brianbalfour:

The $5M Keg

In 2007 I was 23 years old, working full time as a product manager at ZoomInfo while moonlighting on a number of entrepreneurial side projects.  I had previously started a few companies with angel funding and a couple small exits, but certainly nothing of scale.  In a whirlwind of a month, all of that changed based on an inebriated conversation while standing over a keg of beer. As the title of this posts suggests, this random keg conversation transformed into finding an amazing technical co-founder [1], building a prototype, and raising $5M dollars in VC funding.  These major events that typically take months (sometimes years), happened in less than 4 weeks. [2]    

While I don’t consider these items as the definition of startup “success,” [3] it does represent a period of my life where I made a giant leap in progress on my professional career and passion.  Consequently, I have invested a considerable amount of time thinking about what caused this leap of progress and if they can be recreated.   What I found isn’t a short answer, quick fix, or a hack to starting a company and raising money.  Rather an answer that if we invest the time in, will lead to progress in our personal and professional goals that is unachievable through other common avenues.   

Following Success

Many entrepreneurs (including myself) spend time following and reading other successful entrepreneurs.  Whether it’s countless business books, blogs, or Quora, there never seems to be a shortage of content of someone telling their success story and how they got there.  We try to emulate aspects of these success stories in our own life. However, most success stories are told in hindsight with a predefined ending in mind.  In an effort to tell a good story, they often gloss over the real learning experiences, such as near death experiences, failures, and moments of luck.  We can find great inspiration in stories like these, but we will never find the answers to our entrepreneurial challenges.

Workaholics

While some have their head in a book, others just have their head down.  It is easy to think that the more hours you put in the more progress you will make, but this leads us to incremental and linear progress, when we need to be on an exponential path.  Ultimately, the progress produced by working harder is limited by the hours in the day and the capacity of the human body. The entrepreneurs who brag of 100+ hour work weeks, are also the entrepreneurs that burn out the fastest.

Networking

For every entrepreneur with their head down, there is another competing in an endless of game of “Who can collect the most business cards.”  It’s not what you know.  It’s who you know.  Right?  While it is great to have a large rolodex, these types of relationships are extremely limited.  You may get introductions and other light help from these relationships, but when you or your business faces real challenges and problems, are these going to be the people that are able to help?  Most likely not.  As a result, a large network of light relationships leaves us feeling like something is missing.

Mentors

In addition to a large network, every successful entrepreneur has great mentors in their life, but this is even limited.  A mentor relationship is typically one sided.  The flow and balance of knowledge and experience is heavily weighted in one direction and we become limited to the Mentor’s available time and generosity. 

Linear Progress vs “Scale”

The startup world talks about how startups and their business models need to “scale.”  “Scale” is depicted by the typical “up and to the right graph” where the return on investment is exponential, not linear.  Similarly, our path to success requires exponential personal progress where every unit of investment we put in, we are getting more then one unit of return.  All of the activities described above share the same limitation.  They lead to linear progress, not exponential. 

“By Our Powers Combined…”

If all of these avenues are limited, what was it that lead to my whirlwind of 4 weeks in 2007? Six months before starting Viximo I was lucky enough be one of the original members of 

Betahouse, the first ever co-working space for technology entrepreneurs in Boston [4].   It was a diverse group of individuals who were each working on our own projects, but there was no hesitation to collaborate and overcome problems on each others projects.  We were invested in seeing each other succeed.  Everything that happened in the early days of Viximo I can credit to Betahouse.  The original idea was formed by Greg Gibson, another Viximo co-founder, and myself.  Betahouse member, Dan Choi, built the early prototype of Viximo, and my technical co-founder, Sean Lindsay, was introduced to me by another Betahouse member.   The funding came from VC’s within the network of Betahouse members.  Oh, and that famous keg conversation?  It was at a Betahouse party. It wasn’t the skills, network, mentors, or great beer selection from Betahouse that was the catalyst to this leap in progress.  The catalyst was the relationships between members of the group. At the time, Betahouse was the beginning of my first Core Peer Group.

Core groups are composed of a small set of exclusive relationships that provide unfiltered, honest, and deeply invested relationships.   Core groups become so invested in each other that a positive feedback loop occurs.  As one-person gains success, so do the others. They build off of each other’s knowledge, networks, and brands, leading to exponential progress.  As a result, Core groups can help achieve things that an entrepreneur can’t on his own, producing results unattainable with the largest network or list of mentors.

One of the most widely known examples of a core group is the “Paypal Mafia

.”  These early members of Paypal have continually invested in and alongside each other.  Post PayPal they have gone on to found (with each others help) companies like YouTube, LinkedIn, Slide, and Yelp.  Most attribute the ongoing success of the PayPal Mafia to the success of PayPal; however, the reason they are successful in the first place is because of each other. 

Changing The Economics For Entrepreneurs and a Tech Community

The concept of core groups for personal growth isn’t new.  Multiple books have been written about the subject including “

Who’s Got Your Back” by Keith Ferrazzi, “Vital Friends” by Tom Rath, and “Think and Grow Rich” by Napoleon Hill.   I am realizing the impact that these types of groups can have for early stage entrepreneurs, and furthermore, a startup community as a whole.  Yet, core groups don’t get as much attention as they should.

The books about core groups discuss high level effects such as personal accountability, motivation, and achieving your life goals.  Betahouse and other experiences have shown me that core groups also have very practical effects for early stage startups.  They help raise funding faster, find co-founders and early employees, and acquire your early customers.   These are often considered the toughest items in starting a company.  As core groups help you increase these components, it can increase the probability of success, and therefore the economics of entrepreneurship. 

      As exemplified by the PayPal Mafia, the effects of core groups impact more than just individuals of the group.  The benefits created overflow and become a cornerstone of a successful community.  As the PayPal Mafia continues to invest in each other, their success helps fuel the entire technology community; creating a new breed of entrepreneurs, angel investors, and ultimately core groups.  

Core groups have substantial impact, but they aren’t easy to build.  They require a significant time investment.  The people, elements, and expectations are a unique combination of four principles that form an unstoppable force: 

Deep Relationships 

Core groups can’t exist without deep relationships between each of its members.  These are relationships that go well beyond your average professional relationship or even friendship.  It’s a unified bond with one common goal:  Excellence.  

These relationships aren’t built over coffee, lunch, or networking events.  They are built over repeated interactions with each other within, and well outside of the professional context.   They take time and investment in each other.

When interacting with people in our network, we often discuss what we want to achieve.  In core groups, the conversation is focused on why we want to achieve these goals. Knowing why requires understanding someone’s motivations, personal history, family background, and impactful life events.  Knowing why leads to a deeper sense of investment in each other and paves a clearer path to actually achieving those goals.

Any path to great achievement isn’t easy as it faces great challenges and failures along the way.  While it is difficult to discuss these things, they contain the largest opportunity for progress. With deep relationships, we can openly admit our challenges, weaknesses, and failures and quickly get on the road to growth.  

Brutal Honesty

Oddly, we tend to lie to ourselves more than anyone else in our lives.  It is extremely difficult to be brutally honest with ourselves.  Much of the time what we think is the truth is just emotional rationalizations. We’re human. Everything we do, especially in startups, contains components of emotional investment.  But, emotional investment is not rational investment.

One of the golden rules in sports gambling is to never bet on your favorite teams.  You know the most about that team so theory should have it you have the best chance of winning with that team.  But too often the emotional stake skews your decision making ability.  We also see this in romantic relationships.  We’ve all had that “friend” in a detrimental relationship who ends up rationalizing the relationship for longer then they should. Emotional investment once again skews are ability to see the truth.

Furthermore, the people that we typically go to for advice in our lives aren’t able to provide us with brutal honesty.  Parents, siblings, friends, advisors, investors.  Most of the time they aren’t knowledgeable enough about our specific goals to truly help.  Even if they are, their opinions and advice are biased with their personal incentives.  While they have good intentions, then subconsciously push you in the right direction for them, not the right directions for you. [5]  

We avoid brutal honesty with ourselves and others because it’s uncomfortable.  But the truth isn’t going anywhere.  If you turn your back to it, it will bite you in the ass.  Avoid it, and it will surface eventually.  Accept the truth, and you can start to move forward.  

The deep relationships between members of core group allow us to be brutally honest with each other.  We can remove the filter that prevents us from saying what we really think because we can challenge each other with out fear of alienating others.  With brutal honesty, interactions become more blunt and genuine.  We can get to the core of issues much quicker and focus on solutions.  We push each other to the max and keep each other on course for what truly matters.  As a result, real progress is made quicker then you could ever make it before. 

Peers

As you search for your core group, it is easy to become engrossed with brand name individuals or those that have had more success.  Most assume a positive correlation between how successful a person has been and how much they can help you.

However, success is a large misleading indicator of one’s ability to help you.  In hindsight, people tend to take more credit for success than is actually due.  There are a lot of factors that go into being successful, one of them being luck, whether they admit or not. Most commonly, those that have been successful in the past aren’t in touch with the current challenges you will face in today’s rapidly changing market.

We underestimate what we can learn from our peers.  The path to success is one giant obstacle course.  Just like an obstacle course, those that are at a similar point on the obstacle course are in a much better position to help you than those already at the end.  The power of core groups is when members can all help and challenge each other as equals;  it leads to deeper investment and relationships in each other.  

When we see previously successful people achieve something new we tend to attribute this achievement to something we don’t have ourselves.  But when you see a peer who is on the same playing field as you overcome a challenge and achieve something, we have no excuses for why we can’t do the same.  It makes us more aware of what is possible and motivates us forward.

Diversity

We naturally gravitate towards building deep relationships with those that are similar to ourselves.  We do this because it’s easier.  While its easier, these aren’t the relationships that will challenge us the most.  We end up doing the same things, having the same conversations, and getting opinions too close to our own.  Einstein summed the result of this by saying, “Insanity is doing the same thing over and over, and expecting different results.”   

Core groups thrive on diversity of skill sets between its members.  It isn’t about surrounding ourselves with people smarter than us, it is about finding people who are smarter than us in different areas.  This gives us the opportunity to invest in our own strengths, yet fill holes where we are weak.  Trying to be strong in every skill set on our own just leads to mediocrity.   

Those with different skill sets have a different perspective of the world.  They analyze and approach problems from a very different direction then we do; as a result, they often end up at a solution that we would never come to on our own.  We typically attribute this to someone “thinking outside of the box,” but in reality a person is just approaching a problem from the same lens they always do.  It is just different from our own.

I have benefited from having a great professional network and personal mentors through out my professional path, but as I wrote this post, I discovered that I could tie every period where I made giant leaps in progress, to the fundamentals of Core groups.  As for what happened after that 4 weeks, Viximo quickly out grew the space available at Betahouse so we had to move out.  Viximo is now about 30 employees and one of the premier publishers in the social game industry.  Nevertheless we have never forgotten our roots, and as a result have housed numerous startups within our office space.  Betahouse lived on for a few years and went through various evolutions through the leadership of Jon Pierce, but is currently on hiatus.  

Beyond Betahouse I have continued to facilitate the strengths of core groups through organizations such as PopSignal[6] and ReCatalyze[7].   I truly believe the next great companies and entrepreneurs will be born from core groups.  The closer we are to having the deep, honest and diverse peer group relationships, the closer we are to building the most successful and innovative companies of our time.

———

Thanks to members of my own core group for reviewing and inspiring this post.  Specifically Ariel Diaz and David Kadavy.  Also, a special thanks to Antonio Rodriguez for contributing his thoughts to the subject.

—————-Footnotes—————-

[1]  That amazing technical co-founder is Sean Lindsay, who beyond Viximo, has also established Founders Mentors.  

[2]  Success will only be determined over the long term of the company.

[3]  Raising that much money, that early is something I don’t recommend to other entrepreneurs.  Another day, another blog post.

[4] Other original members included Jon Pierce, Greg Gibson, Brian Del Vechio, Dan Choi, and more.  Betahouse back then was very different to what has become the norm for co-working spaces today: non collaborative desk filling environments.

[5]  Parenthood is a perfect example of this.  So many kids end up being exact replicas of their parents, rather then their own person.  

[6]  PopSignal is an invite only networking group created by myself and Jay Meattle.  Every couple months we invite a group of core members who all get +1’s.  This core group acts as a signal to noise ratio.  The events have lead to co-founders finding each other, companies being funded, quality partnerships, and numerous relationships built. 

[7]  ReCatalyze is still in the experimentation phase, but details will be released soon.

trevorowens:

The purpose of LSM is to learn how to build & to actually build learning startups. I would like to see the presentations framed with this goal in mind.

1. Chronology

• I woud like to see how things unfolded throughout the weekend, a narrative would be most effective here.
• How did the team…

Pros & cons of “going it alone” or as Bonnie and Clyde (by Jacques):

The Pros of having co-founders

• Co-founders bring more brains to the table
  Instead of just your own brain you now have two or possibly even more of those wonderful devices at your disposal (and so do they), this in theory increases the amount of experience, knowledge and brain cycles available to help solve the issues that your company faces.

  If your co-founders are as smart and capable (or even more so!) as you are then that alone should count as a gain, but chances are that they are not only that but in different directions, and that’s where the real advantage lies.

  One of the co-founders I worked with, Michael is a very smart cookie and he helped to steer our company in a direction that I would have never picked if I had been a ‘loner’, he made the case for giving away the software that we were selling quite eloquently and we made out pretty good on transforming from a license based business to a more service oriented model. To help with the transition we put a few usage restrictions on the free software and sold to the companies that wanted to use it for different purposes. This allowed us to have our cake (a huge audience for the free product and the bandwidth and server capacity to make it happen) and eat it too (a solid revenue stream from the sales of the ‘commercial’ licenses).

• Co-founders will tell you the truths that no one else will tell you
  When you are working on your projects on your own it is very easy to walk down some dead end street for a long time, or to simply be doing the wrong thing. For outsiders it can be very hard to ‘bring the bad news’, simply because they don’t have a stake in it and it’s your folly after all. Customers can tell you about your product - to some extent - but are not much use when it comes to strategy or dealing with adversity. A co-founder however, has a stake in the company, you and your co-founder(s) sink or swim together, if a co-founder has the feeling that you’re on the wrong track with something then you will be more likely to listen (ideally speaking) because you realize they are not saying that to make you feel bad or to hurt your business. Your fate and theirs are intertwined so that means that your goals in so far as the business is concerned are mostly aligned. The simple fact that co-founders can and will disagree with you gives room for plenty of opportunities to learn on both sides and for the company to benefit from the joint experience of all founders. Unless the disagreements become too strong (see ‘cons’).

  One of the co-founders of TrueTech, one with only a very small stake in the company saw trouble ahead with one one of the other partners, a person that I thought would work out well. We discussed it back and forth for a while and little by little I came to lean more and more towards their point of view. I decided to confront the other partner with this so that I could justify going forward with a clear conscience, much to my surprise the whole thing crashed down on the spot with him storming off with screeching tires never to be seen again. Sometimes you can be totally blind to something right under your nose and having co-founders that are not afraid to tell you the truth can help tremendously.

• Co-founders bring more man power
  Which translates roughly in to the more hands you’ve got the more work your company can do in the same amount of time. Some work can not be sped up by throwing people at it (having a baby for instance), but a large majority of the work that goes in to running a company can be done more quickly if there are more (well organized) people working on it. Some work even has a linear effect on the growth of your business (for instance, if you are selling software to mid sized businesses, having two sales people instead of one should automatically double your turn over, assuming the market is not saturated and the sales people are not fishing in each others ponds) so it can make good sense to have someone on board that has expertise in this direction.

  While I was working alone as a contractor there were plenty of times when I wished I could ‘clone’ myself so that I could work harder than I already did. Having co-founders made it possible to tackle jobs and projects of a scale that I would not have been able to do myself in the same time. For some of the projects we did that wasn’t too important, but there were quite a few where simply the fact that we could turn stuff around quickly made a huge difference in our competitive situation. Company ‘X’ would roll out a feature on Monday morning, by Thursday we’d have an equivalent up and running, so playing ‘catch-up’ or leap-frogging the competition is definitely easier when you are with multiple people.

• Co-founders can stand in for you
  Co-founders can go places and do things in a physically different location than the one where you currently reside. This has all kinds of practical benefits, co-founders can be sent out as emissaries of the company to multiply your presence in the physical world.

  They can give interviews, visit customers, approach prospects and do all kinds of business development activities in parallel to yours effectively they’re like having a body-double, and that in turn should lead to more exposure, more leads, more deals. If your company is mostly web oriented then this translates in to more online presence and the ability to serve more customers.

  It also means that occasionally you get to take a day off to spend time with family and friends, recover from illness and a whole pile of other things that can be very hard when you are a single founder. A co-founder is like having a co-pilot, if you are looking the other way you know that your back is covered, and of course that also goes the other way around.

  For a long time while growing the company it was ‘all hands on deck’, but once things quieted down a bit I felt ok with taking it easy every now and then, kicking back a notch or two in the knowledge that the phones were manned and the customers were kept satisfied even if I wasn’t there, conversely the partners in the company knew that if they needed to rely on me for some reason or other that I’d be there. This helped a lot in dealing with the day-to-day stress of a fast growing company (1 to 15 employees in a years time, offices on two continents).

• Co-founders have different (life) experience
  The fact that co-founder(s) as a rule have not led the exact same life that you did means they bring different experience to the table, a complimentary kind of experience, one that does not conflict with yours, but hopefully contrasts. One person working by themselves usually ends up in a virtual echo chamber, with little interaction with others that could change the dynamic. Some people think that just having a rubber duck on your desk is enough companion, but during a brain storm session the duck would be terribly quiet and it is also not very good at giving a second opinion or playing the devils advocate. For those roles a live human being is much preferred, for ‘cognitive dissonance’ you may rely on the duck.

  One of the partners in TrueTech, a guy called Bob had been a fund manager for Shell in the Netherlands. He brought a lot of experience with him in terms of how large companies look at the world, something that none of the others ever had dealt with. This helped tremendously when looking for funding and deals with larger corporations (Microsoft, AOL, Yahoo!, Phillips, Logitech and so on). He could see much further down the road to what it was that we should be doing in order to be a better partner to these giants.

• Co-founders have different skills
  Typically co-founders that work really well together when growing a company are not cut from the same cloth experience wise, neither do they have the same professional background. If one is a keyboard whiz it wouldn’t be bad to have the other be a sales and marketing type of person or something that more in the line of business development. Like that, between the two of you with a lot of discussion and learning back and forth you can achieve things that neither of you could do alone. The sum should be significantly larger than the parts.

  One of our minor partners had experience as an accountant and as a bookkeeper. That’s something that none of the younger techies and designers had any interest in or ambition to learn. But administrative skills are very important to have and I’m fairly sure that we would have gone under several times if not for having this particular skill on board with someone that we could trust.

• Co-founders are real people
  Unless you are a hermit by nature, the fact that a co-founder is a real person will help to mitigate the crises that you invariably face because you can share the burden, and it will help magnify the joy of success. That rubber duck mentioned elsewhere or your online buddies will not be able to share in the success of something that you both created in the same way.

  I clearly remember the day when Bob scored the MSN deal, which basically meant that there would be a segment of the MSN portal dedicated to live webcams, and that all that traffic would come to us. There was a ton of work done behind the scenes by Michael, Bianca and myself to be able to deal with the expected influx of traffic, Jonathan had made a landing page that was really nice. It felt really great to have a team like that firing on all pistons and landing the one of the largest fishes in the portal business at the time and delivering on time. It also marked the beginning of a period of lots of big partnership deals.

The Cons of having co-founders

• Co-founders can be a liability
  Ideally a co-founder has the same level of standards when it comes to ethics and making business decisions as you do, they won’t [normally, tx wccrawford] take risks that can affect the company in a negative way and they’ll do everything they can to stay on the right side of the law.

  That’s problematic if it turns out after the deal is inked that your co-founder is not like you in this respect. One of my co-founders in a company called TrueTech disappeared for a week all of a sudden, it turned out he’d gotten himself arrested by the dutch police for hacking parking meters. Not good. It got worse, I was advised not to leave the country but that we probably were in the clear, and the business would not be raided.

  It all ended reasonably good (for me, that is, he got a deferred sentencing) but that was pretty scary.

  Other possibilities are your co-founder making debts, going to the casino with the company credit card or the contents of the checking account, disappearing to Upper Volta, developing a $200 per day drug habit or bi-weekly drinking binges with 72 hour recovery periods.

  Vetting your co-founder thoroughly before you take them on board and spelling things out just in case they’re not clear can help a lot with stuff like this. Make sure that you’re on the same page when it comes to dealing with the law, to avoid surprise wake-up calls like that. And lay out the consequences for any transgressions beforehand.

  Vesting cliffs and corporate form may help with this as well but they come with their own sets of trade-offs.

• Co-founders complicate things
  Having one or more co-founders makes running your business more complicated. Instead of just doing stuff the way you want it you are now looking to build consensus and you’re trying to extract the good parts from every-bodies view on things and to suppress the bad parts. This can be quite a headache, the more opinionated people are and the more their views on subjects diverge the harder this can get. On the other hand, if all parties are on the ball great stuff can come out of this. Co-founders also complicate any exit, and it can create fiduciary responsibilities between the various share holders and officers of the company, which if you don’t take them serious can result in nasty stuff down the line (minority shareholder lawsuits for instance). These complications can cost a lot of time, money and energy.

• Co-founders have equity
  The clear disadvantage of that is that whatever the take is, it now has to be split. This can add up, especially if you have more than two co-founders, it’s a big difference if you take a 100K business, subtract your operating costs and you yourself have to live off the remainder or if that remainder has to be split two, three or even four ways. And if you thought that that problem is only there because the amount is so small wait until there is a million or more at stake. People tend - not everybody, but on average they seem to do this - to overestimate their contribution to the company, and invariably there will be one (or more) that see the rest as luggage to be carried along on their capable backs. This is also an endless source of trouble.

• Co-founders may disagree on important stuff, such as an exit strategy
  This can cause real trouble, if the co-founder is important enough to the company that may mean that they can block your planned exit. Maybe they think they ought to get more out of it, maybe they want to remain small. As many co-founders as there are as many opinions on things like this you’ll have to deal with and that can be a real problem.

  When we got a buy-out offer of 5M I was all for a sale, but because the shares were distributed unevenly the rest of the co-founders wanted to go for more, and in the end lost their chance at an exit on their terms all-together.

  They got very close to getting an exit done for double that amount but when that fell through the window of opportunity had closed (the dot com crash was in full swing) and any other option was for substantially less than the original offer. This left a lot of people feeling very bad.

• It’s easy to get in, very hard to get out
  It’s very easy (almost ridiculously easy) to get a co-founder on board of your company, all it takes is a transfer of a couple of shares, a visit to a lawyers office or a notary public and you are now ‘in business’ together. The reverse is very, no make that extremely hard to effect. You can’t just repossess a bunch of stock because someone turns out to be less good than you (or they, or you both) believed they were. Once someone has stock, normally speaking that stock is theirs to keep until a large number of conditions are met (or until they die, which might suggest alternative solutions to problems like these and no doubt plenty of people have contemplated such solutions but I would strongly advise against it, it isn’t worth it).

  Dissolving a partnership can be done in several ways (without it automatically resulting in the dissolution of the company), for instance:

  - one of the partners can agree to be bought out by the others

  - a third party can agree to buy out one or more of the partners

  - the company can go ‘dormant’ (effectively that’s the same as dissolution
  but you will still need to file taxes and maintain some other records)

  - one of the partners could sue the other and might confiscate the shares
  the other party has or force a buy-out at some (independent) valuation

  - one of the partners can become a ‘silent partner’, in other words they won’t
  show up on meetings they won’t interfere with the running of the company they
  have the status of a partner that is there just for the profits to be divided
  and a stake in a possible exit (which they can block if their share in the
  company is large enough).

  The exact possibilities are usually governed by the corporate documents, and that’s one reason why you want to make sure those documents don’t contain clauses that might come back to bite you later.

  We had a German partner that tried to pull a leveraging trick to use a small number of shares as a reason for a lawsuit to be compensated with a larger number of shares. It would have worked too if not for a very savvy German lawyer and some friends with more business experience than I had at the time.

• Co-Founders have a life too
  While initially that might seem to be an advantage, it may not always be so. For instance, the shares in your joint company might become a bone of contention between your co-founder and their spouse during divorce proceedings. Effectively this would mean that instead of with your co-founder you might end up with your co-founders ex-wife/ex-husband as a major shareholder in your company. This can lead to a large amount of trouble, and it is usually wise to make sure that the shares in your joint company are held in such a way that this is not a possible scenario. If you don’t anticipate that and deal with it before it becomes an issue you might find that any exit strategy you had has just evaporated without so much as a bit that you can do about it.

  Co-founders can go from single, motivated young can-do types to hen-pecked go-home-at-5 in a hurry, if you’re all single when you start your company make sure you discuss what will happen if one of you decides to have a spouse and have children because the impact could be significant.

  Just as co-founders have a life, they might also one day no longer have one, they might drive in to tram #9 on the way to work or die in their sleep. In that case you might find all of your co-founders heirs as your shareholders, and on top of that your co-founder will no longer be around to pull his weight. One more of those things you should think about beforehand and which the corporate documentation and shareholders agreement (and possibly the will of your co-founder (and yours!)) can mitigate to some extent.

  One of our co-founders was doing great until he got a girlfriend, and suddenly turned from go-getter to clockwatcher overnight. It also didn’t help that his s.o. only saw his salary as the pay-off and never the value in the equity.

• Co-founders may disagree violently on important issues
  And normally speaking, that’s a good thing too. But when the disagreements go over and beyond a normal working relationship it might lead to you or your co-founder walking out.

  This is a difficult situation in the best of times, and without a very capable mediator can get very messy, especially if the stakes are high. What starts out as a disagreement about the corporate direction could easily result in a corporate funeral or a forced sale.

  After finding that an exit at a valuation that would leave enough on the table to make everybody happy was no longer in the cards I sold my house and used the proceeds to buy out the other partners. (I’ve written about that before). This was because the disagreements about any new direction and the feelings that persisted after the failed exit attempts had gotten to the point that they were poisoning the atmosphere. The solution (to buy everybody out) was a difficult one for me because I ended up wiping out 10 years of savings in order to end up with a company that I had to run all by myself again (with some help from my spouse), but I’m still pretty happy that I did it that way. It solved a lot of issues that would have been very hard to solve in a nice way otherwise, nobody left with empty hands.

• Co-founders have standards of their own

  A co-founder that you bring on board may not do a job as perfect or in the exact same way as you would do it. How you deal with that can make a huge difference on the well-being of the company in the longer term. Some people turn in to control freaks, others learn to relax and mentor. If you can’t live with other people making mistakes that you all end up picking up the pieces for then life with co-founders can be hell.

  That doesn’t mean that sometimes you won’t be picking up the pieces after all though.

  One of the co-founders I worked with had a Japanese holiday planned, and delivered a large chunk of code the night before the flight out was due. This would have been fine if the project had been tested properly, but it turned out it wasn’t. We spent a couple of months to fix the trouble and to try to retain the customer for the company. To some extent that worked, fortunately, but leaving the rest of us to hold the bag was something that really didn’t help the relationship.

“Yesterday Fred made the trip from New York City to Toronto to present to a theatre packed full of entrepreneurs at Democamp. The topic of his talk was Ten Golden Principles for Building Successful Web Apps…”