Deciding whether to start a business on your own or with a co-founder is one of the most important decisions a founder will make. Serial entrepreneur Lara O’Connor Hodgson has launched startups in both ways. She chose to form her third and latest venture, NOW Corporation, a B2B payments company, with co-founders. Under Hodgson’s leadership as CEO and President, the company has doubled in size twice in four years. She credits the combined strengths and varied perspectives of her partners with making their flagship product materialize—NOWaccount® is an innovative revenue accelerator system that helps startups survive cash flow shortages that often accompany rapid growth. What traits matter most when you’re searching for co-founders? Many advise that your co-founders should complement your skill set. In this short clip from a longer informal conversation with Shikhar Ghosh, she summarizes her beliefs about the real benefits co-founders add.
Think Strategically When Adding a Co-Founder
- Don’t choose a co-founder primarily to complement your skills. You can hire senior management to round out your skills
- Choose a partner who can bring a different perspective to the table and help you balance the business
Interested in learning techniques to help you find the right co-founder? “Choosing a Co-Founder? How to Find the Right Person,” features tips and methods used by Hodgson and other entrepreneurs, including Kevin Ryan, Founder and CEO of AlleyCorp, that can help you evaluate potential co-founders.
Choose a Co-founder for the Right Reasons
How has Hodgson decided if she needed a co-founder? The complexity of the problem that the business intends to solve determines whether she’ll launch the business on her own or with a partner. She explains, “When I had a very discreet problem that I was trying to solve, I knew what the outcome was and I marched ahead.” As she started businesses more complex in nature—if different channels to the customer existed or the strategy to scale was complicated—she learned the real benefits of adding a co-founder.
When building and scaling a venture, “partners play a really important role.” But, Hodgson notes, “most of us pick them for the wrong reason. The first time I picked partners, I went out and I was really trying to find skill sets to round out my skill sets.” For instance, like many founders, she initially believed that she needed to find a technical co-founder to deepen the founding team’s tech skills. However, she learned that “If you’re really just trying to acquire a skillset, you’re probably better off hiring that person” as part of your team, not adding them as a co-founder.
Partners play a really important role, but most of us pick them for the wrong reason. The first time I picked partners, I was really trying to find skillsets to round out my skillsets. What I realized is, that the role they should play is not to bring a skillset, but to provide balance.
Consider giving someone who is highly skilled in areas your startup needs a C-level role and profit-sharing. But she cautions, “to make them a partner is a separate and discreet decision.” Because that person will become a partner for the life of your business.
Co-Founders Should Add Perspective and Balance
Ideally, don’t choose a co-founder based on skills, Hodgson learned, because the true value of a co-founder lies in their ability to bring balance. She elaborates, “Entrepreneurs are optimists. We see opportunity in things.” A good co-founder can act as a governor. “Sometimes, Hodgson learned, “You need somebody to just say, ‘Whoa, time out. Are we thinking about this the right way? Have we looked at other opportunities?'”
Having a partner helps you balance not only the business but the rest of your life.
Employees bring skills, but a partner brings a different thought process and mindset. Hodgson learned that partnering with a person who holds a different perspective and comes from a different background can prove invaluable.
Look for Aligned Values & But Divergent Perspectives and Backgrounds
She observes, “People often think that they should go start a business with their best friend,” but she believes, that partnering with a friend or someone who is too close to your perspective might become a liability or provoke conflict in the long run. “Your partner needs to be someone you know well enough to trust, well enough to know their character, well enough to know that your drivers of success in life align with theirs,” she emphasizes, “but not so close that they are part of every facet of your life.”
Ideally, she explains, “you’re trying to create an optimization in your life of the personal side, the business side, the family side, the educational side, your community work.” If your co-founder is involved in all of those areas in your life, “it’s too close because you don’t have your own corner to go back to.
Your partner needs to be someone you know well enough to trust, well enough to know their character, well enough to know that your drivers of success in life align with theirs, but not so close that they are part of every facet of your life.
Our Founding Team section explores other issues surrounding co-founders, including perspectives of solo-founders. Learn to recognize mistakes and get advice on common challenges founding teams face, including what terms to include in a founders’ agreement and how to approach founder equity splits.
Benefits of a Co-Founder
- In “Thinking of Going Solo? 7 Reasons You Need a Co-Founder,” BottleKeeper co-founder Adam Callinan highlights the benefits of having a co-founder including, emotional support, stress distribution, and counterbalancing ideas.
- In “Five Reasons To Consider Hiring A Co-Founder,” Ludovic Huraux, CEO of Shapr, underscores Hodgon’s point that co-founders provide valuable additional perspective. She notes that co-founders can help keep you grounded and strengthen your position with investors.
Resources for Finding Co-Founders
- In “Looking for Love in All The Wrong Places–How to Find a Co-founder” serial entrepreneur Steve Blank advocates using a simple tool, the Business Model Canvas as a way to help you identify key areas where you need expertise. He advises that potential co-founders engage in a project together before formalizing their partnership. Working together, assess the person’s demeanor. “You want someone who exhibits intense focus in chaotic situations, keen decision-making skills when faced with little data, relentlessness, agility, and curiosity.”
- In “A Tech Founder’s Guide To Picking A Non-Tech Founder,” Jessica Alter, founder of FounderDating, provides basic tips on the most qualities a non-technical co-founder should possess.