
The importance of co-founder due diligence - jordn
http://chrisjamieson.me/the-importance-of-co-founder-due-diligence
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mikeho1999
All very good points... but one additional thing to add: what is his/her
reputation with former co-workers / companies that s/he has worked with?

I had one co-founder who (we thought) had a very celebrated career at a very
large (e.g. publicly traded) eCommerce-based company, making his way up to Sr.
Director, etc. Considering we were starting similar type of company, it seemed
like a perfect fit to bring him in as our chief executive.

However, we never asked for contacts / references with people he had worked
with, VPs he worked under, etc.

When it came time to raising an institutional round, we were in due diligence
with a VC that _did_ look up those references, and it wasn't pretty. Turned
out he had gotten fired by the company because he was using insider knowledge
to basically try and start a competing company. Through his time there, he
lost the trust of most of his co-workers and alienated everyone around him.

As our VC had then told us -- our CEO was a poison pill. _Any_ VC we would
talk to in the valley would have connections at this company, and would
definitely follow up with their contacts at the company to find out more about
our CEO, and every VC will come up with the same conclusion, that he is not to
be trusted.

Had we known about all of this at the beginning (including how detrimental his
relationships and his reputation has become), we would've never co-founded
with him.

Definitely a tough lesson learned.

~~~
UK-AL
Except most references are complete BS anyway. Normally good references are
agreed upon before leave, regardless to if they were good employees or not.

Bad references are normally given because of political reasons(as good
references are almost always given) not performance. I.E Employee exposed bad
practices or made boss look bad, and a bad reference is used as retaliation.

I think there was some academic research that said references are the worst
predictors for performance.

~~~
PakG1
This is the problem we're trying to fix with my startup socialcheck.me. We're
trying to make a safe environment to give full picture comprehensive reference
feedback by ensuring privacy and anonymity after verifying relationships are
real via social networks. Then we make the data easy to analyze and compare.
But admittedly, it's been difficult to figure out even then how to get people
to trust that we keep the feedback private and anonymous the way kids trust
Snapchat to really delete messages. Good reference checks are hard and broken
(which is why we're trying to fix them).

~~~
UK-AL
Doesn't fix the problem of references being used for politcal retaliation,
rather than actual performance. Which what the large chunk of bad references
are about. In-fact it increases it, because the employee can no longer sue for
retaliation, so the manager can make up anything he wants. Managers using
references to retaliate against employees is fairly common.

This is why people are scared to whistle-blow. And businesses who value
integrity miss out on good employees.

~~~
PakG1
Yeah, we try to compensate for that by increasing the data volume to balance
out outlier feedback and identify whether something is a trend or not. But
it's not easy.

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throwaway985023
I'm working for a startup where the primary founder did not perform enough due
diligence on his co-founder and the results have been disastrous.

The co-founder constantly brags about his employment history at major tech
companies in the area. Only later did we all learn that: 1) His roles weren't
as important or high-ranking as he claims and 2) He was fired for non-
performance from his last two positions. Both of those points are becoming big
thorns in our fundraising as investors want to speak with both founders'
former bosses.

This co-founder did work hard for a brief period when the company was started
and managed to produce some good initial funding. But when the funding hit our
bank, he became a victim of his own success and spent more time empire
building than working on the company. Within months of our initial funding he
was already working his way into adviser positions with local startups and
spending our marketing budget on having a PR firm get puff-piece articles
about him into major publications. I think he's spent less than a thousand
dollars on customer acquisition and advertising for our product.

He rarely comes in to the office any more, and when he does he can often be
found watching ESPN or Hulu in the conference room. He some times doesn't even
bother to stop watching his sports games on his laptop with his headphones
over one ear while he's supposed to be leading team meetings. It's depressing
for the entire office, and we're losing people left and right over it.

The takeaway here is that a bad co-founder can easily sink your business. A
bad co-founder isn't immediately obvious. In this case, the person in question
is charismatic and persistent when necessary, and has a great ability to sell
himself to others in the short term as long as you don't dig too deep in to
his spotty past. This was great for securing our early angel funding and dumb
money, but once the company tried to secure real funding from the big league
VC firms the professional investors saw right through his BS.

~~~
thenmar
Can I ask why you're sticking around? How can a company like this succeed?

~~~
throwaway985023
I'm actively looking for and applying at other companies. Most of my coworkers
are looking for new jobs.

We've all stayed this long because we have fun working here. We're building a
good product and we like working with each other and the primary founder.

Up until recently the co-founder has mostly been dead weight. He positioned
himself as the money guy, and his early attempts at fundraising worked, so we
put up with all of his bad behavior as long as we got a paycheck and were able
to work on the things we loved.

Now that the money is running low and his attempts at fundraising are failing,
we're all ready to abandon ship. The only hope left for this company would be
if a generous (or dumb?) investor would invest in us for the product and then
replace the bad apple co-founder with someone who could actually get the job
done. That seems unlikely to me though.

~~~
cdman
What is your domain of expertise? Hit me up (email in the profile) if you're
interested in working with Python and/or JS (Angular mainly).

~~~
jaytaylor
@cdman Just a heads up - you're email isn't in your profile

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loladesoto
"Pay close attention — true motivations are revealed, not declared." ~ Naval
Ravikant [http://venturehacks.com/articles/pick-
cofounder](http://venturehacks.com/articles/pick-cofounder)

tl;dr: either go with someone you know and launch something together. if
strangers: brainstorm, hack something together in 48 hours and thoroughly go
through their background. if they've done a startup before, ask them to walk
you through PG's 18 mistakes and identify which they've made (and their plan
for doing things differently).

it's actually a two-sided problem. how do technical and non-technical co-
founders who are potentially strangers and often have wildly different skill
sets evaluate each other?

i asked a few hacker-founder friends for their take. one (well-known) serial
CTO said: "I don’t have negotiation skills and I’m afraid of talking to
business people. They play this "wordsmithing" game and I can’t keep up.
Before I know it, they talk me into accepting less than I deserve and I get
screwed.”

turns out, being taken advantage of was a common theme among the technical
founders i talked to. most have been burned. in some cases it turned them off
forming partnerships altogether.

what about the other side? i was a non-technical founder when i launched my
first startup, which failed partly due my inability to judge a good from a bad
developer. i eventually realized that being non-technical put me in a
foolishly helpless position so i did two things: 1\. i taught myself to code
(i started with Pygames, moved to Project Euler and wound up working on small
Python projects and learning ObjectiveC); 2\. i got lucky when i met a
developer at a hackathon last year. we became friends and i asked for his help
interviewing technical co-founders. he wound up being interested in the
problem i was trying to solve and contributed to the project. when i wound
down that startup and told him about my next one, he wanted to get involved.

 _but not before suggesting i quickly hack together an MVP, get some initial
user feedback and even land a few potential customers first._ :> i'm so glad i
did and he was smart to ask for this. he now understands how i approach
problems, saw my ability to hack something quick and dirty, and witnessed some
serious hustle as i did all of that in 48 hours. the point is we have some
shared history now and the net result is trust. we also understand each
other's strengths and weaknesses and talk about them openly.

(note: i also did a post-mortem on my previous startup and identified which of
PG's 18 mistakes i'd made. it was a great exercise and i recommend it to
anyone who has had to wind down a startup before launching their next. do it
for yourself but share it with prospective co-founders and team mates.)

~~~
digita88
I used hackathons as a good type of way to network with other developers, see
how we work under pressure etc. I think it works initially but start-ups
aren't quick and dirty solutions. It'll be time that can dissolve a start-up!

------
ChuckMcM
Small companies are much more like families than like work projects. There is
a lot to be said for this. I would be a bit careful about engineering to
stressful a situation at first, often with much less stress you can get hints
at what the response will be and test those. Full on stress can bring out
things you don't expect so you need a good backup.

At a former job we hired a person I knew from a former company into a job that
was too stressful for them and it brought out some addiction issues the
employee felt they had conquered. Turns out not so much. It was challenging
but we got the employee help and back into a stable situation, but it was not
the experience we had expected or planned for.

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mingmecca
Values matter. Ethics matter. If you're considering someone as a co-founder
that believes the end justifies the means, or it is better to ask forgiveness
than permission, then pass on that person and keep looking.

Personal anecdote: I wasted years of my life trying to get my multi-
millionaire co-founder to be honest, but to his way of thinking there was no
value in being honest all the time, so he wasn't. Consequently, because of the
social isolation and loss of business contacts that comes from being
untrustworthy (and just making bad decisions in general) this person went from
have nearly 12 million dollars in the bank to having less than $500.

Karma is a bitch.

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liface
Having the author's face peeking out at me from the bottom of the screen is
creeping me out a little bit.

~~~
jamiesoncj
Hey! Author here - it is a bit creepy, I suppose! Sorry about that. I might
need to tweak the theme :)

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stormqloud
People need to realize most things in business are a "numbers game".

A funnel.

You try 10 companies, 2 work etc.

You have 10 co-founders, each time you learn something.

Don't understate the value of luck and randomness. Even Bill Gates realizes he
was just plain lucky as much as he was smart, had the tech, timing etc.

The more you try the more you can take advantage of randomness.

IE if you don;t play you can't win.

~~~
Ma8ee
And if you do your homework you don't need to even start _some_ of the failed
companies. By check the references and ask the right questions you can avoid
_some_ of the failures before they even happen.

Of course you must try, but don't spend 18 months trying something that three
days of research would have shown to be doomed from the start.

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nlh
I can't possibly agree with this premise more strongly. Having the right co-
founder chemistry is as critical (if not more critical?) than having the right
chemistry in your personal relationships (there's a reason it's called
FounderDating ;) )

I haven't been around that long, but I'd say a majority of business failures
I've learned about (outside the Silicon Valley bubble) happened because of
disputes and frustrations between partners.

I know a lot of people, and there are probably no more than 3 that I would
ever start a business with.

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tluyben2
I have been very lucky with my business partners so far ; some of them I have
never seen in person and yet have started successful business with them. So
far (around 20 companies) I have not been wrong about my gut feeling I got
when first talking to someone wether this would or would not work well.
Unfortunately at a few occasions I ignored that feeling because it seemed like
too good an opportunity to miss and I paid dearly for it. But that's only
money so who cares. My biggest success has been with someone I knew I wouldn't
be compatible with at all but he was so well connected and financially gifted
that it didn't matter.

It is how I still start my businesses; I talk to someone briefly and if we
seem to have align for the particular business in question, we just start.
Personally I think people worry too much in general; there is no way to plan
these things. You can be plainly stupid about it but if your intuition is that
bad maybe you don't want to run a business anyway as you will have to be able
to vet partners, employees, investors etc very quickly all the time after
starting.

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digita88
In my last start-up, I was the sole Founder and had a Partner which dealt with
the development side (instead of a 'Technical Co-Founder') so even though I
could do it myself I prefer building the organisation. This time around we are
Co-Founders but one is more 'Technical' by way of formal education. With my
last one, we have been together for several years. There was a bit of a
stressful period last year which they could have easily cut me off but instead
shrugged and went "Look, don't worry, if you have any further projects just
let us know". That was several years after our first partnership agreement.
With the current one, I called this person out, working on multiple other
projects and felt like mine was being delegated down to "Unimportant"
(although could have been communicated better). In terms of potential
development loss not a big deal, won't be a start-up killer, but nonetheless a
pain for me. I am willing to 'train' up this Co-Founder though and get them
into a start-up state of mind as to not burn any bridges. I think that with
Co-Founders you have to work on making things go smoothly, and it's the soft
skills like: \- Communication (Founder agreements, meetings etc) \- Figuring
out how to work as a team (ie who is doing what etc) \- Expectations. I think
that some people have a concept as to what it's like being a Co-Founder based
on what they read on blog entries, on popular culture and so on and then when
they actually do take on board this type of position at a start-up they get
that big wake up call. I think that is where fall outs happen especially for
first-time entrepreneurs. Some people may also realise that they would rather
work for a company or for a start-up rather than run one, and that's OK. Some
people may not handle the stress and again, that's OK.

I think it's important that, in the end, we all treat each other like human
beings. We're not saving lives here - we're not surgeons, nurses,
firefighters. Keep that in perspective.

~~~
digita88
Also out of this experience, my other benchmark should I look for a
new/another Co-Founder is whether or not they've had experience in start-ups,
and I don't mean 'I published an app and a one pager website' but ACTUAL
start-ups ie they have hired, done media/press/publicity, done partnerships,
done funding, and so on.

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tUrG0n
If you can build it (ie if you're a techy), stop looking for a co-founder.
I've seen early stage startup's team shatter due to co-founder breakups,
including mine. I saw my first 4 startup die, because I either couldn't stand
my co-founders or we just didn't have complementary skills.

Don't force getting a co-founder. Instead, LEARN TO CROWDSOURCE YOUR TEAM.
Have as many 'advisors' as you can in as many areas as you can. They are your
'team'. They don't do the work for you, but they guide you. Hire the rest or
do it yourself.

With a team, you risk having constant fights and eventually breakups. It
HURTS. Your startup can't afford it. Solo, you face an attrition war, as it
takes you more time to build it. Its survival of the toughest, and if you have
what it takes to survive, you will make it.

I base this on the fact that I've been solo founder and bootstrapping Beepl
([http://beeplapp.com/](http://beeplapp.com/)) for the past 7 months. I don't
have to deal with other people's drama. I face my own depression and that's
something that I can solve easily.

------
rrhyne
Emotional intellegence is a critical skill. Be clinical and ruthless in you
culling of potential co- founders in this regard.

Do not make allowances for bad emotional behavior or lack of ability to reason
properly, no matter how much you currently respect or like the person. The
stress will make magnify every seemingly small issue 100 times. Try to imagine
what the traits you observe early will be like under that kind if pressure.

------
apunic
A friend said: cofounders are the biggest driver before getting funded and the
biggest obstacle after.

~~~
jason_tko
If your co-founder is not as equally a driver before and after an arbitrary
business event such as a fundraising round, you picked the wrong co-founder.

