Do You Need A Co-Founder To Raise Venture Capital?
If you have ever thought about founding a company, odds are that you have also thought about having a co-founder.
It could be because some of the most well-known companies had co-founders (e.g., Facebook, Google, Microsoft, Apple). In fact, one report found that 80% of billion-dollar startups had multiple founders.
Maybe it’s because you want someone with complementary skills to maximize the chance that your company is successful. It could also be that you’ve heard being an entrepreneur is very lonely and stressful and hope that having a co-founder will help alleviate some of the downsides of entrepreneurship.
Perhaps it’s because you’ve heard that investors will require you to have a co-founder in order to back your company.
Whatever your motivation—before making a decision—you need to consider all of the implications of having a co-founder. Some of them are well known, such as sharing of equity and decision-making authority. Some of them may be lesser known. Let’s try to summarize this with a game of “Two Truths and a Lie.” Here we go.
All Co-Founders Are Required To Be On Investor Calls
Truth. At least in the early days, all co-founders are essentially required to be on investor calls. It’s odd for founders to miss investor pitches, and it will raise yellow flags. In the same vein, all co-founders are required to know all of the details of the business. If you are speaking with investors and one co-founder is always deferring to the other, someone likely has the wrong title.
A Co-Founder Is Required To Raise Venture Capital
Lie. While VCs generally prefer backing co-founders with complementary skill sets, many VCs will back companies with single founders. Remember, while there are many billion-dollar companies that have multiple founders, plenty do not. In fact, if VCs pick up on the subtleties of your relationship, and identify any weaknesses or lack of trust, it will actually backfire and could deter them from investing.
No Co-Founder Is Better Than The Wrong Co-Founder
Truth. Think about who you are as a person. If you know that you will likely always want to make strategic decisions, don’t set yourself up to be in constant tension with another strong voice. Or, perhaps you are the type of person that would enjoy having a co-founder, but you have not found someone that you trust as a strong complement to you as of yet. In both of these situations, it will likely be better for you and your company, in the long run, to forgo having a co-founder.
Remember—the implications of selecting the wrong co-founder do not go away as a company matures. In fact, they are exacerbated. If you think about it, it makes a lot of sense. All aspects of founding a company can be stressful—raising capital is difficult, hiring the right people and retaining them feels nearly impossible, and 12-plus hour workdays can only persist for so long. Imagine a scenario where on top of this stress, you and your co-founders’ visions aren’t in sync or where you have very different management styles.
Here’s a bonus statement.
“Co-Founder” Is The Only Title That Can Attract A C-Level Early Joiner
Lie. You can have a founding team without a co-founder. Explore alternative titles. For example, a professor is often considered a potential co-founder. If that person wants to go back to academia, perhaps they are better suited to be an advisor or a board member without a co-founder title. This way, if they do leave the company, you won’t forever have to explain the departure of a co-founder to potential investors.
Or, perhaps you are considering bringing on a co-founder that you have not worked with previously, and you’re nervous about the long-term fit. Consider if there is a way to make both parties happy. They could come on as an early joiner with a meaningful equity package without the label of co-founder.
At the end of the day, as the founder, you are in the best position to determine if a co-founder will ultimately be beneficial to you and your company. While the potential outcomes are endless—one co-founder, two co-founders, early joiners, founding advisors, etc.—you should feel confident making the decision without feeling constrained by the requirements of your potential investors.