Startups are hard. Don’t go it alone.

I suppose I shouldn’t be surprised that with the continuous growth in the number of startups (we’re seeing between 150 and 200 new seed opportunities per month at Homebrew), we’re also seeing a related trend in the growing number of companies being started by solo founders.  I’ve taken a particular interest in this because Hunter and I have a strong bias against investing in solo founders (although we have done it once so far).  This clear shift in the market caused me to reflect on why we prefer founding teams over founding individuals.  In fact, we prefer teams that have known each for a long time and ideally have worked together before.  While solo founders can absolutely build great companies, I think we’re right that having a founding team materially increases the chances for success.  Building a great company is hard enough.  It’s even harder to do it alone.  In no particular order, here’s why having co-founders can be helpful:

Idea validation: If you can’t convince someone else to join you in pursuing your idea, maybe it’s not worth pursuing.

Pressure to perform: Having a co-founder makes you responsible to someone else, which in turn puts pressure on you to deliver results, probably faster than you might otherwise.

Emotional outlet: In startups the highs can be high but the lows can be low.  And the inevitable trough of sorrow can be a lonely place.  Surviving the anxiety and emotion of a startup can be much easier when the burden is shared.  It’s great to see much more dialogue about the emotional challenges of being a founder.  One way of fighting depression and other forms of emotional distress is by having a co-founder with whom you can be open and honest about your fears, struggles and insecurities.

Skill diversity: No one person, no matter how brilliant, has all of the skills needed to make a startup successful. Having co-founders with complementary skills can make it much easier for each person to say no to everything but the tasks most critical to achieving success.

Hiring strength: Multiple people on the team means a broader network from which to recruit, a diversity of skills with which to evaluate candidates and a more pronounced culture for potential hires to experience.  Having co-founders just makes hiring easier.

Sounding board: Co-founders lie awake at night worrying about the same things as you. They’re just as committed to the mission as you. And they’re equally invested in seeing all parts of the company work as you.  And so they will challenge you, scold you and push you (and often hug you) unlike anyone else at the company can or will.

It’s important to note that having a co-founder just for the sake of having one, or randomly meeting one at a “dating” event, isn’t the answer.  Having the wrong co-founder can be more damaging than going to alone.  There’s lots more to say about finding the right co-founder(s), but it starts with having shared vision, shared experience, trust and complementary skills.  It means having alignment on goals, culture and values.  It doesn’t necessarily require equal equity or compensation, but it does mean early agreement on those things.  Finding the right co-founders can be challenging, but we strongly believe that the startups most likely to become the best companies are founded by teams that belong together.

Successful startups say “no”

“The difference between successful people and very successful people is that very successful people say “no” to almost everything.” – Warren Buffett

We’ve been spending the past few weeks at Homebrew helping several of our portfolio companies work through their planning for 2015.  It’s no surprise that during these conversations incredible ideas for new products and features, partnerships, revenue streams, technologies, etc., emerge.  So we and our founders all remind ourselves about the value of doing just one thing (or a very small number of things) exceptionally well.

Often times it’s easier for companies to choose to do lots of different things.  New initiatives are fun and energizing and get lots of attention while the effort required be truly exceptional at one thing can be an exhausting grind.  But being adequate at lots of things almost always comes at the expense of being excellent at the most important thing.  Great companies are born of focused excellence.  Google was the best at search before it expanded into new product areas and markets.  Facebook was a powerful social network before venturing into mobile communications and virtual reality.  Narrowing from lots of good ideas to just the most critical ones is the lifeblood of a successful company.  We constantly remind our teams that startups rarely die from lack of ambition, only from a lack of focus.  And we insist that there’s incredible power in saying “No” to the things that distract them from being best in the world at whatever they are doing.

So what are examples of  things that startups should be saying “No” to so they can focus on what really matters?

  • Settling for the good enough hire: It’s tempting to fill the hole on the team that seems like the obstacle to progress.  But hiring people with enough aptitude but the wrong attitude is guaranteed to impede and even reverse progress in the long run.  These kinds of early hiring mistakes can cripple a company.
  • Building new products or more features: There’s that one customer that is willing to pay a lot for just one new feature.  Or if you just add this small feature that will solve your user growth problem.  Or you’ve got early customers that love your product so you want to give them more to love before growing the customer base.  Do any of these help you deliver the simplest offering for the core use case you’ve identified?  Are you sure that you’re not iterating toward a local maximum versus placing a bet that might unearth a global maximum?
  • Short term revenue: Revenue can be found in lots of places, such as consulting contracts, project development work, one-time ad sponsorships, etc. But does generating revenue in an ad hoc way help you build a business that will scale and be sustainable?  Is the revenue you’re generating the income stream you want to bet on long term?
  • Potential investors: The dirty little secret about “coffee meetings” with investors is that even though they’re positioned as relationship building, you have to treat them like you’re actively fundraising.  Because most investors are judging you and your business in every interaction (a few are genuinely trying to be helpful or to get to know you).  So the easiest thing to do is politely pass on that coffee and stay focused on the business until you really want to be fundraising.
  • Big company partners: Big companies offer the promise of distribution, revenue, resources and many other things. But the vast majority of the time you get stuck in a never-ending cycle of meetings, negotiations and more meetings.  And if a partnership is struck, the likelihood of it amounting to anything is next to zero.  In the meantime, you’ve taken up a ton of time, resources and mental energy that has a real opportunity cost.  More often than not, these types of relationships can be all consuming for small companies and can distract them from your ultimate goals.
  • Corporate development: See Paul Graham’s excellent post.
  • Networking events: Just build a great company.  Your network will grow because you’re creating something incredible, not because you drank beer and ate cold pizza with a bunch of entrepreneurs in a converted warehouse somewhere.

At Homebrew, our primary goal with Fund I has been to overdeliver on our brand promise to the founders who’ve chosen to partner with us.  We prioritize our time and efforts such that the needs of our companies come first.  We often choose to pass on meeting with new startups, speaking at conferences, attending happy hours, etc., because none of those are immediately and directly in service of our founders.  And we’ve found that because we’ve made making these types of choice a habit, they get easier to make over time.

Saying “no” absolutely requires discipline and grit, because “yes” doesn’t disappoint someone or necessitate a difficult conversation.  But there is real value in saying “no” because it orients startups towards spending their limited time and resources on doing just one thing incredibly well.  And if you can do one thing exceptionally well, chances are you’ll have the opportunity to try another in time.

Any other things startups should say no to in the interest of focus and pursuing excellence?

What We’re Curious About at Homebrew…

Every day we meet amazing founders sharing their ideas for how the future will evolve. In fact, we see about 150 new companies each month. Where do these teams originate from? Roughly 65% are referred to us by other founders or people we know. 25% are introductions via investors – either angels or VCs. The remaining 10% are a combination of cold inbound/outbound sourcing, often based upon a specific area we’re investigating. So recently we asked ourselves a question “is there strategic value in keeping our list of interests to ourselves?” That didn’t seem like a very good idea if our goal is to connect with thoughtful founders or inspire conversation. And thus http://bit.ly/HomebrewWhatIfs

What Ifs will be an dynamic list of ideas, questions and technologies that we are curious about and specifically want to connect with entrepreneurs to discuss and learn. We’ll edit, add and remove items as appropriate and link to our longer blog posts when it makes sense.

If you’re a founder in one of these areas or someone with domain expertise, we hope you’ll reach out. Do we hope to find new investments this way? Sure, but we’re also happy to just learn and hopefully help.