How to find a co-founder as a first-time founder
What to do when you have no money—but need a team
“You need to do three things to get in: Find two co-founders, raise more money, and launch a new website,” the Techstars program Managing Director told me. It was January 2021 and I had been working alone, full-time on my company for nearly a year. I had raised $20k from friends and family at that point, but had no professional investor prospects, no startup network, and basically no money to spend on anything besides building my prototype Pilates reformer.
At first I was offended. Couldn’t he see how much work I’d already put in? Progress I’d made? Didn’t he know I was the hardware expert and had been doing the thing for a year, so why would someone come in to be a co-founder now? How could he say I needed to raise more money before the program when the whole point of Techstars was to help me raise?
“This is a test,” he told me. “Let’s stay in touch over the next few months. Submit your application for the program, and if you can show me you can take action, you’re in.”
As I had so often in the last twelve months, I did everything I could to prove to him I was meant to be there. I found two co-founders, redesigned my website, and raised a tiny bit more capital. And as a result, in June of that same year my new team and I started the Techstars accelerator program.
One of the most common questions I get asked by new founders is how I found my co-founders. I share my story and advice on the topic below.
You have a network even if you don’t think you do
Despite being fifteen years into my professional career, I didn’t really know what networking was. As a mechanical engineer, I gravitated toward friends, role models, and my own principles of how I thought work should be. I didn’t know how to strategically meet people, and honestly didn’t know what I’d do with them if I did.
But, when it came to finding my co-founders, I realized I did have a network of sorts. This was the first time I needed to leverage my network (to use startup jargon). I hadn’t built it intentionally for career purposes, but I had met and become friends or acquaintances with quite a few interesting people over the years. So, I reached out to them.
Were they interested in what I was building? Were any of their friends into startups?
How I met my Technical Co-Founder
I met my co-founder and CTO at Flexia, David, playing adult rec soccer in Georgia in 2015. As a team we’d go out for beers after games. David and his wife and me and my husband formed a bond over craft beer and travel. Over the next several years we adventured together, and I got to talking to David more about Pilates and business and my quest to bring innovation into the Pilates world. At one point, David offered to help me with some coding on a side project I was working on. It was after this small project that we had a long conversation about the things I wanted to accomplish and he told me, “When you’re ready to hire your first tech person, I want to be that person.”
By 2020 I was ready to found Flexia. I was living with my husband in my parent’s basement(!) teaching Pilates, and itching to create. I dove into Flexia head first. At this stage I had an idea and was searching for all the ways to make it happen. I knew I could handle the hardware side of my idea, but I am a terrible coder. I needed a partner.
Accepting a co-founder role takes convincing
As soon as I committed to the idea myself, I started the conversation with David. “Join me!” I said. He politely declined.
However, he offered to keep being my sounding board as I shared what I learned about startups and honed my idea. By the end of 2020, he told me he would happily build the online portal in his spare time, but he wouldn’t quit his job until we had some validation that there are legs to the business.
So, I worked with that. I now had another goal to work toward- get some validation to bring David on board full-time.
Founding a startup is hard and I knew the people I chose to work with were vitally important, so I prioritized getting David to a spot where he could join me because I thought he was the best person for the job and wanted it to be him. (spoiler: he was!)
The third Co-Founder
The Techstars MD told me I needed two co-founders though. I was building three businesses in one (hardware, novel tech, and SaaS) and didn’t yet understand the immense undertaking that was going to be. During our original conversation I told him I could hire the person I needed, but he said, “Look, you need to not spend money on hiring right now. You have none. You also need to prove to investors, including me, that you can convince people to work for you even though you have no money and just an idea with a minutiae of traction. Find another co-founder.”
There were no other David’s in my immediate circle, so I branched out. The year before I had worked with an independent product development consultant. Our project went well enough, so despite not knowing him well, I asked if he’d be interested in hearing more about where we were at. He was.
We had a few good conversations, then arranged for him to come spend a weekend with me and the prototype to discuss how things might work. It was a great weekend and I was stoked! I could see him as the 3rd Flexia co-founder!
I offered him the “job” but a few days later he declined. I felt deflated. What was I going to tell Techstars? I knew that program was critical for me and I just had to figure this out.
Always Work Together First
One of the other tasks the MD set me on was redesigning the website. I had been making my own websites for years, but I knew the current one was still amateur. So I reached out to my network (aka friends) and asked for a recommendation for a website person. That’s when I found CJ. She helped me navigate a very poor experience with a freelance brand designer (from which I extricated myself) recommended someone else to design the brand assets, and then I hired her to build the website.
I paid her first payment in cash, but when it was time to pay the second payment she jokingly said “you can pay me in shares.”
I thought, “Hmmmm…”
See, CJ was a Pilates instructor with marketing skills, and knew what I was building was interesting. I also liked working with her on this project. She made the website look professional, communicated throughout the project well, and knew a lot of stuff I didn’t. Plus, we bonded over Pilates stuff.
So, talks progressed and we found an arrangement. Yay! 3rd co-founder!
Compatibility
One of the tools I used with both David, the potential hardware co-founder, and CJ, was a founder compatibility questionnaire. This was passed along to me by a mentor earlier on in my startup, and with a few tweaks I used it for our discussions. Not only did it prompt me to think about myself and how I imagined working with co-founders, everyone filled it out for themselves and we used it to guide the conversation when we were seriously considering joining forces.
A couple of things that this tool surfaced for me were:
The hardware consultant asked me if David and I could yell at each other when we disagreed and still work together after. That was a weird question to me, I’m not a yeller. But maybe startups required yelling? I gave him the benefit of the doubt at the time, but it turns out that in 5 successful years David and I never yelled at each other. In the end, that comment said more about the person asking it than the person answering it.
Second, the three of us spent a lot of time talking about who would make final decisions. While I wanted them to have a voice and autonomy, it was ultimately my company. Even though they were sacrificing for the company as a co-founder might, we all agreed that it would be terrible if we had the same amount of sway causing every decision to be made via consensus. I respected them, wanted them to have a voice, and needed their expertise to complement mine, but ultimately I was the CEO. This turned out to be a very good decision that allowed us to move quickly and avoid unending disagreements.
Compensation
Another important factor to consider in co-founder discussions is compensation. I considered three components in our arrangements: Cash, Equity, and Title.
The Techstars Managing Director told me at one point that the title co-founder was a perk. Lots of people want that title, and it cost me and the company nothing to give it. So I did. I was the founder and they were the co-founders.
Additionally, I gave David and CJ (as well as all later Flexia employees) three options.
High equity / low cash,
High cash / low equity
Somewhere in the middle
When crafting these options I considered what their cash salary was “worth” to the company. How much more flexibility to invest in the business would their cash sacrifice be worth… and then ensure that the equity balances that. The three of us worked on no or very reduced salaries for a long time, and I know that to be the case for most founders. The ones you see make the headlines all the time aren’t the norm.
Real world example: With my two co-founders the lower bound of cash was $0 and the higher bound of cash was the most the company could afford (not market value). But with later employees the upper and lower cash compensation bounds were much nearer market salary rates.
I respect that not everyone is in a position to work for free or reduced salary, and I believe it’s important to talk openly about compensation with anyone joining the team, ESPECIALLY co-founders. However, if someone needs a full salary from you they probably aren’t meant to be a co-founder. Yes, that may be unfair. But it’s the reality. Co-founders take personal risk. If they’re going to earn a market rate cash salary (no personal risk), they’re not a co-founder.
Documentation
Finally, you need to have a good agreement in place. There are tons of free templates around if you don’t have a lawyer yet, but it’s best if you do. If your company turns into “something” documentation is vital.
Not only should your company have a legal entity (LLC or C-Corp), but you and your co-founders should have a formal founder agreement and equity vesting schedules for everyone. Yes, even you!
Asking people to join you without paperwork in place to govern that relationship is a red flag all around. Don’t be that person.
tldr;
You have a network even if you think you don’t. Be dogged about using it.
It takes time to convince someone to join you. Put in the work. Show them you’re in it for the long haul.
Always work together on a project first.
Do premarital counseling with your potential cofounders. Even if it’s just a questionnaire that you share and use to guide a conversation.
Compensation matters, even if it’s not cash. Make it official.