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Get a co-founder or fly solo—how to resolve the biggest startup dilemma

Jan 4, 2022

A startup is a tough job. A co-founder, or more, can lend a steadying hand in the ups and downs of the journey but it is important for skills, values and goals to align or you have a royal mess in the making January 04, 2022 / 01:19 PM IST Note to readers: This is the fourth in a series of articles designed to give our readers an edge on matters of competitiveness, upskilling/reskilling and knowledge gathering. Essayed in a lucid, snackable format, this #HowTo series acts as a tutorial, bringing in the most relevant voices on a subject, so that you benefit the most in your business or career. In the article below, we examine the advantages of having the right cofounder and why some prefer not to have a cofounder. You can read the previous article here . Are you the marrying type or do you prefer to remain single? Running your startup poses a similar question. Do you onboard a cofounder or should you go solo? Launching a startup and running it is a hard job. It requires the tenacity of the highest order. A funded startup brings with it added pressures and sometimes you need a fellow traveller to share the highs and lows of the journey. But, yet some prefer to be the sole founder, to be in control, and are not much into consulting or collaborating. So, there is no right or wrong answer here. It’s a choice you make. By and large, startups have two founders. In some cases, there are three but it’s never advisable to have more than four. One obvious advantage of having a cofounder, as opposed to a senior management person, is that the co-founder is equally vested in the company as you. You have someone to share critical issues with, which you can’t with an employee. Doesn’t matter how passionate you are about the startup, there are bound to be days when the founder feels dejected. That’s when a co-founder lends a steadying hand. “Deciding to have a co-founder or not will depend largely on one’s personality type,” says Shanti Mohan, founder-CEO, LetsVenture, which helps startups raise funds. Depending on the outcome, building a founding team can either be a deal-breaker or a game-changer. Why a co-founder? The first thing is to figure why you are onboarding a co-founder? Is it because you are friends or are the reasons professional? Does the co-founder enjoy a vast network of connections or is the person a tech geek who can resolve a hard problem? Is the co-founder a marketing whiz or financially adept? You need affirmative answers for some of these questions before going ahead. Kris Gopalakrishnan, a co-founder of IT behemoth Infosys, says it is better to have co-founders who have similar values, goals and time horizons for achieving their goals. “Alignment is important,” says Gopalakrishnan who is now an investor. “Skills and capabilities, ideally, should be complementary. This is important since it is difficult to find one person having all these,” he says. Alignment is important. Skills and capabilities, ideally, should be complementary -Kris Gopalakrishnan, Infosys co-founder It is good to have founders who drive each other and can stand in when one needs to take a break. “Investors prefer to have two-three co-founders so that all their eggs are not in one basket and the ‘key person’ risk is reduced. It is also important that the families connect and are comfortable with each other. Otherwise, the families can pull the founder alignment apart,” says Gopalakrishnan. He, along with NR Narayanamurthy, Nandan Nilekani, SD Shibulal and others, built Infosys into one of the world’s leading IT services companies because they had a shared vision. They also got along with each other. “A great founding team is the one that is more than the sum of its parts,” says Smriti Tomar, founder-CEO of fintech start-up Stack Finance. “It’s no surprise that a number of the original founding team members leave in the first two years. This can bring down the morale of the team and also affect the image of the start-up in the eyes of the investors,” says Tomar. Some of the founders prefer not to have a cofounder because as more investors come into the picture, there will be considerable equity dilution. Yet, most of them prefer having a good cofounder along with a dedicated founding team. The energy within the team is almost as important as the quality of the product being built. Often, founder fatigue can lead to a company closing down. “A company run by a single founder can reach its fatigue faster,” Mohan of LetsVenture says. But multiple founders can lead to conflicts as well. “Hence, conflict resolution is critical. Just like in any relationship, one has to sit down and talk, and not wish it will go away. The earlier you do it the better,” says Mohan. Whoever the cofounders may be, they all should align on core values and a common mission. If that isn’t the case, then having varied skills will not help. That does not mean they can’t have opposing views, which can be settled through a discussion. That’s why many startups have two co-founders. But having too many can delay decision-making. “It’s important to appoint one of the co-founders as CEO, who will be the face of the company. The CEO will be the final decision-maker,” she says. It’s important to appoint one of the co -founders as CEO, who will be the face of the company. The CEO will be the final decision-maker.-Shanti Mohan, founder-CEO, LetsVenture Have a board, document and be clear on equity split Having a board is a good idea, even when the company hasn’t raised any funding. “It’s all about governance; there’s nothing emotional about it. For the company to be professionally run, documentation is needed, like a founders’ agreement,” says Mohan. Multiple co-founders can lead to a dispute over the equity split. Often, the split is unequal. In some cases, it can be extremely unequal, possibly because one founder claims credit for the startup idea and wants greater equity or someone is more experienced and was drawing a higher salary in the corporate world. Sometimes the equity is split unequally because one co-founder takes salary for a year and the other cofounder doesn’t or simply because a cofounder onboarded the startup earlier. But do these things matter? Most startups need five-eight years to be successful (not just become a unicorn). Finally, it’s about which cofounder can make it work. The reality is that the lesser the equity disparity, the better it is for the company. What’s the point in having the lion’s share of the equity if the company is doomed. Why would investors trust a cofounder-CEO who keeps the majority of the equity even when they have equally talented co-founders? You want all the founders to be equally committed and motivated. But yet, it is important to realise that all fingers are not equal. “There are founders who can do 0-1 but cannot do 1-n,” says LetsVenture’s Shanti Mohan. “I feel I’m a very good 0-1 person who can ideate, bring it off the ground but after that I need to bring in someone who can scale the business.” One has to be equally proficient in hiring the rest of the founding team too. It's important to weigh the attitude of the founding team as much as their skills, says Tomar of Stack Finance. "You need to look for what is called the 'founder's mindset'. That basically means the person should be passionate, resilient, self-motivated and not risk-averse. See if the person is willing to take a lesser salary and take more shares/ESOP in the company," says the 25-year-old founder. You need to look for what is called the founder's mindset. That basically means the person should be passionate, resilient, self -motivated and not risk-averse.-Smriti Tomar, Stack Finance Co-founders should have varied skills but common objectives If one founder is quiet, the other co-founder should be a networker who can strike good conversations with investors and customers. If one is temperamental and bound to lose cool, you need a more placid cofounder to balance it. Similar expectations regarding work-life balance will help. Mismatch in the number of hours put in or having completely different objectives in personal lives can wreak havoc during initial years. That’s why it’s great to have someone who has worked with you as a cofounder. “Knowing the working patterns of the cofounder is an advantage. One should know the deal-breakers,” says Mohan. “For example, I would like to spend time with my family after 8 pm. The co-founder should know that. You can’t take what is important to your company and align it back to your life. You have to take what is important to you and then align it back to the company—otherwise, you get an unhappy individual,” she says. The fact that you will likely spend more time with your co-founder than with your spouse, it is extremely important that the founders relate to each other’s personalities. If you can’t get along, then it doesn’t matter what other skills the cofounder possesses. Darlington Jose Hector is a Senior Journalist

Shanti Mohan Investments

10 Investments

Shanti Mohan has made 10 investments. Their latest investment was in Gobillion as part of their Seed VC on December 12, 2021.

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Shanti Mohan Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

12/22/2021

Seed VC

Gobillion

$2.9M

Yes

9

12/22/2021

Seed

Minko

$1.5M

Yes

Kunal Shah, LC Nueva Investment Partners, and Undisclosed Angel Investors

3

10/25/2021

Seed VC

Siply

$3.2M

Yes

2

6/22/2021

Seed VC - II

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$99M

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10

3/16/2021

Seed VC

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$99M

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10

Date

12/22/2021

12/22/2021

10/25/2021

6/22/2021

3/16/2021

Round

Seed VC

Seed

Seed VC

Seed VC - II

Seed VC

Company

Gobillion

Minko

Siply

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Amount

$2.9M

$1.5M

$3.2M

$99M

$99M

New?

Yes

Yes

Yes

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Co-Investors

Kunal Shah, LC Nueva Investment Partners, and Undisclosed Angel Investors

Sources

9

3

2

10

10

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