Tag Archives: startup teams

Startups are hard. Don’t go it alone.

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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.

Trust and shared goals in startups

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Of the many wonderful things about starting Homebrew, possibly the most satisfying has been working with a partner, Hunter Walk, in whom I have absolute trust.  That trust stems from a longstanding relationship, a commitment to helping each other be successful and a shared vision for what we want Homebrew to be.  And it makes it possible for work to rarely feel like work.  Most importantly, that trust allows us to focus exclusively on the activity of the fund and being supportive of our partner companies.  No time, energy or resources are wasted on questioning each others motivations, actions, decisions or feedback.

All of this has reminded me how much trust is fundamental to the success of startups (Homebrew is our own startup after all).  I would argue that no characteristic impacts the productivity, motivation, camaraderie and longevity of a team more than trust.  But how do you assemble a team that trusts each other when trust is usually forged through shared experiences over time?  Culture, values, transparency and many other things certainly contribute to building trust.  But the foundation of trust in every startup I’ve ever seen have it is a shared goal.

Whether you call it the Why, a mission statement, a shared vision, a true north or a common understanding of why the company exists, there is no replacement for everyone on the team knowing why they collectively and individually come to work each day.  Startups are faced with many obstacles, unknowns and failures.  People have to wear many hats and pitch in across many different areas.  There’s often little, if any, time to coordinate activity, assign responsibility or formulate a plan of attack.  When your team has a shared goal it becomes infinitely easier to assume, and eventually know, that your teammates are doing the right thing.

In startups, it’s the job of the founder(s) to repeatedly communicate the shared goal of the company and to make sure that anyone joining the team understands and shares that goal as well.  At Homebrew, we prefer to work with mission-driven founders because they seem to do this innately.  As a result, they are often successful in building teams and cultures that are based on trust.  And these teams leverage that trust to become high-performing, making work feel nothing like work at all.

Avoiding failure in early stage hiring

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Nearly a year into Homebrew, we’ve learned a great deal about startups, investing and ourselves.  And we’ve also reinforced many of the things we believed to be true about each of those things.  Probably least surprising (and most painful!) to us and the companies we meet is how challenging it is to hire in today’s ultra-competitive talent market.  While the immediate goal of startups is to get to product/market fit, the right team needs to be hired before that can happen.  And when demand outstrips supply of talent, it’s easy to take shortcuts and to make hiring mistakes, especially when it feels like people are the main constraint to moving forward with your business.  As a result, we spend an incredible amount of time with Homebrew family companies focused on helping with hiring, including trying to help avoid common hiring mistakes.  Unfortunately, it’s an absolute certainty that hiring mistakes will be made, but you can improve your chances of success by being mindful of a few simple things.

Here are what we believe to be the most common mistakes (in no particular order and not a comprehensive list) that founders and startup teams at the seed stage make in hiring their earliest employees. Please share your thoughts on these and other hiring mistakes that founders should be sure to avoid.  If you have hiring tips or tricks, we’d love to hear about those as well because hiring is an area in which everyone can always be learning and improving.

Choosing aptitude over attitude: It’s easy to believe that a highly skilled candidate who doesn’t fit the culture of your company or who can’t play well with others will still help you quickly tackle the problems you face.  But history shows that undervaluing attitude and overvaluing skill actually leads to more problems, less output and lower team morale.  Make sure your hiring process includes a thorough screen for culture fit and for an attitude that reflects the characteristics that you believe to be the foundation upon which you want to build your team, product and business.  The right attitude alone isn’t always sufficient, but it’s always necessary.  Aptitude alone is never sufficient.

Hiring specialists over “generalists”: Early in a company’s life, the reality is that nothing is certain, including which aspects of the product will be successful and which skills are needed on the team to scale beyond present day.  Accordingly, startups can’t afford to have team members that are only able to do one thing well and not stretch beyond that one thing.  I suggest that startups hire “T-shaped” generalists who have a superpower but also have the flexibility in thinking, curiosity and desire to take on more than only what they know incredibly well.  Early team members are ideally multi-tool athletes with a particular strength who can also fill positions of need whenever and wherever they are found.  Hiring people who only do one thing really well can limit your potential paths to success as well as make it more difficult for those team members to be successful themselves during the early phases of the business.

Being seduced by credentials: “But she worked at Google and Facebook! She was a Director so she’s obviously a total rockstar. We need to do everything we can to hire her!” It’s easy to be allured by high profile names and senior titles.  But at a startup you need people who can get shit done and who don’t wait for others to tell them what to do.  Having done it before can be tremendously valuable, but only if he or she has really done it before.  Don’t rely on recognizable company brands and lofty titles when hiring.  And be wary of candidates who seem to be escaping from a large company rather than running to a startup.  Ask the questions and do the work to find out what the candidate really delivered at his prior job, how he went about doing it and whether he has the potential to continue to grow.  Experience at the right company or in the right role can matter, but there is no substitute for making things happen and having the potential to excel in the future.

Rushing to fill a need: Every company has a position that has been open too long or that seems critical path to success.  So it seems justifiable to hire the candidate who is “good enough” or who can “do what we need right now”.  But once you capitulate on a hire that doesn’t quite meet the bar, it becomes easier to repeat that behavior.  Introducing a mediocre hire into a high-functioning team inevitably creates friction, reduces trust and slows down progress.  Waiting to make the right hire is always less expensive (in time, energy and money) than fixing the damage done by hiring someone just because there is a gap that needs to be filled right away.

Being stingy with equity: I believe that being generous with equity for early hires is critical for building a culture where every team member has a founder mindset, feels responsible to the company first and is fairly rewarded for taking early risk.  A proper vesting schedule ensures that these early hires only earn their equity if they are contributing significantly to the success of the company over the long term.  In addition, issuing larger amounts of equity is a far better way of compensating hires given startups are typically cash-constrained and need to focus on giving themselves as much time (i.e. cash runway) as possible to establish product/market fit.

Ignoring hiring mistakes: This one happens after the hire is already made but it remains true that most founders fire too slowly.  Founders find it really difficult to trust their gut instincts around an employee’s fit for the company because they originally did so much work to make sure that the hire was the right one.  Founders also tend to look at it as a personal failure if a hire doesn’t work out.  But it’s important to accept that absolutely no one bats a thousand when it comes to hiring.  If an employee has lost your trust, finds it difficult to work with others or proves unable to deliver results, make the decision to move on immediately.  In my experience, founders always fire six months too late, even though they sensed the right answer earlier.  Trust your intuition around your team and make the hard call because it will save you and your team many months of pain and expense.

Other mistakes that are worth mentioning include 1) introducing too much diversity of thinking too early 2) overselling and not being honest about the company and role during the hiring process and 3) giving senior titles (VP and C-level primarily) too early.  There are many hiring landmines, but most of them can be avoided with some careful thought and a well-defined hiring process.  Investing early in hiring right pays off in multiples down the road, and beyond making sure there is money in the bank, is the primary responsibility of founders.  In a market where talent is scarce and the best talent has lots of options, it’s difficult but critical to maintain a rigorous process and to not compromise on the qualities of the team that are important to you and your culture.