Setting Yourself (and Your Co-founder) Up For Success
There are many articles online that discuss what an entrepreneur should look for in a co-founder. One of the leading references on this was published on Venture Hacks a few years ago. The truth is that there are rarely scenarios that come together where every piece of these criteria fit together perfectly. Regardless, the aforementioned article and many like it are helpful guides as an entrepreneur picks a founding team.
An entrepreneur might not be able to check every box on the wish list, but there are a few criteria that I believe should not be compromised when picking a co-founder and setting up a company with them. This article is about these “must haves.”
Two is the Magic Number
The correct number of co-founders is two. A founding team should be two partners who 1) work well together, 2) compliment each other and 3) share a vision. All three components of the two-person team are important.
You have to be able to work long hours, work quickly, take and mitigate risks, make hard decisions, and more with this person. You need a truly strong working relationship that will remain strong in a very dynamic work setting. You’ll have to work together intensely at times and totally independently at other times; you’ll have to meet a one-hour deadline one day while having to plan strategically for several quarters down the road the next.
You have to have skills and experience that compliment each other, and trust in each other’s abilities. While you will be working together, learning from each other and sharing a lot of responsibility, at the end of the day it should be obvious which partner will take the lead on each aspect of the business, and on opportunities and challenges that arise. If you and your partner both believe that you each should be leading the investor outreach or the product development effort, you’re probably not a good pairing.
You have to share a vision for the product and the company trajectory. It is important that this symmetry exists not just for launch but also through growth and the eventual long-term plan. You don’t want a partner who envisions being in a lifestyle business if your goal is to sell in 3-5 years!
Finding the right combination of two is the primary challenge, but it really should be limited to two. Any more and politics starts coming into play, personal interest (from one or more parties) may start to supersede the company’s interest and both work and planning will likely become inefficient.
Founders should bring in additional skill and experience to the management team, though, as time, money and opportunity permit. While not equity or title equals, these additions are vital members of the team and should be treated (and made to feel) like owners.
Shared Ethics and Philosophy
Ethics are the most important element in a partnership. A hard truth is that when money is a factor – especially when times get either very good or very bad – many people suspend their morals and opt of self-preservation (or self-gratification). You have to find someone who will keep promises, stay ethical and fulfill commitment throughout. Lawyers will cringe at this next statement, but a legal contract is only as good as the men and women who sign it. This is especially true in a start-up when finances are scarce. Simply put, there is nothing to “go after” if a partner fails to comply with an agreement.
Talk about ethics with your potential partner. You most definitely have to put a legal contract together governing your relationship and company ownership, but it is equally important to make sure you both understand the moral bond that is going to be formed, and that you both embrace it. Look each other in the eye and make a commitment to uphold your agreement no matter what happens.
Most issues between partners arise due to unequal treatment. This could be as practical as financial disparity or as emotional as jealousy over power and notoriety (and it is often both). Knowing this up front, co-founders should set up the corporate structure and compensation packages to be equal. This is not always easy, as one founder may have been involved longer, hold the IP/patents, etc. I suggest that you find a way to make it happen (and find a partner who is able to make it happen with you).
Ideally, two co-founders will have equal equity in the company, equal voting rights, equal representation on the board, and equal pay (I would even go as far as putting in an agreement that the co-founders will always have an equal compensation package). One partner may have to “buy in” to get this equal partnership. If this is not possible, perhaps that co-founder buys in by taking no salary (or a reduced salary) for a significant period of time (after which the compensation would revert to the equal status mentioned above).
There are some situations where equity (or other) equality is not possible. This can be ok. Set up the relationship so that it is equal as possible – both in perception and reality. Even if this means one party is generous at the outset, equality will pay dividends in the long run. I guarantee that more money has been lost by damage caused by partners clashing than by a business owner being generous with his partner (or generous with employees in general).
Choose your partner wisely. Trust them and design a truly equal relationship. Be generous with the people who are in a position to impact and grow your business. That recipe will give you your best shot at success.
Amazon sets eyes on couture with launch of online Luxury Stores
(ENTREPRENEUR) As of this week, Amazon is an online luxury retailer. Is this good or bad news for smaller luxury retailers?
When I think of high-end fashion shopping, Amazon is not the first store that comes to mind. Groceries, random knick-knacks, and pet accessories for my adorable pooch are the items in my cart.
This week, Amazon confirmed the launch of its high-end online designer fashion and beauty brand shopping experience, Luxury Stores. Currently, Oscar de la Renta is the first brand to launch on the platform, but more are on the way.
Available by invitation only to eligible Prime members, the store launched on Amazon’s mobile app. Eligible customers received early access to the designer’s Pre-Fall and Fall/Winter 2020 collections. The collection included “ready-to-wear, handbags, jewelry, accessories, and a new perfume,” according to Amazon.
If you’re a Prime member and didn’t receive an invitation, you can request an invite by visiting amazon.com/LuxuryStores.
Alex Bolen, CEO of Oscar de la Renta said, “Oscar de la Renta is thrilled to partner with Amazon for the launch of Luxury Stores.” He told Vogue that “somewhere near 100% of our existing customers are on Amazon and a huge percentage of those are Prime members. For me to get more mindshare with existing customers in addition to getting new customers—that’s the name of the game.”
According to The Verge, Amazon has over 150 million Prime members. With that big of a number and potentially huge customer overlap, we can all see why Bolen is so thrilled.
But what does Amazon’s break into luxury retail mean for smaller luxury retailers? Smaller companies are still struggling to keep up with the retail giant. With small brick-and-mortar stores fighting to stay afloat during the pandemic, could Amazon’s online Luxury Stores be an all-inclusive solution?
According to Amazon’s press release, the company doesn’t plan on only partnering with established fashion brands, but also with “emerging luxury fashion and beauty brands.”
“We are always listening to and learning from our customers, and we are inspired by feedback from Prime members who want the ability to shop their favorite luxury brands in Amazon’s store,” said Christine Beauchamp, President of Amazon Fashion.
Engadget reported that Amazon is taking a hands-off approach with Luxury Stores. The company will offer backend and merchandising tools support. Brands will have control over their pricing, inventory, and selection. With brands being able to have more control over their experience, maybe smaller luxury retailers will feel inclined to use this new sales outlet.
“It’s still Day One, and we look forward to growing Luxury Stores, innovating on behalf of our customers, and opening a new door for designers all over the world to access existing and new luxury customers,” Beauchamp said.
Amazon has yet to reveal which new luxury stores will arrive on the platform. Hopefully, we will also see our local luxury stores on Amazon in the future, too.
Small businesses must go digital to survive (and thrive)
(BUSINESS ENTREPRENEUR) A study at Cisco reveals how digitizing small businesses is no longer optional, but critical to success, thanks to the pandemic.
As digital transformation efforts ramp up due to the COVID-19 pandemic, a new study released by Cisco has highlighted some key insights into how small businesses will need to adapt in order to survive in the “new normal.”
The study, conducted by International Data Corporation (IDC), analyzed more than 2,000 small businesses across eight different markets, including the United States, Canada, Germany, Mexico, United Kingdom, Brazil, Chile, and France. Using a four-section index to assess a small business’s digitalization efforts, the research found that 16% of companies said they were “thriving and feel their businesses are agile and resilient.” While 36% stated they were in “survival mode.” Regardless of where they were ranked in the index, the study concluded that 70% of firms were in the process of ramping up digital transformation within their company due to the coronavirus pandemic.
“The COVID-19 pandemic has exacerbated the digital divide that was already present in the small business market, and it is forcing companies to accelerate their digitalization,” said Daniel-Zoe Jimenez, AVP, head digital transformation & SMB research at IDC. “Small businesses are realizing that digitalization is no longer an option, but a matter of survival.”
The study also highlighted several challenges associated with digital transformation. The three biggest obstacles that businesses seem to face during the process were digital skills and talent, budgetary issues (lack of funds or previous commitment of funds), and cultural resistance to change. Despite these roadblocks, 45% of companies surveyed stated that they expect over 30% of their business to be digital by 2021. And 32% responded that they are planning on developing a digital strategy. This included investing in talent with the right set of digital skills moving forward.
Those decisions fall in line with Cisco and IDC’s recommendations. These include creating a three-year technology road map and building a workforce with the right skills to succeed in a digital world. Other suggestions include finding the right technology partner, and keeping up with industry trends. Leveraging financing and remanufactured equipment can aid with cash flow and budget requirements.
As small businesses continue to adapt to consumer behavior and the whirlwind of ever-changing rules that have come with the coronavirus, digital transformation will continue to play a major role in the post-COVID world. According to the report, if half of the small businesses surveyed can reach the second-highest tier of the index by 2024, those companies could end up adding an additional $2.3 trillion to the eight markets’ gross domestic product (GDP), contributing to the global economic recovery.
As we approach the six-month mark of the pandemic, just when and how the “new normal” will emerge is still uncertain. But there seems to be a light at the end of the tunnel for small businesses — even if it’s faint green and contains zeroes and ones.
Choose your startup business partner wisely
(BUSINESS ENTREPRENEUR) Creating a startup business with a friend sounds amazing, but consider carefully if you may be better off as friends.
So, you want to be your own boss? Maybe get out and into a new career to crawl out from under the corporate drone motif? What better way to do it than to go into a startup business for yourself?
Hundreds of Americans have ideas that could turn into a new career. But not as many have the support structure, either financial or social, to make these dreams become a reality. A few of these people might look for someone to go into business with to help with the financial burden.
Can you think of a better way to start off a new business than with your best friend by your side? I sure as hell can.
My best friend and I get along great in our personal time. We’re both zombie horror nerds. He’s straight, I’m gay. He’s a cop, I’m an out of work geophysicist/bartender/writer – the jokes don’t quit with us. Our typical nights together include drinking at bars and smacking the other one upside the head as deemed necessary. We’re both slightly better than Neanderthals some days. And most importantly, neither of us should be trusted to work together.
Now of course that’s probably more specific to my situation, but let’s just realize that finding two people who can be the closest of friends and business partners is pretty rare.
There are a few people who have figured it out though and you can find a number of pointers online for new/established startup companies. A few of these tips include: Lots of structure to try and keep the fun at home and the business in the office, clearly defining roles, honest open communication, and strictly defining fiscal expectations.
So basically, it’s like committing to another marriage, which is what another set of people do for their startup business as well. Numerous married couples have put together careers and their relationships, and a great many of them are very successful.
So, if you have someone who you can commit to another potentially lifelong relationship with, and you trust to follow all of these rules, then go for it.
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