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This post written by me was originally posted on Up and Running Blogs

Do I need a co-founder? How do I chose one? What do I do if the relationship doesn’t work out?

These are some of the most frequent questions about co-founders that I have heard from entrepreneurs over the years. In this post, I’ll try to answer these, and a few other important related questions.

Do I need a co-founder?
The entrepreneurial journey, though exciting and romanticized with stories of huge successes, is actually really lonely. It is a place where the buck starts and stops with you. You have a great idea to start a new venture and the theory goes that if you can’t convince at least one other person to join the venture with you, how will you convince customers to buy into your vision and product/service. The bottom line is that you do need someone else to bounce your ideas off of, someone who offers a different perspective at least sometimes, someone who also feels that his/her success is tied to the venture just as yours is.

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How many co-founders should I have?
There is really no right or wrong answer here. I have seen many successful companies with as few as 2 and as many of 11 co-founders. For every company there are critical skill sets that are needed to get it going. It could be an engineer and a business person, or it may need two different sets of engineering skills and a business person. For most companies, two to three people are sufficient as co-founders. Two co-founders is the most ideal from management perspective. Three, though okay in many cases, can become a crowd when new management is brought in and founders start taking sides.

What is the criteria for selecting a co-founder?
I have seen many companies with spouses as co-founders succeed, but as an employee I have stayed away from joining these type of companies and advise my friends to do the same. Often co-founders are friends, but is that the best way to select co-founders? I have seen many good friendships ruined after a startup venture goes south.

Every business needs some technical skill and some business acumen.  A good engineer can design something fancy but that doesn’t mean there’s a market for it or that it will sell. A good business person may know what will sell but if he or she can’t get someone to produce the right product, what good does it do? Co-founding teams should bring in complimentary, not overlapping, skills.

Should co-founders have the same equity stake?
If you asked me this question before my first startup, I would have said why not? Now that I have launched some startups, I would say there is no reason to have co-founders have the same equity stake. Most co-founders decide on the equity structure in a very arbitrary way. If you’re interested in more details about this topic, I recommend a very good book called The Founder’s Dilemmas.

I came up with a formula to make determining equity stakes easier:

Let us say founder A and B both start at the same time with similar value-add. Founder A is going to be the long term CEO while Founder B is going to be the VP of Engineering.

There are two parts to the equity:

  • Founder’s Part
  • Skills Part

Founder’s Part – This should be the same for both. If they started at different times or brought different contributions, that should be adjusted accordingly. But in our example, they’re even.

Skills Part – A CEO in a high-tech may get about 6-10% of the equity post Series A (when a VC or some accredited investor puts the money into company) while a VP of Engineering may only get 2%. So take this to pre-money level and assuming 50% dilution, it will be 12-20% (assume 16%) for the CEO and 4% for VP of Engineering.

Therefore 20% is based on skills and 80% is based on founding status. Founder A will get 16+40 = 56% while Founder B will get 4+40=44%

This is not the only way to do it, but it is something I have seen justifiable.

Can I fire a co-founder?
A company is a separate entity from the founder, and that relationship becomes even more separate when outside money is raised. If one of the co-founders is not performing or is being disruptive or unethical, you should definitely consider getting rid of him or her. However, never ever do this for wrong reasons, like depriving co-founders of their equity. Also, if and when you end up firing a co-founder, please do it with dignity. Everyone should be able to maintain their dignity in the process.

Conclusion
Deciding how many co-founders you need, who to bring aboard, and how to distribute equity all depend on your individual skills and the gaps you need filled. Whatever choice you make, be sure everyone is clear about their roles and agrees on the overall goals for the company.

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Earlier this week, DEMO, considered as the launchpad for startups, was held in Santa Clara Convention Center and our company DocSync.Net was selected amongst other 81 vendors to showcase their wares at the show.  This blog talks about our experience and an amalgamation of some of the comments heard from other startups along with some comments on what can DEMO do to make this conference even better next year.

For the uninitiated, DEMO is like an American Idol but for entrepreneurs. Unlike American Idol, it only lasts for 2 days and winners only get one chance of 6 minutes to make their pitch along with an opportunity to showcase their products in the exhibit area. Every company comes with certain goals to the conference with launch publicity being number one followed by investor interest and partnership discussions.

Organization

The amount of preparation and the amazing efficiency with which this conference operates, I would like to congratulate not just the organizers but everyone else in the team for an excellent conference. Yes sometimes there are schedule delays and long waits for speakers but considering the number of companies doing live presentations, it is still amazing that conference works as well as it does.

Initial Feedback

For many companies this may be their first public showing of the product and hence it is a great forum to get initial feedback on your product and your pitch. Moreover the preparation that an entrepreneur has to go through to get ready for this including working with a demo coach, doing an on-stage and many off-stage rehearsals really prepares an entrepreneur well.

We also got to meet lot of other entrepreneurs who are also likely to be partners and users of our product. We got a lot of useful feedback from fellow entrepreneurs and managed to sign up a large number of beta customers. In that sense it was a successful event for us and probably for many other companies.

Sages and their feedback

After every six or so presentations, there was a sage panel of 4-5 experts giving their commentary on the pitches of various companies. Comparing it to American Idol, there were a lot of “Simon Cowell wannabes” in the sages and so entrepreneurs needed to have a thick skin while taking in the feedback. Most of the companies in a session were totally unrelated to each other and sometimes companies in pre funding were in the same session as a company in Series D round of funding thereby creating an unwarranted comparison.

The best sage panel, in my opinion, was the last one on Consumer wherein some of the sages looked at what was there and what can be done with the ideas and some sages like James Slavet of Greylock even made an effort to do some due diligence on his smartphone to see the background of the founders and taking that as part of his feedback.

Press and Buzz

Did Demo help companies in creating buzz? Yes it did but as usual the buzz varied from company to company as well as on how well the company leveraged the available resources.  We were lucky to get few articles written about us. Was there a lot of press at the show? Compared to last year, I felt that the press presence was somewhat light at the show with lot more press from IDG group of companies and not much from mainstream national media. However, I am hoping that as DEMO content spreads, it will create a more lasting buzz for many companies.

Investors

Meeting investors was not my prime goal but it sure was a goal for many entrepreneurs. I did get some interest from investors but I couldn’t guess as to how many investors were at the show and how many of them really made it to the exhibit area to meet with entrepreneurs. May be other entrepreneurs can chime in and share their experiences here especially the ones that came with that goal in mind.

What should be changed?

Rather than putting companies by broad technology categories, the companies should be classified by their stage i.e. Seed vs Series A vs Series B or by the amount of funding they are looking for. For example putting a late stage company like Fusion I-O in the same group as our pre-funded company DocSync was just a wrong fit. DEMO already has an example of that in Alpha Pitches and what I am suggesting is to make the similar changes to the overall agenda. In addition, the sages for each of the sessions should be actual investors who are interested in investing in this stage.

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The key theme of President Obama’s state of the union speech on Jan 25th was Innovation. There is no doubt that we all agree that innovation is the key to maintaining America’s coveted top spot in the global economy. Yet it will be innovation pushed forth from the private sector that will create the bulk of this success. Government funding may have helped create the Internet, but it took many startups and large companies to bring it to the masses.

At TiE, our mission is to foster entrepreneurship; through our collective thinking we decided that Innovation would be the most fitting theme for our annual conference, TiEcon. We tip our hats off to the head of state for recognizing the importance of Innovation since it’s very much in line with our mission here at TiE. But at TiE, we make a mission out of Innovation in showing innovators a path forward — a path forward to innovate , a path forward to create something big and meaningful for this world whether within their companies, or to go out and create the next Google or Facebook.

Whether you are an Intrapreneur or an Entrepreneur, you need tools to channel your Innovation. So what are the tools needed for channeling innovation? Equally important, we believe them to be the following:

  • Mentoring
  • Networking
  • Education
  • Funding
  • Celebrate

Mentoring

There are many who have tread this path before and so knowing some of the  roadblocks and how to clear them may save you months. Yes you need mentors who have done it before and that is what TiE provides. This year’s TiEcon will enable informal and formal mentoring 1-on-1 sessions with experienced and successful entrepreneurs we call TiE Charter Members

Networking

One reason to go to any conference or trade show is to network with your peers and competitors alike. TiE has one single-minded focus on fostering entrepreneurship, whether inside or outside your companies. Therefore, this year’s TiEcon is expanding its formal networking opportunities by allocating more time between sessions and expanding its coverage to include TiE Innovation Expo wherein you can network with your peers, your customers and partners.  TiEcon will offer you opportunities whether you need a co-founder or just some early team members.

Education

Knowing how the system works is half the battle, and that is why TiEcon focuses on both basic and advanced skill workshops and panel sessions. This year we will focus on the 5 hottest technology trends of Cloud, Energy, Mobile, Physical Science and Social while enhancing our offering of basic how to sessions for entrepreneurs. We will have many inspiring speakers to keep your batteries charged.

Funding

Every successful innovation needs money to complete development and productize or to market and sell it to the general market.  At this year’s TiEcon, you will learn how to do fundraising and you will meet with many investors from seed to venture capitalists to late stage fund managers.

Celebrate

It is more important to celebrate small victories than to brood on setbacks.  This year’s TiEcon will end with a celebration of success in the form of a giant banquet and entertainment for entrepreneurs.

Conclusion

If you are an entrepreneur or want to be one, you can’t afford to miss TiEcon this year on May 13th and 14th at Santa Clara Convention Center.

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