The StartUp Blog at PartnerUp

Author, speaker and entrepreneur Guy Kawasaki knows a thing or two about putting together a killer startup team. He is currently the managing director of Garage Technology Ventures, a venture capital firm that invests in extraordinary tech startups. In the 1980’s Guy worked as a marketer for Apple and was integral in turning Macintosh customers into Mac fanatics.He has also written eight books, the latest of which, “The Art of the Start,” is about turning ideas into action.

Guy recently answered some questions for us about how to put together a successful startup team.

Q: What sets of skills do you look for in the team members of a startup? Should you look for people with skills the same as yours or different?

A: Startups are pretty simple: someone has to create it, someone has to sell it, and someone has to collect the money. So generally, a team should have these three skills and not, for example, be all engineers, all marketers, or all accountants.

Q: How many team members, do you feel, are needed to adequately launch a startup?

A: Two or three are sufficient. One is lonely. Four is overkill for the three main roles.

Q: What personal qualities (personality, etc.) do you look for in startup team members? Are there any qualities that you always try to avoid including in your team?

A: You always look for “chemistry,” but I think this is bull shiitake. It’s funny how if a company is doing really well, all the jerks can get along. Also, if a company is tanking, even the nice people start getting testy. You could make the case that nice people communicating well can make a company successful, but I think luck is more powerful than this factor.

Q: Do you prefer to see startups teams where each team member has some of their own money invested, or are you ok with only one team member providing the seed money?

A: It really makes no difference…to the extreme of no one investing any of their money. The theory is that a team will spend its own money more carefully. However, if it’s the team’s money, they also think that the other investors shouldn’t have as big an influence.

Stay tuned for some more Q&A’s from interesting people in the business/technology field over the coming weeks.

We often hear questions from entrepreneurs who’ve found a business partner and are working on starting a business, but aren’t sure who should get what percentages of the equity in their new business. Obviously there isn’t one easy way to allocate the ownership of your new business, and there are a lot of factors to consider when assigning equity. However, this post will take a general look at the process of assigning the initial equity of a company.

1. Determine how much you and your business partners are worth

This is often one of the biggest sticking points in any partnership negotiation. Take a look at what role you and your partner(s) will be filling in the new company and try to calculate a value for each partner.

This will depend on a variety of factors, but some good questions to ask yourself are: How much time will each of you be working? Will one of you be traveling all of the time and working non-stop during their travels? How much did each of you get paid in your previous jobs? How much do comparable executives get paid in your functional area for small to mid-sized companies?

Once you’ve assessed this, look at your business plan and try to figure out how long you and your partner plan to go without salaries. Then, multiply the annual salary that each of you is worth by the number of years that you plan to be without salary. This effort that you’re putting into the company is called sweat equity and will be figured into how the equity pie gets divided.
 

2. Look at how much capital (or assets) each business partner is contributing

This can often make the biggest difference in who owns how much of the company. Look at the cash and asset contributions from each of the partners and add them all up. Make sure to include everything that gets contributed: cash, furniture and fixtures, computers, equipment, machinery, office supplies, etc. Although some might argue that the term is technically incorrect, most people refer to everything, including non-cash assets, which the partners give to the company as contributed capital.
 

3. Add everything up and calculate the ownership percentages

The last step is to add up all of the sweat equity and contributed capital to the company to get a total dollar value. Then, add up each of the partners’ contributions and divide it by the total you’ve just calculated. This should give you a percentage of ownership for each partner.
 

There can be a lot of variations here and this post isn’t meant to be all-inclusive. The main reason that I’ve written this is to demonstrate that a partnership doesn’t have to automatically be 50/50. It is perfectly reasonable to have an equal partnership, but you should definitely sit back and take a look at everything that each partner brings to the table and how much equity they are entitled to in exchange for their contribution. Also, there may be situations in which you want to give one partner more equity than another. Perhaps one partner is exposed to more risk and accordingly you feel that they are entitled to more reward. In any event, the key to this decision is to ensure that all partners feel like they are getting a fair deal and that they don’t lose interest in working for the company after the equity allocation negotiations.

Finally, before you do any deal you should always talk with an experienced attorney and accountant. People often tell me that they just can’t afford to pay an attorney or accountant for an hour of their time and my response is always the same. If you want to grow your company to be the next Microsoft or Google, wouldn’t it seem pretty foolish to potentially risk millions of dollars in the future over a few hundred dollars today?

This is an age old debate that companies both large and small struggle with on a daily basis. Is it better to have a great idea or a great team to execute the idea? Obviously the ideal situation is to have both. However, if you had to choose one or the other, to me there is no debate; the people are the difference makers in any organization. If you surround yourself with great people, the great ideas will flow like good wine.

Great teams can turn a mediocre idea into a profitable and successful business. A great team can help your company expand and grow beyond your wildest dreams. On the flip side, a great idea, executed by a shoddy team is nothing more than a recipe for failure.

Building a great team is easier said than done and is especially hard and even more important in a startup environment. People are the lifeblood and most valuable asset to any organization, so I’ve compiled a list of the key steps to building and developing your team:

1. Ensure your employees share one common goal - This goal should in some shape or form be focused on Success. If everyone works toward succeeding at their individual tasks the team should succeed as a whole.
    
2. Define clear roles and tasks - Make sure each person on the teams knows their role and the task associated with that role.
    
3. Hire winners and fire losers - Hire fast and fire even faster needs to be your mantra. Realize quickly if you made a bad hire, swallow your pride, fire and move on. You cannot afford to keep a poor performer on staff for long. This person could also be very detrimental to keeping the team dynamic in your organization. Ever heard the saying about the bad apple spoiling the bunch?
    
4. Treat your people like gold - People are your most valuable asset. Make sure they know and understand that you feel this way about them everyday.
    
5. Listen, listen, listen, and then listen some more - One of the most frustrating things to an employee is a boss that does not listen. Take the time to hear what your people have to say… you might be surprised!
    
6. Reward successes - Treat failures as learning experiences and celebrate all successes. Celebrating successes as a group emphasizes the importance of the team dynamic in the organization.

In the end great teams generate and execute great ideas. If you surround yourself with energetic, creative, hardworking individual’s your business will succeed. So build, nourish and develop your dream team and head out there to grab your piece of the proverbial pie!

Below is an article that I wrote a few months ago, which appeared on FoundRead.

As most founders know, or come to learn, finding the right business partner or co-founder is among the most important—and difficult—things we do as entrepreneurs. In 2003 I came up with a killer idea for a new RFID product. I talked about it with a great friend of mine who was also interested in starting a business, and we decided that we’d find a third co-founder who would have the engineering skills to complement our business, marketing, and programming skills. We put the business plan together, developed the brand, got the product details down on paper, and began looking for a third business partner with electrical engineering experience. We looked, and looked, and looked…

Our search for our third partner lasted about 9 months. We never found the engineer we needed to get the business going. Throughout the process, I kept asking myself why there wasn’t a way to find business partners online, so I came up with an idea for one, and I founded PartnerUp. PartnerUp serves as a network where entrepreneurs can find the business partners, co-founders, board members, executives, advisors, and professionals they need to start and/or run their business.

Through all of my experiences, good and bad, and hundreds of other entrepreneurs that we’ve talked to during development of the PartnerUp site, I’ve learned a lot about finding the right business partner. Below are some tips for what to think about when looking for your cofounder. Hopefully, they make the process a little easier for you.

#1 Know what you need.
So, you’ve decided that you need a business partner. Now what? Well, the first and most important step is knowing exactly what skills and experience you need to make your business a success. I’d first make a brief list of the skills and experience (think sales, engineering, marketing, operations, business development, etc.) that you will need in order to make your business idea a success.

Then, from that list, make a list of the things that you can bring to the table on your own, and be honest with yourself about what roles you’ll be able to do, and what skills and experience you just don’t have. It might be fun to learn how to do marketing, but don’t learn on a viable business venture. You might just make it unviable. After you cross off the items on your list that you have the skills and experience to handle yourself, the items that are left on the list are the things you really need to look for in a business partner. Now that you know what you need, stick to it. The best partnerships work because each partner has something different to bring to the table and can do things that you can’t do on your own.

#2 Look in the right places.
Now that you know what you need and what to look for, there are a lot of places that you can try looking for a business partner/co-founder. When I was starting my RFID venture, I pretty much tried them all. I went to every local networking event that I could find. I started talking with old friends and seeing where they were at and if they knew anyone who fit the bill for what I was looking for. I placed a few ads on job sites. And, I found zero leads.

In retrospect, I could have saved myself a lot of time and effort by targeting my efforts on some specific areas. First, of course, try PartnerUp, since the reason that we created it was to help people find business partners/co-founders. When I was trying to find a partner, there wasn’t a service like PartnerUp available, so now that there is, why not use it?

At the same time, now that you’ve already figured out what skills and experience you need, you should be able to start targeting people that fit the bill. If you’re looking for an electrical engineer, find out what local trade associations and networking events exist for electrical engineers and go to those events. Then, try calling some professors at your local university and seeing if they know of any entrepreneurial students, alums, or professors who might be interested in your idea. Finally, don’t forget about existing contacts that you have who could potentially know someone who has the skills and experience that you’re looking for.

#3 Be picky.
Get to know potential partners before taking the plunge. During your search for the right business partner for your business you will most likely meet many intelligent, great business people. Will they all be right for you and your business? Absolutely not.

The smartest thing you can do for yourself and the success of your business is to be picky about the people you choose to bring in as your partners. Interview them, ask them every question you can think of, make lists of what you want the person to contribute, and don’t let emotions get the best of you. Just because the person may have been your best friend for 10 years, does not mean they will be the best fit for your business, and if you bring them on just because they have been your best friend, you will likely both be disappointed in the outcome.

Make sure you know exactly what skills you need the person to have, what personality traits you can and can’t work with, and dig for answers to those types of questions before you take the plunge into business. And most importantly, pick someone that is as excited and as driven as you are to make this business idea a success. Choosing the wrong person can lead to a lot of time, money, and resources lost and ultimately to the failure of your business idea.

Finally, get to know potential partners before you dive in. Meet them for coffee, meet them for dinner, sit down and talk about potential issues and the business, put together a rough business plan with them, talk about how you would run the company. You probably wouldn’t go out to an online dating site, find someone and marry them after one or two dates. A business partnership is also a huge commitment, and you should build a strong relationship with potential partners before committing to working with them.

#4 Hire a lawyer.
Since I started PartnerUp, I often get asked questions about starting a business. You wouldn’t believe how many people ask me what corporate entity type they should choose, how they should distribute the equity in their company between their co-founder and themselves, and a variety of other legal questions. My answer is always the same: hire a lawyer, one who specializes in business formation! Find one that you and your partner(s) all feel comfortable with and who isn’t biased towards any one of you.

Then, meet with the lawyer with all of the partners present and tell the lawyer what type of company you’re starting, what your goals and exit plans are, who’s contributing what to the company, and any other relevant information. Ask the lawyer to put together their recommended entity type and a proposed equity distribution. Go back a few days later and review the lawyer’s recommendation with your partners. Then, if everyone is in agreeance, have the lawyer proceed to form the corporate entity and put together the documentation. Also, never skip a good shareholder’s agreement that covers issues like what happens if one of the partners decides that they wants to quit, what happens if a partner isn’t carrying their weight, and a lot of other issues that could come up. A good lawyer will have already seen many of these issues and should be able to address many of them now, so that you won’t have to later.

#5 Assign roles. Stick to them.
When you choose a business partner, you choose them for their skills, experience, personality, drive, and goals, among many other factors. You choose a partner because they can do some things better than you could do them yourself, and in most businesses, one person can’t do it all (some of us learn that the hard way), so assigning roles for each partner to take ownership of seems logical but is often overlooked, which can lead to partners stepping on each other’s toes which then leads to stress on the partnership which generally never turns out well for either of you. Assign roles in the beginning of your partnership during the business planning phase so that you all have a clear definition for what each of your roles and contributions will be within the business. Stick to what you know and let your partner(s) take charge of what they know and are good at. This is the way to build a successful partnership and a successful business.