it will make sense to.

Paul: Enter a partnership. Since I’m thinking more about this, it totally makes sense because an investor who understands the dynamics of startup co-founder roles can be invaluable in helping you find the right partner. He can see how much a person working in a startup, even if it failed, and it might see the skills that someone’s need and somebody else have it on this part.

Florin: They could easily see, especially if they are good investors, they could easily see how easily they motivate themselves to work. What’s their energy? Because you don’t want to work with people with bad energy. And I’m not trying to sound like all voodoo and stuff, but you wouldn’t want to work with somebody that comes to the room and initially sucks the light out of everybody staying there or just brings bad stuff and always discusses very negative and very horrible things in the office all day long. Then you can see how much they dedicate themselves to actually working and not talking about work. You can see the investor can even see who are the people who are busy trying to do stuff because a lot of people when they hear an idea, they will be like, No, this is not going to work. And you don’t want problem seekers, I mean, problem analyzers. You want people who are problem solvers. You want people to solve problems. That’s the most important thing to get in people.

Paul: We promise we won’t make Consultant Parentheses this episode. Talking about this part with you don’t want to take a person who has a lot of energy, so would you take a co-founder who’s 24 hours out of 24 hours writing to you, sending you emails, sending you messages. There is this problem, there are these things to be done in the morning, in the afternoon, in the midday, in the night. How do you see this?

Florin: I guess it depends. My first instinct was to say I would kill that person.

Paul: Why? Because I.

Florin: Would shoot that person down. I would buy a shotgun. He or she’s very involved. I would shoot.

Paul: That person down. I would buy a shotgun. Working every day on Sundays, working nonstop.

Florin: Yeah, but it depends on the ground rules that you establish. So if you have somebody that you’re very comfortable talking with all day long, then you should totally go for it. Hey, you can message me whenever you want. I don’t care. This is my life now. I’m super available. And this is all going to work out amazingly well because you might get a level in your relationship when you know that the other person, if they bother you, they bother you with the great stuff and they’re not bothering you with… You have to think about the stuff that they have to do. So they basically come and pick your mind 24 hours a day because then you end up working 24 hours a day, not for your company, but for your co-founder. And that’s really stupid. So do you get the picture of this? Because if I come and bother you like, you know what, Paul? I was thinking about this. What do you think about this? Dude, you’re.

Paul: My co-founder.

Florin: Think before, then ask me. Yeah, exactly.

Paul: And actually even better, do it, not only think about it.

Florin: Exactly, do it. Let’s see how this works. Because that’s the most important thing. I mean, a startup should be made with doers, not with talkers, not with speakers, not with stuff like that. You need people to actually do stuff. And you have team meetings and stuff which are weekly for discussing such matters. And that’s it. Other than that, people should just do whatever they’re supposed to do.

Paul: And don’t forget, this is not Tinder. We’re not looking for co founders or partners.

Florin: Yeah, and this is not relationship advice.

Paul: So we’re not your consultants.

Florin: We’re not your lawyers.

Paul: But we don’t mind if you buy us a coffee. Buy us a coffee and see you next time.

Florin: We definitely don’t mind that. Buy us a coffee. Go.