Co-founders: The Great Funding Myth
“There are few factors that can make a company more successful, fun, and epic than an awesome cofounder. There are few factors that can make a company more unsuccessful, aggravating, and pathetic than an incompetent, lazy, or dishonest co-founder” – Guy Kawasaki
Finding the perfect co-founder is often a pressing concern, obsession even, in startup cultures around the world. It’s sometimes even the premise on which we are advised to start our businesses.
While it may be an unwritten rule that seed funds and institutional investors will not fund single founder businesses, my experience is that, (in India where I’m presently based or elsewhere) if you look properly, there are enough folks willing to back a quality idea with a large market and a differentiated approach.
By going alone, you’re forced to do more of what founders need to do: plan more, multitask more and answer more questions from the get-go. But that actually makes it easier when you reach your first funding round.
Being a single founder also means more sleepless nights (2×1). But #mystartupstory has been that while the mandatory co-founder is one of those myths that permeate the startup psyche, at the end of the day it’s more about the total number of things you get right, that attracts funding.
After bootstrapping the company I founded for the first 2 years, we decided to raise a small round of external funding, towards the end of 2015, to help us scale the platform; My takeaway has been that with or without a co-founder, there are things you just need to know and do (often we learn the hard way). Here are some tips, which might be helpful to other first time fundraisers
- Expect anything you put out there to be shared
Your pitch decks will be shared and forwarded, and will go viral much more than that blog! So be careful what you put in there (like confidential IP or new plans that you don’t want competitors to know about). The challenge is that the deck needs to show enough to interest people, but not enough that it hurts you.
- Have a thought through target list and then a work plan
It’s important to do your diligence on whom you are reaching out to, so you understand spaces they are interested in, for e.g. the structures they prefer. Many investors – angels, early seed funds – have clear preferences on whether or not they will do convertible debt, what sectors they are bullish on. Know that as much as possible before you reach out.
- ABC – Always be closing
A close friend, who has also been an investor, told me this and it’s so true. Always be closing – money in the bank is worth way more than on the spreadsheet. This may mean that you don’t wait for the perfect terms, beyond a point, and start closing. In our case, it meant splitting the close over 2 rounds as regulations don’t let you touch the money that comes in till you issue the securities through a board meeting.
- Expect compliance to take, at least, as long as it takes to convince investors
This is super frustrating but it needs to be planned; get external help if you can. In India, the RoC paperwork and filings, or RBI compliances, in case of overseas investors, will take time and need to be done right. You will need a company secretary as well as lawyer to help with all the documentation, and of course a CA firm to develop a valuation, whether or not it’s used!
- It’s harder for single founders but absolutely doable
One last, but important, thing for single founders to prepare for in the fundraising process is that you WILL be distracted from the core business. If you have multiple founders you would usually have clear responsibilities spelt out, but if you don’t, you need to be disciplined in allotting your mind space and your team’s for the extra effort and energy inevitably soaked up in the pitching process, while also keeping the engine running in day-to-day operations.
