It is quite like a matrimonial hunt. Though you take different routes for both, you still have to satisfy the same concerns
When Debjani Deb decided to start her own business of knowledge outsourcing after having worked for 14 years with a host of consulting and technology companies in the US, she looked up to her childhood friend Shoma Bakre in India.
The two had known each other since their school days in Shillong, and Deb was sure Bakre would be her best bet as a co-founder. So, when Deb visited India in early 2004, she could not resist pitching the idea to her prospective co-founder, who readily agreed.
“To start a business where you would have an offshore set-up, you need somebody who you can trust absolutely, and Shoma was the only person I would trust that far away,” says Deb. Besides trustworthiness, it was Bakre’s “single-mindedness and a perfectionist attitude” that impressed Deb. The duo later got two more people on board as co-founders—Kyung Han in the US and Sangeeta Joshi in India. Deb knew Han as a classmate in the US, while Joshi came as the fourth partner through a different source. “That made our perfect foursome,” says Deb. They together founded Empower Research, which has grown "150% year-on-year" and is now 200-people strong with two offices in the US and one in India.
On the other hand, when Michael Jansen founded Satellier, which provides value-added design support solutions to the architecture, engineering and construction industry, he could not find a suitable co-founder because of the nature of his business. “I could have done with a co-founder. Unfortunately, the business that we were in was so unique that I never really found anybody who would have made sense,” he says. So Jansen decided that instead of getting the wrong person onboard, it was better to do it alone. To meet the requirements of various complementary skills needed for his growing business, Jansen hired a core management team, of whom none of the members were either his financial partners or major shareholders in Satellier. Although, Jansen does not have a co-founder, his core team has worked just as well in taking his business forward.
Both Deb and Jansen reflect the two sides of the same coin. For some entrepreneurs, co-founders can do wonders, as they bring with them new insights and a host of complementary skills, while for others a core management team can fill in the gap without sharing any equity with the founder. But an unstable, indecisive and a poorly motivated co-founder or a core team can sink the boat. It becomes important to take your time and look around for the right person or a group of people with whom you can share your business instead of taking a hasty decision only to regret it later. In this story, DARE tries to enumerate the qualities and synergies to look out for in a co-founder, and also the issues partners must discuss before going in for a formal tie-up.
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The need for a co-founder
Starting a business needs a lot of thinking; strategizing and behind-the-scenes activities to give your idea a concrete shape. Just a good idea is worth nothing if it is not properly executed at different stages of the business cycle. This is why you need a co-founder or a group of co-founders who can work in tandem with each other to make the enterprise a success. “You need professionalism from day one,” says Gautam Raj Jain, Senior Professor, Entrepreneurship Development Centre at the Mudra Institute of Communications, Ahmedabad. “In the era of globalization, an entrepreneur needs multiple skill sets and multiplicity of perspectives on markets, technology and finances in the local and global context. Thus, when a team of entrepreneurs establishes an enterprise, they bring together complementary skill sets, resources and networks,” adds Jain.
Skills apart, when it comes to approaching an angel investor or a VC, two is always better than one. Most investors back excellent startup teams even if the idea is a bit hazy. Agrees Sanjeev Aggarwal, Managing Director, Helion Venture Partners. “Typically, we like to see a team with complementary skills. There is one guy who brings marketing expertise and the other guy who brings technology expertise or it can be that there is one very external CEO type of a guy and the other is a very internal COO type of a fellow.” The strategy is no different in the case of a service startup, as most investors want one partner to have thorough domain knowledge and the other with the capability to scale up.
But this by no way means that investors close their doors on solo founders. Aggarwal clarifies that if the founder who is just by himself approaches them with the “intent” to bring on the team at a later stage, his case could also be considered favorably. This is because, “sometimes, a few risk-averse guys sit on the fence and they would come on board only if the funding is established,” he adds.
Does it mean that you cannot succeed if you do not have a co-founder? “No,” says Kartik Varma, Co-founder, iTrust, a financial planning firm. “But then you have got to have enough resources and smart people with you (for a core team),” he adds. Varma cites the example of the American e-commerce giant Amazon.com, founded by Jeff Bezoz in 1994. The 17,000 people-strong company posted $14.84 billion in revenues in 2007. Similarly, R Subramanian, an IIT-Chennai and IIM-Ahmedabad alumnus, founded the Subhiksha chain of retail stores in 1997. From a single outlet in Chennai, Subhiksha now has 1,000 outlets spread across more than 90 cities.
A question of how many
There is no set number that guarantees success. While it would depend on the lead founder to decide on the number of people he would want on board, the requirement becomes clearer once the idea enters the implementation stage. Most people this writer spoke to voted for a small team, particularly because it eases the decision-making process in the company and also prevents too much dilution of equity.
“Sometimes more than two co-founders can make things difficult,” says Arvind Rao, co-founder, OnMobile, a content provider for value-added services on mobile phones. Rao founded the company with Mouli Raman in January 2000. Today, OnMobile is 950-people strong, with operations in 20 countries, and is listed on the Bombay Stock Exchange. Rao believes that one of the reasons why his startup could grow so fast was because there were only two co-founders at the helm of affairs.
The success of Infosys, however, debunks the myth of big teams doing badly. Seven software engineers came together to start the IT and consulting company in 1981 with just $250. Today, the company is an IT behemoth having posted revenues worth $3 billion in 2006-07. But it may be noted that two things probably worked for Infosys—one, all the seven members came from a similar background, having specialized in computers, and two, N R Narayana Murthy was their unanimous leader. Therefore, a big team would invariably require the identification of a leader, who would hold the veto power in the case of disputes among the founding members.
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Any ideas to improve it greatly received!