Hiring at a Startup? Know Thy Weaknesses

Posted on Dec 1, 2009 | 58 comments


This is part of my ongoing series on Startup Advice.

kryptoniteI was reading one of my favorite websites for entrepreneurs, VentureHacks, this weekend and noticed that they are running a long piece on how to pick a co-founder.

If you’ve read my blog for a while you’ll know that I’m a fan of starting businesses in a non-traditional way.  I recommend that you start a company by yourself and own 100% of it.  Once it’s set up I recommend bringing in a co-founder and giving them 10-30% of the company depending upon when you bring them in.  I advocate treating them like a co-founder in every way except when they join and how much equity they get.

I know this is unconventional thinking but if you want to understand more I cover my rationale on this post about The Most Common Early Stage Startup Mistakes and again in this post covering how to implement startup prenuptials.  If the topic is important to you and you haven’t read these posts I think they’ll be worth your time.

In the VentureHacks post Naval Ravikant argues in “the power of two” – that you should have two co-founders as in Bill Gates / Paul Allen, Larry / Sergei, Jerry Yang / David Filo.  He talks about the instability of 3 and the unmanageability of 4 or 5.  For me 3+ is usually a non starter.

I know that people find safety in numbers (and there always seems to be 3 amigos) but imagine this for a moment – you go and raise venture capital and you’re fighting over whether to dilute with a VC by 25% or 30% as a company.  You agonize over whether it is better to take a “A investor” for 30% dilution or a “nice to have” investor for 25% and on better terms.  Well, duh, if you have 3 equal co-founders you personally have just diluted by 66.66% and you haven’t even raised a penny!

OK, so I know that some of you already have 3 co-founders and I’ve met many of you.  You’ll be fine.  But I would hate to not tell future entrepreneurs the truth at the risk of slightly upsetting some of my friends.  And if you’re honest I think the next time around most of you would probably admit yourself that you’d do it with 1-2 maximum.

But whether it’s Naval’s “power of two” or my “start things and then hire your co-founder” approach the reality is that you’ll need to find a partner.  I don’t plan to cover how to best pick your co-founder as it seems the VentureHacks is about to do a bang-up job on this.  I want to focus on a narrower point that can be applied to a co-founder or any senior member of your team in the early days – which is to find somebody complementary to you.

Know thy weaknesses

I’ll use me as an example.  I’ve had the same weaknesses since I was young.  One of the most critical weakness is brought on by my ADD (or I think more commonly called ADHD now), which is that I’m not a “completer-finisher.”  I’ve always known this about myself but could never put any rationale behind it until I read “Driven From Distraction,” which if you suspect you might have signs of ADHD I highly recommend you read.

I have always been able to go very deep on details and I’ve always been able to get things done (JFDI).   I think ADD is totally misunderstood – it’s a very PRODUCTIVE condition but it has downsides.  I’ve always been able to shape deals and get LOI’s done and I’ve always been able to plow through the first 2-3 revs of a legal agreement.  I’ve always been able to do a 12-tab budget in Excel.  But I’m never able to dot the final i’s and cross the final t’s.  I just don’t.

And understand a bit more about how my brain works it makes sense to me now.  For those without this affliction I know you’re scratching your head saying, “just finish” but honestly it’s as hard to explain to you as it is for me to understand why some people are afraid of public speaking.  I can throw bombs by I can’t move the ball forward 1 foot at a time every day of the month until we’re in the end zone.

Because I’ve been aware of this deficiency since high school (even before I had a label for it and therefore an excuse!) I’ve always surrounded myself with “completer finishers” in any important tasks and at my companies (and, incidentally in my home life ;-) )  But it’s also true that many completer finishers aren’t as good at the areas in which I shine.  They are often less good at defining things that are abstract or knowing where to best start strategically.  They are often not as creative in shaping things, one of my core skills.

finger dykePlug your holes

I guess the second point is already self evident.  Your company of 10 people doesn’t need 5 that are like you.  You don’t necessarily have to have a ying and yang c0-founder.  But if not in your co-founder make sure that you think through all of the functional roles in your company: sales, marketing, finance, product management, customer support, technology and think about which ones match your strengths and where you need to plug holes.

You may be introverted and need the more externally facing person.  You might be highly technical but lacking in business acumen.  You might be great at networking and leading but bad at planning and managing.  I think taking an honest inventory if your strengths and weaknesses is the most important starting point.

– Are you a shaper vs. a completer-finisher?

– Are you externally savvy vs. more inwardly operational?

– Are you a leader vs. a manager?

– Are you technically inclined?

– Do you understand how to lead a sales process?

– Have you worked in marketing / customer acquisition before?

– Are you intuitive vs. process oriented?

Take your inventory.  Know thy weaknesses. Resist the temptation to hire clones of you.  Plug your gaps.

  • http://venturehacks.com nivi

    Great post.

    I would counsel founders to focus on maximizing the value of their ownership instead of maximizing their % ownership. Owning 90% is one way to potentially maximize the value of your ownership. So is owning 50%.

    I wonder what would happen if we asked founders who have had good exits whether their co-founders were an irreplaceable component of their success.

  • johnpisciotta

    Killer post

  • http://twitter.com/christinelu Christine Lu

    as someone with self-diagnosed ADHD — yup, self diagnosed. meaning i don't need to pay someone to tell me i have it. i already know i do. LOL — this was very helpful to read.

    it's funny, in a world where i find most people trying to talk themselves up …it's refreshing when you come across those who can also tell you what they're not good at.

    i recommend your blog to everyone. not just startup entrepreneurs. you have a lot of great insight. thanks as always for sharing. ^_^

  • http://twitter.com/MironLulic MironLulic

    I agree with you. I've actually spent the last year focusing on product development and we've now got a sizable user base and are generating a small but decent amount of revenue. I'm at that point where I'm looking for a partner with stronger engineering abilities than me. So if you know anyone, send them my way.

  • http://code.google.com/p/salesforce-python-toolkit/ David Lanstein

    I believe you mean David Filo?

  • http://www.chinalawblog.com/ China Lawyer

    So true. It always amazes me/bothers me when I see a small company where everyone looks and acts alike. Groupthink is never good. Halberstam's book, The Best and the Brightest, does a great job of showing why that is the case. Some tension can actually be good.

  • http://bothsidesofthetable.com msuster

    Yeah, Nivi. I know that I'm swimming against conventional wisdom here but I believe this in my bones. You can find very talented “co-founder” after you've started things and give them 30% of the company. Even 40%. I think this is better than a 50/50 split. Naval talks about the instability of a 3-person startup and I agree with him. But trust me I've seen many busted companies with great potential because founders disagree.

    My advice: treat the person you hire like a co-founder in every way except exact equity ownership. You only stop being co-founders if life isn't working. But then you at least preserve your value. It's a tough road when you get divorced in a 50/50 business after 4 grueling years of hard work and hit happens all the time.

    Have a buddy that you want to start a company with? My non-conventional feedback is: start 2 companies. Swap 10% in each other's businesses. Help each other. But whoever is more successful so be it. The other person had the hedge.

    When do I recommend co-founders? When you really don't have the leadership skills to pull things off on your own.

    My closing argument: when you build a $200 million company everybody is fine with 50/50 ownership. but the average exit is $50 million for successful companies and that's after raising much capital so distributions are less. The more likely positive scenario for you is a $10-15 million exit. And I really mean that it is a positive outcome. Many people sell just to end an initiative that they realize won't be super successful. In any of these “down” positive scenarios you'll be happy you're not 50/50.

  • http://bothsidesofthetable.com msuster

    Thanks, Christine. Greatly appreciated. I think I could at a minimum have diagnosed you as an insomniac! ;-)

  • http://bothsidesofthetable.com msuster

    Yes. Thank you! Good spot. Typing too quickly.

  • http://bothsidesofthetable.com msuster

    Cool. Don't know the book. Will check it out. Thanks!

  • http://www.appwhirl.com Richard Jordan

    Thanks for the book recommendation. I have spent years building structure into my life to accommodate my ADHD (that went years without having a name for me – though my first ever boss tried to talk me through the fact that some people are/aren't completer-finishers and that's okay). It's only in recent years I have embraced it and worked with it rather than seeing it as an embarrassing weakness and struggling to do things the same way as other people. It all works pretty well now, and self-awareness has been the key for me. But this book sounds like a great read.

  • Giarty

    Glad to hear this. Two brains are better than one, but I can hire brains, to some extent, and one is so much more efficient. If I only think at the number of changes to the plan I do on a daily basis, it would be a nightmare to agree on them. It's already enough to have to bitch with my suppliers. Later, when the direction is set, I can hire talent on an equity basis. And market them as co-founders to the nagging VCs.
    Cheers.

  • http://www.altgate.com/ fnazeeri

    HBS entrepreneurship professor Noam Wasserman does a bunch of research on this topic some of which he talks about on his blog. CompStudy is part of his research (survey of executive compensation at startups / venture backed companies). All kinds of interesting findings from that, like the “founder discount.” On your point about whether there is a correlation between the number of founders and failure, that's an interesting question…one that he actually might have some data on. I think I'll ask him and let you know…

  • http://venturehacks.com nivi

    Great post.

    I would counsel founders to focus on maximizing the value of their ownership instead of maximizing their % ownership. Owning 90% is one way to potentially maximize the value of your ownership. So is owning 50%.

    I wonder what would happen if we asked founders who have had good exits whether their co-founders were an irreplaceable component of their success.

  • http://johnpisciotta.com/ johnpisciotta

    Killer post

  • niallsmart

    There's a lot of speculation on potential links between ADHD and those entrepreneurial characteristics you mention; which are a liability in a bureaucracy, but a source of strength in a startup. You can broaden the strategy espoused in this post to a general philosophy of maximizing success by matching personal strengths/weaknesses not just to startup co-founders, but to a career path in general.

    You might find this an interesting read: http://www.windeaters.co.nz/publications/innova

    (For some reason Safari thinks that link is malware, but it seems OK here)

  • http://twitter.com/christinelu Christine Lu

    as someone with self-diagnosed ADHD — yup, self diagnosed. meaning i don't need to pay someone to tell me i have it. i already know i do. LOL — this was very helpful to read.

    it's funny, in a world where i find most people trying to talk themselves up …it's refreshing when you come across those who can also tell you what they're not good at.

    i recommend your blog to everyone. not just startup entrepreneurs. you have a lot of great insight. thanks as always for sharing. ^_^

  • http://twitter.com/MironLulic MironLulic

    I agree with you. I've actually spent the last year focusing on product development and we've now got a sizable user base and are generating a small but decent amount of revenue. I'm at that point where I'm looking for a partner with stronger engineering abilities than me. So if you know anyone, send them my way.

  • http://code.google.com/p/salesforce-python-toolkit/ David Lanstein

    I believe you mean David Filo?

  • http://www.chinalawblog.com/ China Lawyer

    So true. It always amazes me/bothers me when I see a small company where everyone looks and acts alike. Groupthink is never good. Halberstam's book, The Best and the Brightest, does a great job of showing why that is the case. Some tension can actually be good.

  • http://bothsidesofthetable.com msuster

    Yeah, Nivi. I know that I'm swimming against conventional wisdom here but I believe this in my bones. You can find very talented “co-founder” after you've started things and give them 30% of the company. Even 40%. I think this is better than a 50/50 split. Naval talks about the instability of a 3-person startup and I agree with him. But trust me I've seen many busted companies with great potential because founders disagree.

    My advice: treat the person you hire like a co-founder in every way except exact equity ownership. You only stop being co-founders if life isn't working. But then you at least preserve your value. It's a tough road when you get divorced in a 50/50 business after 4 grueling years of hard work and hit happens all the time.

    Have a buddy that you want to start a company with? My non-conventional feedback is: start 2 companies. Swap 10% in each other's businesses. Help each other. But whoever is more successful so be it. The other person had the hedge.

    When do I recommend co-founders? When you really don't have the leadership skills to pull things off on your own.

    My closing argument: when you build a $200 million company everybody is fine with 50/50 ownership. but the average exit is $50 million for successful companies and that's after raising much capital so distributions are less. The more likely positive scenario for you is a $10-15 million exit. And I really mean that it is a positive outcome. Many people sell just to end an initiative that they realize won't be super successful. In any of these “down” positive scenarios you'll be happy you're not 50/50.

  • http://bothsidesofthetable.com msuster

    Thanks, Christine. Greatly appreciated. I think I could at a minimum have diagnosed you as an insomniac! ;-)

  • http://bothsidesofthetable.com msuster

    Yes. Thank you! Good spot. Typing too quickly.

  • http://bothsidesofthetable.com msuster

    Cool. Don't know the book. Will check it out. Thanks!

  • http://www.JamesSiminoff.com Siminoff

    Someone once told me “Partnership is the only ship you should never sail”.

    While nothing is a silver bullet and there are examples of equal partnerships working, overall they suck and should be avoided at all cost.

    Great advice.

  • http://www.appwhirl.com Richard Jordan

    Thanks for the book recommendation. I have spent years building structure into my life to accommodate my ADHD (that went years without having a name for me – though my first ever boss tried to talk me through the fact that some people are/aren't completer-finishers and that's okay). It's only in recent years I have embraced it and worked with it rather than seeing it as an embarrassing weakness and struggling to do things the same way as other people. It all works pretty well now, and self-awareness has been the key for me. But this book sounds like a great read.

  • http://www.giarty.it Francesco Giartosio

    Glad to hear this. Two brains are better than one, but I can hire brains, to some extent, and one is so much more efficient. If I only think at the number of changes to the plan I do on a daily basis, it would be a nightmare to agree on them. It's already enough to have to bitch with my suppliers. Later, when the direction is set, I can hire talent on an equity basis. And market them as co-founders to the nagging VCs.
    Cheers.

  • http://spencerfry.com/ Spencer Fry

    I wrote a response to the VentureHacks' article you mentioned a few weeks back. I argue that three co-founders is better than two for several reasons. You should check it out: http://spencerfry.com/threes-company. It got a lot of great responses and I think I converted at least a few people.

  • http://bothsidesofthetable.com msuster

    Self awareness is critical and reading the book was empowering.

  • http://bothsidesofthetable.com msuster

    I agree on all points. I don't think VCs will nag you about it IMHO.

  • http://bothsidesofthetable.com msuster

    Thanks, Jamie. Welcome to the minority! But having done it you know best.

  • http://www.JamesSiminoff.com Siminoff

    Someone once told me “Partnership is the only ship you should never sail”.

    While nothing is a silver bullet and there are examples of equal partnerships working, overall they suck and should be avoided at all cost.

    Great advice.

  • http://bothsidesofthetable.com msuster

    Self awareness is critical and reading the book was empowering.

  • http://bothsidesofthetable.com msuster

    I agree on all points. I don't think VCs will nag you about it IMHO.

  • http://bothsidesofthetable.com msuster

    Thanks, Jamie. Welcome to the minority! But having done it you know best.

  • http://twitter.com/vnagappa Varun Nagappa

    excellent article but remember it's always better to own 10% of something then 100% of nothing.

  • desmondpieri

    Great post. Thanks. One way to “plug holes” is to bring in an interim exec to help out in the very early stage — BEFORE you've added the second founder. I briefly discuss when this does — and does not — make sense here: http://bit.ly/InterimCEOCOOatStartups

  • http://bothsidesofthetable.com msuster

    That's the false logic everyone uses to justify everything. Yes, I understand the math. But the reality is that it is better to own 40% of something that sells for $5 million than 6% of something that sells for $30 million. You can cut the numbers any way you like to prove any point.

    Mine is more simple: you can get equally quality co-founders by bringing them in after PROVIDED THAT you give them meaningful equity (say 15% and up … as high as 40%) and that you treat them like a real founder. The only time you don't treat them as equal is if you fall out of love. And in that equation 50/50 s-u-c-k-s !!!

  • http://twitter.com/vnagappa Varun Nagappa

    excellent article but remember it's always better to own 10% of something then 100% of nothing.

  • Pingback: Knowtu » links for 2009-12-02()

  • http://bothsidesofthetable.com msuster

    That's the false logic everyone uses to justify everything. Yes, I understand the math. But the reality is that it is better to own 40% of something that sells for $5 million than 6% of something that sells for $30 million. You can cut the numbers any way you like to prove any point.

    Mine is more simple: you can get equally quality co-founders by bringing them in after PROVIDED THAT you give them meaningful equity (say 15% and up … as high as 40%) and that you treat them like a real founder. The only time you don't treat them as equal is if you fall out of love. And in that equation 50/50 s-u-c-k-s !!!

  • http://www.linkedin.com/in/sharelomer SharelOmer

    So true, i know you talk from experience. i think that by definition innovation is something different…. so i love posts which advice to go in different directions.

    What is your approach towards friends who are consulting/helping in what they can when you are in a bootstrap path ?

  • http://sharelomer.blogspot.com SharelOmer

    So true, i know you talk from experience. i think that by definition innovation is something different…. so i love posts which advice to go in different directions.

    What is your approach towards friends who are consulting/helping in what they can when you are in a bootstrap path ?

  • http://bothsidesofthetable.com msuster

    Advice in terms of whether to use them – if they have great skills and are willing – hell yes!

    In terms of equity – small amounts – obviously depending on contribution level.

  • http://bothsidesofthetable.com msuster

    Advice in terms of whether to use them – if they have great skills and are willing – hell yes!

    In terms of equity – small amounts – obviously depending on contribution level.

  • http://www.linkedin.com/in/sharelomer SharelOmer

    Hi Mark,
    Thanks for the reply, i love the way you look at innovation :)

    can i follow up via mail?

    Thanks,
    Sharel

  • http://sharelomer.blogspot.com SharelOmer

    Hi Mark,
    Thanks for the reply, i love the way you look at innovation :)

    can i follow up via mail?

    Thanks,
    Sharel

  • http://twitter.com/tumbledesign Tumble Design

    Hey Mark,

    I first saw you on Mixergy and have been following your blog since. I've been enjoying your articles but this one, especially the second half, really inspired me to get in touch.

    My co-founder situation is a bit different than you describe because a friend and I specifically took time off of school to work on our own projects together. We simply worked together in a way that we didn't with anyone else and wanted to immerse ourselves in that exciting, creative world.

    Over the past 18 months or so since we've been working, I've come to believe that the single most important component to progress is self-awareness; knowing thy weaknesses, strengths and everything in between.

    We are both without a doubt 'initiator-shapers'. He has been diagnosed with ADHD and I wouldn't be surprised to find a psychologist that thought the same of me. But because we are hyper-aware of this, we've been able to really discuss what we're doing, how we approach situations and if we really need to start over or should just pull the trigger and launch.

    We make mistakes everyday but by reexamining ourselves individually and as a whole just as often, we seem to be progressing in ways that are much more exciting in the long run.

    Thanks for getting me thinking!
    -Nicky

  • http://blog.tumbledesign.com/ Nicky Hajal

    Hey Mark,

    I first saw you on Mixergy and have been following your blog since. I've been enjoying your articles but this one, especially the second half, really inspired me to get in touch.

    My co-founder situation is a bit different than you describe because a friend and I specifically took time off of school to work on our own projects together. We simply worked together in a way that we didn't with anyone else and wanted to immerse ourselves in that exciting, creative world.

    Over the past 18 months or so since we've been working, I've come to believe that the single most important component to progress is self-awareness; knowing thy weaknesses, strengths and everything in between.

    We are both without a doubt 'initiator-shapers'. He has been diagnosed with ADHD and I wouldn't be surprised to find a psychologist that thought the same of me. But because we are hyper-aware of this, we've been able to really discuss what we're doing, how we approach situations and if we really need to start over or should just pull the trigger and launch.

    We make mistakes everyday but by reexamining ourselves individually and as a whole just as often, we seem to be progressing in ways that are much more exciting in the long run.

    Thanks for getting me thinking!
    -Nicky

  • http://www.victusspiritus.com/ Mark Essel

    This is a powerful post Mark. Self examination and digging into our own cognitive biases and limitations isn't always a pretty process. Will certainly read over your arguments for a method of starting up a business, but that particular decision was made by me long ago. I certainly want full fledged partners.