You can’t build a billion dollar despicable me organization

Sole founders are bad. You can’t build a billion dollar despicable me startup

TL;DR: Sole founders face an uphill battle compared to co-founding teams. And if you are a sole founder, you still need a team; minions aren’t enough.

Everyone has seen Despicable Me. A hilarious movie with everyone’s favorite yellow, one-eyed minions. I love those babbling, cheeky monkies! The organizational design of Evil Inc. is extremely flat; Gru who is then surrounded by an army of little yellow minions and his impenetrable arsenal of weapons and war machines.

Somehow he is able to almost achieve pretty incredible things, developing whacky technologies and such. But this is cartoon land and the real world doesn’t work like that.

I was chatting with a VC friend of mine today and we were discussing a company that he was thinking about investing in. It was run by a sole founder who is hustling like a beast, but when it comes to smart stuff, the founder is tapped out- everything comes down to him.

In a chat on FB my mate said something I thought was thought-provoking:

You can’t build a billion dollar despicable me organization. You need real talent and the problem for him is he’s on the critical path of everything and has no bandwidth to do anything.

If you are a single founder. Read that again. That’s literally what some VCs will think about you, but since you don’t know them, they won’t tell you. They’ll tell me… and maybe I’ll tell you.

That is a copy/paste quote.

The founder ironically told me on a call “It’s just me and like, 35 minions“. He knows it, the VC knows it. It’s Gru and 35 minions.

Adding cofounders is hard, it takes a lot of time, but if you don’t have a strong foundation, you are going to keep struggling. How will you ever expect to enter scale up without people who can help you? Read Startups and scale ups: Running 10 and 100 person scale up business.

We are going to talk about the importance of a strong cofounding team. It might seem obvious, but the mistake is constantly being made, and basics are what are most often ignored.

Is there anything good about being a sole founder?

If you can somehow make it work, sure, there are potentially a lot of great things about being a sole founder. Just… it’s risky. It’s the kind of thing that makes more sense when you have a crap load of cash already and can afford to pay starting salaries instead of high equity to ‘cofounding’ staff.

Who has done well as a sole founder?

What is an example of a successful sole founder?

Did you hear of Amazon? Yup, Jezz Bezos was the sole founder. What about other ones, though? Well, I pulled together a list:

  • Berkshire Hathaway: Warren Buffet in 1962 (Sort of, he bought it)
  • Dropbox: Drew Houston in 2007 (Got a cofounder because Paul Graham wouldn’t let him into YCom without one)
  • Facebook: Mark Zuckerberg in 2004
  • FireEye: Ashar Aziz in 2004
  • Ford: Henry Ford in 1903
  • Github: Tom Preston-Werner in 2008
  • Mint: Aaron Patzer in 2006
  • Ola: Bhavish Aggarwal in 2010
  • Oracle: Larry Ellison in 1977
  • Pebble: Eric Migicovsky in 2012
  • PlentyOffFish: Markus Frind in 2003
  • Porsche: Ferdinand Porsche in 1931
  • Koenigsegg: Christian von Koenigsegg in 1994
  • Retailmenot: Cotter Cunningham in 2006
  • Service Now: Fred Luddy in 2003
  • Space X: Elon Musk in 2002
  • Suzuki: Michio Suzuki in 1909
  • Tesla: Elon Musk in 2003
  • Tumblr: David Karp in 2007
  • Vitrue: Reggie Bradford in 2006
[Have I missed any? Let me know in the comments!]

Ok but, you need to compare apples to apples here. “Hey Alex, Jeff did it and so can I!” How much money are your parents giving you to fund the company to get going? Jeff got a bit of help here that many people aren’t going to be getting. Majority of founders are broke and don’t have silver spoons.

On the other hand, folks like Markus Frind just grinded as a sole developer for years and made it work. Yes, there are exceptions, but they are just that.

Now to dive into some of the key points about the benefits of being a sole founder.

Culture

You form the culture

What’s the difference between an Australian and a pot of yogurt?
Leave a pot of yogurt in the sun for 200 years and it develops a culture.

That’s an old joke, but it makes a point. Every company, like yogurt, develops its own culture.

If you want to turn up to your own office and enjoy working there, you need to develop the culture into what you want it to be. One way or another you are going to have a culture – make it a good one. Funny thing is that few people really think about this. Many are aware but are ‘too busy’.

What traits do you value? What characteristics would drive you insane you want to avoid? I work hard and I expect the same dedication from everyone else. The great thing about being a sole founder is it all comes down to you. You get to form your culture into exactly what you want, if you choose to. No one else can decide.

If you have a cofounder who doesn’t share the same ethics, you are going to get pretty pissed off and quickly. They will impact your culture and factions may form (Think team Jacob and Edward…). You’re not going to allow things to continue if you’re in the office all weekend and they’re at the beach, right?

You hire staff and they will replicate your actions. The team follows the leaders, and if there’s only one and they work hard, then you are going to end up with a hardworking culture (if you hire right). Multiple founders will end up with a blended result.

Execution

You can make decisions quickly

Startups thrive on fast decision making and execution. You’re not profitable so you are ‘default dead’ and racing against the clock to get profitable or raise yet another round of funding. One person can just make a call on things quickly.

I always recommend that there is one CEO that’s the leader and makes the final call, and all the other founders need to be cool with that. As one founder in Finland said to me in front of the other founders: “This is a dictatorship, not a democracy”. The issue is that not all people would agree with that, nor sets it up that way. When you are a sole founder, you don’t even need to have that discussion.

It’s important to note, that at that company they all trusted each other. Each person had an area of responsibility. The CEO only made the final call on the big stuff and when needed. Not on all decisions.

When I was a VC a question I liked to ask was “Who is the CEO?” If they stared at each other I knew they had not had that talk yet. It’s a red flag. It also made me laugh as I knew. I liked asking that questions for fun to see if things got awkward to amuse myself.

Every person, even with general alignment is going to have a slightly different vision and priorities. Startups are constantly on a deadline and decisions need to be made. Whilst you don’t have anyone second guessing you in a constructive manner, you can just make a call and execute.

How do you get insight without cofounders and before you have hired some grey hair, though? In the absence of having other smart cofounders, sole founders will tend to draw ideas from advisors and then decide what to do. Obviously, no one is right all of the time, but done is better than perfect. What kills a startup faster than anything else is slow and poor decision making.

You are forced to learn more

When your startup is working and you are growing, it is incredible how much you learn and grow throughout the process. A sole founder is ultimately responsible for everything, not just the parts you are proficient at or enjoy. Fundraising, accounting, sales, marketing, HR, operations you need to be across it all. Whenever there is a problem, there’s no one else to deal with it. Take a look in the mirror buddy, it’s you!

Clearly, you are going to struggle immensely at the start as you don’t have a cofounder team with complementary skills but you either sink or swim, and you’ll learn a tonne.

You can more easily hire and fire to get the talent for the right stage of your company

When you start a company you want a marketer, sales person, coder and CEO. Having a dev who can get a system going is fab at the start, but will that person scale with the new challenges? Not always.

Replacing founders is a shit show and almost always gets messy. If you have fewer founders, there’s less of an issue of those people growing as the company scales as they don’t have to step aside and wonder what they should do as you now have a CMO doing the marketing function that they previously did. You may find it hard to be able to bring in more experienced talent when you have a lot of founders all expecting to be head of something.

And come one, let’s be honest here. There are very few companies where there are one or more AAA people as founders.

Stability

You’re not going to break up with yourself

Founder blow ups are real. I know as I’ve seen it happen a few times and it’s a huge pain in the ass. Whatever the reason, things get political, backstabbing kicks off and staff don’t enjoy it. Not having any cofounders means you don’t have to worry about this.

The reality is you are likely to do startup with friends. When things are going well, it’s great. Then after a year or two or trials and tribulations thing start going south and the squabbles start, fingers get pointed, blame is assigned. You start thinking, this person isn’t as smart as I thought, or isn’t working as hard as me… why am I doing this with them?

The fall out from this is pretty severe. If you are building a VC backed business, VCs will lose confidence and your chances of another round get smaller and smaller. Staff will start looking for jobs as the environment gets toxic.

It took me a while to realise how much my mood impacted the whole office. I started making myself enter the office with a smile, even if I was in a bad mood (or hungover). You should read this short blog on the importance of smiling: This one weird Disney trick for CEOs tripled productivity (Smile).

I would never do a startup with a friend unless they had done a lot of startup and get nothing is ever personal, it should always be about business.

Financial

You get more equity as you aren’t giving large stakes away at the start.

If you think dilution at an angel round or seed is painful, think about the dilution from a cofounder. You’re maybe talking 50% with another cofounder, right? That’s a lot. If there are three of you, you’re at about 30%.

Dilution becomes less of an issue for fundraising when you are a sole founder. If you lost a lot at angel and seed, then you aren’t as negatively impacted at series-a as you still will have half the company. You are also motivated as you have a large stake. This wouldn’t be the case if there were a lot of founders. You could also just not get so diluted at funding rounds, but whoever planned on high dilution? Yeah, no one.

Why sole founders are bad

So we’ve gone through what might be good about going alone, but really, it’s better to have a team. Find out why now.

Execution

Critical path of everything

In the introduction, I mentioned a quote from a friend where he lamented on the fact a sole founder in the earlier stages is on the ‘critical path of everything‘. It’s interesting as I hear both what the founder and VC say… and do you know what, they both know the issues. The VC knows the founder is jammed, and the founder knows that every time there is something that needs to be checked, he has to do it. He hates it, but he’s no time to fix it. It’s enormously challenging when you are trying to scale a company and have no capable management layer.

You probably can understand what I am saying, but you will not grok it unless you have lived it. It’s like aphorisms such as ‘hire slow, fire fast‘. You have read it a hundred times but you won’t act on the learnings. You need to hire some marketing manager so you just do it, then you get burned and then you’re like ‘not doing that shit again‘.

The founder knows he needs a team that can take charge of departments but he is too busy to hire them. When will that ever change? It won’t.

If he had smart cofounders, say 3. There would 3 times the brain trust. Don’t underestimate quite how fricking hard it is to get a startup going to the point where you make enough money to hire capable people. That equity you sacrifice is worth it because it gives you a shot at getting off the ground and escape velocity.

I mentioned making decisions quickly was a benefit in the ‘pros’ section. Yes, you can theoretically make a decision quickly, but how many decisions can you make? There is such thing as decision-making fatigue, and when you get larger you can only be across so many things in enough detail to make informed decisions.

You can’t make better decisions and reach the right outcomes faster alone

Three heads are better than one, so long as you have smart heads.

When you have a brain trust that comes from disparate places, the perspectives are pretty incredible. Discussing what you should do with people with very different interests and perspectives can yield outcome paths one would not ordinarily think of.

As long as your co-founder is smart and approaches problems from a perspective that differs from your own, through a process of debate, you’ll arrive at better decisions.

Disparate views can even be applied to starting a company. I’m working on setting up some companies with a growth hacker in the US. He loves an idea as he can ‘target the crap out of them on FB‘. I like it because I think about metrics; CAC, LTV and payback time. Knowing the business works from unit economics and we would have a low CAC is cool. We found someone who covers the tech aspect. The tech and marketing bits I know a bit about, but when someone is a boss and knows way more, that’s really cool. I just don’t have to worry about it.

Figuring out if you are doing the right things early on is awesome; I want to fail fast. Executing fast because collectively you are awesome sets you up to a fab growth trajectory.

Effective leadership is easier

The larger your company, the larger your team will be (Unless you are Whatsapp). The larger your teams, the less time you spend doing ‘work’ and the more time you spend managing people. Check out this blog Startups and scale-ups: Running 10 and 100 person startup.

When you are a sole founder it is likely you are going to have to motivate everyone, articulate your vision and strategy and deal with every department adequately to help them. With multiple founders, you can spread the load.

Everyone is always fundraising and that takes a lot of time! Your CEO should be fundraising for 6 months and nothing else till close… only, who is going to keep running the ship? If you have multiple founders, someone can keep on top of marketing to ensure you are growing, tech and product is shipping as well as everything else a company does.

There’s just not enough time in the day and is spreading yourself too thin is dangerous. A synergistic founding team draws on respective strengths, and a lot more gets done.

Emotional stability

It’s just more fun

Starting a company is all sorts of lonely, dark and twisted. When you are alone and times are tough, well, I don’t want to talk about friends who have tried to top themselves.

Anyone who hasn’t felt depressed to the point of suicide isn’t trying hard enough, or are so lucky they are an exception. Mental health isn’t talked about enough.

Cofounders are like marriage, only you can’t really get divorced. When it works, it’s worth the dilution. Being able to talk through stresses and challenges is incredibly valuable.

Shoulders to lean on

No one likes to be cried on 😉 Crap is always going to happen. If you are down, there is someone else to step up. This is startup life:

startup life sole founder

Most startups take a long time to be profitable. There’s going to come a time when you pull out your credit card to make payroll and it’s better when there are three credit cards to pay bills!

Holidays are possible

Startup is a marathon not a sprint. You don’t want to burn out. Being a hero doesn’t end well. When there are other people as invested as you are it’s nice to know you ‘could’ go on holiday and the world won’t burn.

Unfortunately, ‘marriage happens’ to us all. You can actually do stuff like that. Each unto their own ;).

Fundraising

Multiple founders are simply more fundable

Honestly, VCs hate sole founders. Reread the whole critical path thing!

What are investors investing in? A team, your company. They aren’t investing in an idea as the idea morphs over time, or you simply pivot. Read Before they were famous. 15 startup pivot to fame

There’s simply a lot of risk with one founder, other than the whole getting hit by a car thing. Startup is just hard. Multiple founders have different skill sets, experiences and networks. One can pull the other up when motivation is down and you fundamentally make better decisions. It’s a lot of small things but they add up to increase your chances of success (which is low).

Better decision making

Sure, you need to get folks on-board with new ideas, which can be hard, but that’s good. Ideas from one person are rarely developed well enough. Different perspectives can be enormously beneficial. I love coming up with a new idea and putting it past people. Often they don’t like it but they touch on something which gives me a better idea.

It may sound dull, but having ‘dull’ people on your team can be good. By dull I mean operations type people. They think super pragmatically. It’s all very well having crazy, awesome ideas, but they need to be viable too. So pissing on the party parade saves you wasting energy on a pipe dream.

Why VCs like multiple founders

Pick good cofounders. Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard. And the success of a startup is almost always a function of its founders. – Paul Graham

I sort of addressed this already so I’m not going to labor the point. It’s one of those things that you just need to take my word on, VCs strongly prefer teams. I could write all sorts of fancy stuff to explain why, but it’s pointless. Like the fact VCs won’t sign NDAs, they don’t like single founders. Whether you agree or not is just moot. Don’t fight me on this as it’s pointless.

If you are a total boss, you can do whatever you want, of course, and VCs will throw money at you, but that’s super duper rare.

Founders with same skill sets

Ironically, I just got asked by a founder on my live chat “Is it ok if  I get a founder with the same skill sets? We are both business people.” So thought should address this.

No.

Yeah, sure, good business people are good business people, but wouldn’t you rather have someone who was a total boss at something you are deficient in? You ideally want to have a CEO, CMO and CTO. I think that’s the best mix. Yes… I know it’s fricking hard to find 3 awesome people for each box. But that’s your job. Do you want to get rich, or not?

You should read this presentation I did a while back on investible founding teams: Investible Founding Startup Teams

Is there such thing as too many founders?

Yes, there is, but what some think is too many can actually work

The main issues with multiple founders is that communication dynamics between say 5 founders is more complex. There are many  one-to-one relationships vs fewer founders. This results in mini gangs and a lot of communications overhead.

Finally, the more founders you have the higher the probability one will quit the company. Facebook had Eduardo Saverin and Youtube had Jawed Karim (He went to Stanford). When a founder quits or is removed it’s damaging to morale, and you potentially have a lot of equity disappearing from your cap table that could otherwise be used in a moer productive manner (especially if you didn’t have a proper founder agreement!).

  • Housing.com started with 12 founders. At one point they were thought to be the next big thing, but it devolved into a total shit show. The number of founders wasn’t apparently the issue though, the fact they were idiots was. Another big Indian CEO didn’t have great things to say about them.
  • Wolt in Finland isn’t super well known. One of the founders is the founder of Slush which you may have heard of though. They have 7 founders. They haven’t blown up 😉
  • Excite had 5 founders. Excite became the fourth most popular website in the late 90’s so it could be a great number, but they also went bankrupt in 2001, so maybe 5 isn’t?
  • Next you have Twitter with 4. If you have read Hatching Twitter, which details the rise and growth of Twitter from 2006 through 2013 you will know what I am talking about. They had a tonne of issues with leadership, some of which came from the fact that four separate people (Noah, Jack, Ev, Biz) could claim the title of co-founder and even who came up with the idea

What is the ideal setup?

I’m going to keep this short:

  • 3 cofounders (not a sole founder)
  • 1 CEO that does business and sales, 1 CMO that does marketing and 1 CTO that does the coding
  • Set up as a dictatorship. Each is responsible for their department day to day, but the CEO makes a final call when it matters
  • 4-7 year vesting and a one year cliff. Angel List has 7 years
  • Equal stakes (assuming everyone is equally capable and aware of thet fact)

How to find cofounders

This is really hard and I get asked all the time. There is a simple answer, but you are not going to like it.

You know these people already, they are in your network.

You need to have a working history with people to know how they are going to respond in the good and the bad as well as what their motivations are. Working with someone you found on Reddit is like a shot-gun wedding in the sticks. Ye hawwwwww! You really want to marry Bertha?

You need to tap your network. If you don’t have a network, then you need to put in the work and make one.

Conclusion on sole founders

You can make things work as a sole founder, it’s just a lot harder. If you can, I would go the cofounder route.

If you can find good cofounders but you opt not to, why? If you don’t want to deal with cofoudners challenging you then it’s more likely you don’t know how to argue your case of generally lack logic and data to support your case, which isn’t great either. You aren’t going to be able to handle the senior execs you hire when you scale. They’ll quit on you.

A share in a success is better than 100% of failure. The likelihood of your startup succeeding is exponentially higher having a band of rock stars committed as you are to succeeding.

How many cofounders you have will not determine your success, who those people are will and how synergistic those relationships are. Having 3 bozo founders is the start of a bozo explosion.

Bill Gates had Paul Allen, Larry page had Sergey Brin, and Steve Jobs had Steve Wozniak. Who are you going to have?

I’m a CEO coach, helping founders start, scale raise and learn. If I can help you, reach out to me here.

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