12 Step Checklist for Qualifying a CoFounder

CoFounder Quotes:

“If you can dream it, you can do it.” – Walt Disney

“Innovation distinguishes between a leader & a follower.” – Steve Jobs

“Choose a job that you love, and you will never have to work a day in your life.”

“The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” – Rupert Murdoch

“No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.” — Reid Hoffman

” Ideas are easy, Implementation hard“. Guy Kawasaki

“I’m here to build something for the long run. Something that will really benefit people“. Zuck

Topics: Need? Trust, Skills, Habits, Communication, Shared Goals, Biz Plan, Market Savvy, Agile,

A successful business CoFoundership has many similarities with a successful marriage. In some ways it is even more challenging to build such a CoFoundership.

“Do you really need a CoFounder?” If you can create a viable business without a CoFounder, you are probably well advised to take that route. It may be that a CoFounder is essential to fill the Gaps in your talents (ie, to sell to customers, to help handle the work load or to bring needed financing). In that case, you and that CoFounder should consider together, whether it will work for you both, by going through the following Checklist. It is often said that you learn more from your failures than from your successes. You should consider every one of the twelve items in this list in an realistic & objective way with your CoFounder, before either of you commit to the CoFoundership. The more critical elements in that real life situation are discussed in the case study that follows the checklist.

A. Key CoFounder Attributes

  1. Absolute Trust in each other

This is rightly set as the #1 condition – since without it – disaster may well occur at some time in the future. I think that is an excellent test of your trust. The ultimate condition here is that such trust will be durable even if circumstances go awry.

  1. Complementary Skills

If you both have the same skill set, then the reason for the CoFoundership is somewhat weaker. When skills are complementary, (ie, they fill in the gaps where you have a void or are weak) much stronger leadership is possible and you have the benefit of different points of view.

  1. Compatible Working Habits

Nothing will sap motivation faster than feeling your CoFounder is not pulling his/her weight. You do not need to follow the same work schedule – and indeed – different work schedules may give better coverage to satisfy customer needs. Each CoFounder should feel that there is a fair division of labor.

  1. Good Communication

Nothing will erode that absolute trust faster than a failure to communicate important news or decisions. With modern technology & smart phones, there is no excuse for not staying in touch on important issues.

B. Key CoFoundership Factors

  1. Shared Goals

The priority & timing for the goals to be achieved by the CoFoundership should be equally satisfactory for both CoFounders. You might even discuss alternative scenarios to cover how goals might need to be adjusted – if things do not go exactly as planned.

  1. Agreed-to Business Plan

You should have at least a 1 page, Lean or outline of a full Business Plan on how those shared goals will be achieved. This should be a realistic commitment that sets out the human & capital resources required on the timeline.

  1. Market Awareness & Savvy

It is critical to have identified a market need for your products or services that you will sell and be aware of any competition that could make the sales projections uncertain. A SWOT analysis checking strengths, weaknesses, opportunities & threats is a good way to assure yourselves that you are not being overly optimistic.

  1. Agile Management – Flexible

The race goes to the swift. Rapid identification of the time when action is needed is important. Then appropriate actions must be taken with vigor.

  1. Good Decision processes

The company radar should provide appropriate intelligence & data – as needed – for timely decision-making. Appropriate team members should be involved to ensure there is full team consensus, commitment & motivation to the chosen action plan.

  1. Strong Execution

A major cause of company failure is that the right actions – which have been correctly identified – are not executed with appropriate energy & timeliness. CoFounders need to be of one mind on this.

C. Formal Understandings

  1. Written CoFoundership agreement (confirming the above 10 points)

There should be a written statement identifying for each of the CoFounders their ownership, rights & obligations. This should include clear descriptions of any critical items for the first 10 topics in this checklist.

  1. Written Exit Strategy (just in case)

Just as a pre-nuptial agreement is often deemed necessary for some marriages, the basis on which either CoFounder might exit the CoFoundership should be clearly spelled out. This document should be revisited from time to time to make sure that it is still fair & equitable – if circumstances differ from what had been projected.

D. A Real Life Case Study

Two friends who are fired up by a potential business idea may well set up a CoFoundership and achieve great results. If they do so without considering all the items in the above checklist, then they have been extremely lucky.

I was involved in such a CoFoundership which did review some of these items in-depth and others only partially. On many items the CoFounders shared a common understanding. However the CoFoundership was not a success and looking back it is possible to list the items which caused our downfall. For privacy reasons for others involved, I will keep some aspects of this business confidential. [Reference #s above)

  • Item 5. Shared Goals – at this point, my CoFounder and I had somewhat different goals – with respect to the involvement of the Venture Capitalists. The difference was so great – that I could no longer have the absolute trust in my CoFounder that I previously had and was unsure what unilateral actions he might find appropriate.
  • Item 6. Agreed-to Business Plan– like many Entrepreneurs, we were overly optimistic on revenue growth and ran into Cash Flow problems, because we didn’t meet our planned expectations.
  • Item 7. Market Awareness & Savvy– in our enthusiasm, we did not make sufficient allowance for the technical & market threats that we identified from our SWOT analysis.
  • Item 9. Good Decision processes– since the technical concept was still attractive, Venture Capital was aquired to provide needed cash. The new players caused changes in the decision processes – which were not equally acceptable to my CoFounder and me, but could not be avoided. So there was significant frustration.

EXIT Arrangement

Given my concerns, I negotiated with my CoFounder a suitable Exit arrangement and had no further involvement with the Venture. In hindsight, a more rigorous application of the elements in the 12 point Checklist might well have resulted in the CoFoundership not being aborted, because of the situation.

Comments: Do you know any other Points to consider when qualifying a CoFounder?

fm Under30 CEOs.com 9/20 enhanced by Peter/CXO Wiz4.biz (good for >30’s too)

For more Info, click on Founders.

 

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