New businesses in Silicon Valley
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The Ideal Number of Founders
Experienced business economists have diligently researched this topic, and there is no right answer. Some studies indicate that startups should have at least two co-founders but no more than four co-founders, while other business models encourage multiple co-founders. It’s generally agreed that you should have at least two co-founders because venture capitalists will seldom fund single-founder business ventures, or at the very least, be more stringent in giving funds to a single founder company. Having multiple co-founders adds credibility to your business. Further, it’s recommended that three co-founders are better than two because you’ll always have a tiebreaker vote. This often helps expedite a deadlocked decision-making process.
Factors to Consider in Choosing Co-Founders
Don’t include co-founders just for the sake of having co-founders. This can lead to severe problems in the future. Consider the following factors in determining whom to include in your founder’s circle:
- Investment Value – Are you seeking future investments? Does your co-founder have connections, and can he or she lend value to your startup?
- Equity Split – Are you planning on splitting equity equally such that you’ll need a tiebreak vote?
- Core Values – Do all your founders share the same vision for your company? If not, this can create decision-making problems.
- Reliability – How involved do you want your co-founders, if at all? Are they reliable in their business and personal ventures?
The more co-founders you have, the more issues can arise when agreeing to an equity split. This can create dissent that quickly derails your startup. All co-founders should also decide on a vesting schedule and related terms before incorporation and registration. These terms should be fair and made to prevent future dissatisfaction in the company.
Contact Startup Company Counsel to Discuss your Business Foundation Today
