BY | Narayan Thammaiah | Chief People Officer | Venture Partner, Accel
The idea is everything.
How often have we heard this statement, especially in the world of startups? While the idea definitely marks the dawn of a startup, we have seen many instances where better execution has allowed the upstart to beat the incumbent at its own game. Better execution boils down to the team. Which is why, I say that in the world of startups the team is everything.
In the First Principles series, we have tackled the Founder to Leader journey and the importance of Strategic Thinking, Organisation Design, and designing Organisational Culture. In this post I am stepping back and looking at the founding of the startup itself. You have a great idea, now how do you realise that idea? You need people to do that with you. Do you get a co-founder or do you go solo? If you are going solo, how can you get work done without doing it all yourself? Further, how do you ensure your chosen fellow travellers and you work well together and scale up the startup together for many years? These are some of the questions that I try to answer here, in this post.
Two to tango?
In the startup ecosystem, it is considered almost a rule to have a co-founder alongside to build a startup. But a co-founder is not necessary in every case. We have seen successful solo founders, like Vijay Shekhar Sharma of Paytm. How do you decide if you should go it alone or have co-founders? Sometimes the answer is obvious, like when a couple of friends or colleagues work together to arrive at a startup idea and go on to become co-founders. But, consider a situation where you have had an eureka moment and have zeroed in on a world beating idea. Now, you need to decide how to transform the idea into a product and take it to market. Most advisors around you will tell you to find a co-founder and the hunt begins, but have you asked yourself whether you truly need a co-founder?
You need to understand yourself first to arrive at the first big decision for your soon-to-be-born startup—on whether you will have a co-founder on this journey.
Before getting to deciding whether to have a co-founder, let’s first see what an ideal co-founder looks like.
- has equal skin in the game
- is as passionate about the idea as you are
- brings diversity of ideas and skills to the startup
- protects your back (and vice versa), especially in times of trouble
- Is someone you trust completely (and vice versa)
However, remember that if you bring co-founders on board, but still call all the shots, make all the decisions, and expect the others to only execute, then they are not co-founders, but glorified employees.
Let’s look at the factors you should consider when deciding on the co-founder question.
Personality type: If you are a collaborator, like working together to get something done, and prefer having someone to support you, then it is good to have a co-founder. If you are individualistic and prefer doing things your way, then it might be best to be a solo founder.
Experience: Many young wannabe entrepreneurs may not have the organisational building experience that while not essential is still good to have. In this case it makes sense to have co-founders who bring complementary skill sets to the table, so together they can get a startup going. But, those with relevant and varied experience of many years may only need specialists for execution and so can hire for such roles, instead of opting to have co-founders.
In the case of SaaS customer lifecycle management and mobile marketing company CleverTap, in which Accel is an investor, its founders Sunil Thomas, Anand Jain and Suresh Kondamudi had worked closely together for many years at Network18.
“I am a big believer in the fact that starting up cannot happen as a single founder. There are way too many ups and downs. Life as an entrepreneur is not easy and you need co-founders with you,” says Sunil, CleverTap’s CEO.
On the other hand, Rahul Garg, the founder of ecommerce destination for industrial tools and equipment, Moglix, another company Accel has invested in, decided to go it alone. For Rahul a co-founder was optional. He was open to the idea but was more inclined to being a solo founder. Earlier, he had attempted starting up with co-founders and they had backed out and the startup fell through. He didn’t want a repeat of that experience.
My many conversations with multiple founders has made it clear that deciding to have a co-founder is a personal decision.
It is best to not rush into this decision and opt for a co-founder just because others think so.
But once you decide on the co-founder question, then what next? Let’s take a closer look.
The Co-founder Route
I believe co-founders should have detailed discussions, structured and otherwise, to understand their styles of working and how to work effectively together in the early days or even before formally starting up. An important discussion they need to have is on equity distribution.
As co-founders, it does not make sense to be coy about discussing finances or equity. In fact, you should have an open discussion about equity division early, so you do not face complications later.
When starting up, co-founders are equal partners and decision makers and so an equal division of shares makes the most sense. When one co-founder gets a rather large share of the company, an imbalance is created right at the start. Later, as investors come in and other variables play a role, the share dilution can be the individual co-founder’s prerogative.
1. The CEO question:
Beyond the equity decision, the most important decision co-founders will make is who does what. Typically, the different skill sets of each co-founder directly leads to the roles they play. But how do you decide who becomes the CEO?
What I see happening in young startups is when two co-founders come together, the person with more connections or access to VCs or those who are good communicators or storytellers become the CEO. While these are important requirements, it does not encompass all the ‘talents’ a startup founder-CEO should possess.
Here are my top skill requirements for a startup CEO:
- Should be a good storyteller, especially in the early days when the story is most likely all you have to get people to believe in your idea
- Should be a good problem solver, be it in technical and business areas or even emotional problem solving.
- Should have a strategic orientation or the talent for foresight. The CEO should be someone who can look at today’s decision and see what the impact will be like three to four years down the line.
- Should be someone who can inspire. A founder-CEO needs to be able to motivate, engage and create a sense of purpose.
- Should have the ability to work well with people, take them along on the startup journey and build an organisation.
- Should have strong empathy and should be able to play the role of a coach to the team.
The duties of a CEO like fundraising are byproducts of the above skill sets.
Sunil recalls that the CEO decision was made pretty early at CleverTap. His expertise lay in organisation design, building at scale, and getting systems and processes in place and so the three founders felt he was most suited for the role of CEO.
“There are creators and mechanics, with the latter focused on building and improving efficiency. I believe creators are not the right fit for the CEO role; mechanics are better suited for it,” says Sunil.
Once the CEO is decided, establish the responsibilities of the other co-founders like CTO or COO.
Typically, if the co-founders have complementary experience and skills, this is an easier decision to make. In the case of CleverTap, all three co-founders have a technical background, but Suresh’s technical capabilities were far ahead and so he was best suited for the CTO role, says Sunil. Anand, who is CleverTap’s Chief Strategy Officer, is the company’s very own ‘zero-to-one’ person and so the strategy role was the right fit.
2. Decision making
As a startup begins to scale, who decides on what can become a contentious topic. Sometimes airtight silos develop. This can lead to irritations, disagreements and bad outcomes for the startup.
For a startup to grow from strength to strength, co-founders should continue to work together across various aspects of an organisation and sound each other out before a decision is made.
For sound decision making between co-founders, it is absolutely necessary to build a collaboration mechanism.
For instance, at CleverTap each co-founder has his own clearly marked area of operations, but all three discuss, share opinions, and ensure differences of opinions are heard.
“In conflict resolution, knowing who the final decision maker is makes a big difference. When we (the three co-founders) are debating, we almost always make it clear who the owner is depending on the topic and that person is the final decision maker. Disagree and commit is a value we follow strongly,” says Sunil.
But to get to this stage of open communication, it is exceedingly important for the co-founders to have built a close rapport. As co-founders, you should spend time together and not just on work.
The co-founder relationship is also a close one that needs to be nurtured. Not for nothing has the co-founder relationship been compared to that of a marriage—it cannot be transactional.
The co-founders should be able to consider each other as friends, as otherwise a barrier gets created. You should be able to talk about every aspect and give constructive feedback.
To build camaraderie, co-founders need to spend time together off work too.
It could be something as simple as meeting for coffee, where work is not discussed, or going on a hike together. Such common activities build up the personal relationship and trust.
At CleverTap, the co-founders have a daily 30-minute call every single day. Sunil tells me the trio have missed this call only once or twice in a year—that’s how important this daily call is to them.
While Sunil lives and works in the US, Anand and Suresh are in India. In pre-Covid-19 times Sunil used to travel regularly to India for work, but the three co-founders would ensure that they spent time together beyond work as well during these trips. They share a common mentor right from their Network 18 days, who helped them get their working relationship right. The three also have regular offsites, especially out in nature, with some such trips open to their immediate team.
“The three of us enjoy spending time together. It is not just work all the time,” says Sunil.
3. Scaling up with the startup
In the world of startups, you either stay relevant or you are left behind. In fast growing startups, the roles and skills required change rapidly. This has led to numerous instances where when a startup scales up, only one of the founders—typically the CEO—continues to grow and the other co-founders fall by the wayside. If only the CEO-founder is growing with the startup, it means the environment is not conducive to growth. This is when we see at a later stage, professionals replacing co-founders at various roles.
It is the duty of the CEO and the other co-founders to ensure they have a development plan and the support to help all co-founders scale up their skills and capabilities to fit the growing demands of a high-growth startup.
As the gears change from early stage to growth, co-founders need to assess what additional skills they need to pick up. Maybe they need a leadership coach, or it could be needing help with communication skills. It is best to take preventive measures than corrective steps, so get the training and development plans in place before the need becomes critical.
Sunil suggests matching founders to roles according to skill sets. A co-founder might not enjoy leading large teams, so forcing them to do that will only backfire. “In a startup, there are lots of jobs to be done. When a job is falling through the cracks, it lands up on a co-founder’s plate. Finally, the job description doesn’t matter,” says Sunil. He says getting personality and behavioural assessments done truly helps. CleverTap did a DISC Profile of the co-founders and top leaders.
Personality and behavioural assessments bring structure and discipline to the process of identifying a co-founder’s strengths and weaknesses, so they can be placed in a role that helps them and the company succeed.
The Solo Founder Route
Even if you have chosen to be a solo founder, the truth is starting up requires the support of a team—there is only so much one person can get done in a day!
Your most important responsibility when starting up as a solo founder is the hiring of the initial team.
1. The Founding Team
The first set of hires can make or break a startup as they will help you transform your idea into a product and take it to market. What should a founding team look like?
- While your founding team will be employees, they should have an entrepreneurial mindset and are almost like co-founders.
- With roles that are fluid and numerous tasks to be done, they should have an almost emotional connection with the idea and the startup, and even to the founder, is a critical quality among the initial hires.
- They should have skill sets that complement that of the founder, so they can independently execute tasks, make decisions and take responsibilities in their sphere of operations.
When hiring is done right, at this stage, the founding team will stick around, become the entrepreneur’s biggest support system and will scale up with the company.
This is something Rahul of Moglix has seen and experienced first hand.
“You need to have a proper HR perspective when hiring, even in the early days. My hiring bar was very high even early on. I think the people I hired then, still are among the smartest people in the country,” says Rahul. No wonder then that of the six founding team members, five remain at Moglix even after five years since the company’s founding.
2. Decision making
While, as the sole founder, you do call the shots it is important to have a team who are not just yes men. Hiring smart and capable talent is only one part of the equation.
It is the duty of the founder to create an environment where these smart individuals can openly share their opinions and suggestions, so mistakes can be avoided.
“We are taught this axiom from childhood—I am saying, so you will do this. We do not follow this in Moglix. We operate as a theorem. We say ‘this is why I am thinking this and this is why we will do it’. We are extremely professional and people offer opinions, we brainstorm, we disagree, but once we decide on a path, we follow it together as a team,” says Rahul.
Rahul adds that being an open thinker helps. He shares that founders should actively avoid one plague that besets companies—silent disagreement. This applies to co-founders and founding teams alike. If an employee does not share what they think and act contrary to what they say they believe in, that does not bode well for a company. Decision making and execution suffer alike in such situations.
3. Scaling up the founding team
Since the founding team is made up of employees, it is easy to believe that they can be replaced with more experienced professionals when the startup scales up. But, this is not necessarily beneficial for the company in the long term.
As Rahul says,“The early team has been around right from product-market fit; they have a strong connection with the company and the founder and have strong pride in what has been built. They have the emotional connect and a certain ability to do zero-to-one far easier and far more seamlessly than leaders who come in later.” So it is vital that this highly invested team stays around.
How do you ensure your founding team stays relevant and is able to contribute at the highest level as the company grows?
Hire the right candidates. They should be open to strong feedback, to the conversation around what they need to do to stay relevant in the company. “We are like siblings; we can fight and still stick around. At Moglix, we are fairly ruthless in our execution and the leadership team has that inherent confidence that they can get things done and so are open to feedback,” says Rahul.
Help them scale. Like with co-founders, with the founding team too it is imperative to create the environment and framework for their professional growth. Development programmes and training sessions early on will help. Rahul recalls that when Moglix was just 35 to 40 people strong, the company undertook an exercise to understand the team and their individual behaviour traits better.
The founder needs to offer the founding team opportunities to scale, to test themselves, provide them with the right exposure, and give them the freedom to ask for help if required. The founder, especially when a startup scales up, needs to be a coach and mentor to his team and enable their growth.
A tip Rahul shares is to not use CXO titles. This ensures that, if needed, specialists can be brought in at a level higher than the founding team member without creating problems when operations get more complex.
There is no one correct path to starting up. There are times when despite the best efforts, a co-founder thinks it best to move on and other times when an employee is as good as a co-founder. In fact, we are seeing multiple instances of employees getting the co-founder tag even at scaled startups in India. Food delivery startup Zomato elevated two of its employees to co-founders. Home interiors tech startup Homelane, in which Accel is an investor, also recently promoted its VP-Growth, Tanuj Choudhry, to Co-founder and COO.
Whether you choose to have co-founders or a founding team, being open, fair and empathetic will ensure you are setting yourself and your fellow ‘travellers’, and eventually your startup, for success.