A Good Match is Necessary With a Start-Up Partner

Matt Crowley Starting a business on your own can obviously be daunting. You get all of the rewards but you are the company’s only salesperson, worker-bee, networker and office manager rolled into one. This requires a ton of energy. The solo road is also potentially lonely and isolating. Consequently, many entrepreneurs look for teammates to share the fun and the burdens with as they get started. Forming a partnership with other entrepreneurs really can be like entering into a marriage. Most business partners spend more time with their co-founders during a given work day than they do with their families. Long days are a big staple of startups, so you need to make sure you fully appreciate how much time and reliance you will have on your partners. When you are looking at potential partners, how do you know if you have a match? You should start by looking at potential partners in the same way that your investors will look at them. Prospective venture capitalist investors will frequently tell entrepreneurs that they are betting on the jockey as much as the horse; i.e., the management team that will execute a business plan is as important as the plan itself. Investors will analyze a management team by looking at the amount of collective experience around the table. A team of serial entrepreneurs from companies that went public two years ago is more impressive than a husband and wife team that want to start a coffee shop because they like coffee but have never run a business before. Key objective factors to consider when looking at a potential partner are: • Can your partner carry his own weight financially? • Does this person have skills that the business needs immediately? • Does his experience add to the team’s credibility? • Does your partner have the right energy level? • Does he have the tenacity it will take to stick it out long enough to make it to the break-even point financially? What does his employment history tell me about how long he might stick around? Delineation of duties A good starting team will have one person focused on the product (e.g., software, coffee, web design), one person in charge of finance (keeping the books, running financial projections, doing tax returns, paying bills) and one person in charge of sales and marketing. Defining each partner’s role at the beginning can help eliminate unnecessary friction, wasted time and potential confusion. One final note about objective factors, I have yet to see a book recommend checking out two unpleasant but necessary items to check. Running a criminal record check and a credit check is a very healthy way to avoid rude surprises. Somewhere between the objective factors above and the more emotional, personality-related factors below, lies the land of worklife factors. First, some team members may be financially better off than others during the true startup phase. Consequently, while one team member may be able to work full-time on getting the company started, other partners may have to keep their day jobs and work on the project during the evenings or on the weekends. The obvious trap for a team here is the increasing probability of resentment that the full-time folks could end up having. Second, teams may be composed of people working in geographically different locations. I have had clients with team members separated by three hours of driving and I have had clients where two partners lived at opposite ends of the country. Typically, the long distance teams will initially comfort themselves by focusing on how e-mail, cell phones and other technology make it easy to coordinate across distances. When trouble starts however, they are in no position to have regular face-to-face sitdowns to resolve their differences. Becoming isolated The flip side on the geographic issue comes when teams adopt a bunker approach. They will rent a place together and lock themselves up until their project is launched. This approach can work well if a company is focused on a website requiring a lot of intense software coding sessions, and the team has a sharpened sense of their mission. The downside to the approach, other than ending up living in a corporate version of “The Shining” after three months of isolation, is that your team could inadvertently squelch its creativity by not being exposed to what’s going on in the rest of the world. Business teams also sometimes suffer the Yoko Ono problem. Sometimes one partner’s spouse will have opinions on how the business should be run. Doing some discreet diligence on your partner’s significant other is usually a good idea too to make sure the spouse or significant other is on the same page everyone else is. Following the advice above will cut down on the risk of making a mistake, but all the advice in the world can’t completely eliminate the risk. A teammate with a great pedigree, good ideas and a can-do attitude can accelerate your timeframes and help you maintain your own motivation. Be careful to do your homework before you fall in love with your potential partner – think about what he adds to the equation objectively and emotionally. Matt Crowley is a veteran venture lawyer who has participated in over $6 billion in deals. He was also on the frontlines during the first dot.com era as a start-up general counsel.