How to Build a Strong Startup Team: Co-founders, Equity, Culture + First Hires

Hi. Uh, I'm Ree. I'm the director of alumni engagement here at the Harvard Innovation Labs. Uh, today with my

Innovation Labs. Uh, today with my friend Pete here, we'll be talking about how to build a strong team. Uh, all the way from like the co-ounding team to hiring to how to building culture, etc.

So, I'm really excited about the conversation.

We actually had one yesterday on a call asking um, I'm a solo founder. I'm

actually considering now looking for a co-founder. How do I go about it? What's

co-founder. How do I go about it? What's

the best way? Where do I find them? What

kind of conversations?

>> What advice do you give?

>> So, I asked first the question. I said,

if you had a million dollar today, would you actually have a co-founder or hire someone? Right? So, that already

someone? Right? So, that already illustrates like, am I doing this just because I'm lonely and because everybody else is doing it or actually no, there is really a need because that co-founder

could pro, you know, offer complimentary skills or maybe connections to another market, etc. So we had a little bit of a conversation on the why you know uh and

also we talked about um you know because he was going about he wanted to find ways or like a structured way to go about it you know and often times

co-founders you know maybe they met in school before or they know each other like they have some relationship right so um we discussed a little bit also like what's important in terms of

alignment on vision mission, values, these types of things.

And how important is that? And we talked a lot about how important is actually to date before you marry, you know, like try actually uh a project maybe with that person and see if you know it's a

good fit or not. So I think that's probably one of the single most important decision that these founders need to make and could have major implications going forward. So I feel

like in the advising I'm sure you cover many topics but this one in particular almost like we have to bring it up to most of the very early stage team to make sure that they do the things right.

>> I've had so many founders who found someone super enthusiastic brought them on and then realized wait they don't actually have the skill set to do what I've brought them on to do. Um but your

point about you know would you hire them or would they be a co-founder is a really important point also from I always push my co- my founders to be like you want it to be a trial period

>> because you don't know until you work with someone and you face hard decisions if this is someone you can really work with because I've had a lot of team just implode because co-founders don't get

along don't have the same vision don't have the same level of commitment to the And you also have to be a little leery if someone's excited to just jump in and be a co-founder. Like that's almost a

red flag because they should be just as cautious as you because this is this isn't a semester decision. This is like a five or 10 year decision. Like it's a big deal.

>> It must be tricky also the students because some of them are here to explore or like try something and the goal maybe is more to learn than anything else and others are really serious about their venture and building it and scaling it.

So like different individuals will come with different goals in terms of you know personal goals but also capacity.

How do you advise them around you know that fluctuation that could happen and also how they should be communicating etc. Uh to make sure that this doesn't implode like you were saying.

>> Yeah. I mean, I force them to have the conversation early because expect there's just all that animosity comes if one person's shouldering the burden of it and someone else is off wanting to

have a more college experience because it comes with sacrifice like you said and a lot of them don't appreciate that because they also think entrepreneurship is a lot easier than it is and then once they start they're like oh my god this

is hard and I'm doing the sacrifice and some people just don't want it. So, you

have to have those conversations earlier because it's ultimately it's either you're going to have the conversation early and everyone's sort of aligned or it's just going to blow up when someone starts to feel really taken advantage of

by other co-founders.

>> Do you also get questions on how they deal with equity etc. How do you go about advising them on that?

>> That's the biggest question once you get to who should I find.

It's what's the equity because also a lot of times because I'm dealing with students, right? This is they're doing

students, right? This is they're doing it voluntarily. These are early. They

it voluntarily. These are early. They

don't have revenue. So the whole idea of would you hire someone? Would you make them a co-founder? Hiring is not really an option because there's no money to pay someone. So they're almost like

pay someone. So they're almost like offering co-foundership as a way to compensate, which is really expensive, but if that's your only option. So then

it becomes who gets what. And there's a sense of oh if I had the idea I get more equity >> and at the end of the day it's not about who had the idea it's who's doing the most work or who yeah who's putting in

the most resources whether that's money or time and then ultimately what role are you going to play because the CEO should get more than the CMO or the CTO you want everyone to be happy and

everyone has different expectations or needs right there are some people who care more about compensation than equity and so you can structure something we're fine once you get funding this is the first person to get a salary like you

have to understand what everyone's motivation but then I found online some really good like co-founder calculators where it prompts a lot of questions and then it al it assigns equity and I'm

like this isn't the answer this is a starting point for a conversation cuz it's a really emotional decision and the worst thing you can do is force people to agree and again there's this

animosity because someone feels they're getting less than they deserve or someone gets more cuz again that ultimately rears its ugly head and then there's fighting.

>> So, what I like about that calculator is it take makes it less emotional and no one can give you the answer because everyone has different motivations, but at least it's a sort of third-party

um simulation that's not driven by one person with an agenda.

Sometimes these things are a little bit more difficult when you deal with like social impact ventures because it's not about just the profit, it's also the impact side and you know they don't early teams don't necessarily start

measuring impact in a quantifiable way to be able to think that way as well.

>> So it's a little bit trickier for those teams uh how to think about co-oundership and all that.

>> Yeah. and even raising money because a lot of the social impact ones >> because they don't focus on making money, it makes it a lot harder to have investor discussions.

>> Yeah.

>> And that gets tricky because you have to understand how you're going to lay out your equity before you start going and talking to investors.

So we also have in some of the pre-LX teams where a team or like a founder is already working with someone um kind of

more in the tech side and kind of testing and con thinking about should I actually bring that person as a co-founder. So uh I wonder if you face

co-founder. So uh I wonder if you face also situations like this where people are actually going about this dating before marrying you know and like how do

we like how do you advise them on when to do that transition how to go about it in a more kind of formal structured way also and what kind of conversation they

need to have u with a particular team members who potentially would become you know in the front. Yeah, I mean I lay out exactly what you said, right? It

should be this sort of dating. Have a

project, work on it together, see how well you work, see if it makes sense. So

there's the working relationship. How

well do you work together? And then the other element is how solid are two there's two elements. One is let's say it's someone to build the tech. If

you're not a tech venture and once you have your tech, you're sort of done with that part and now it's about the real driver of the business, you don't want to make someone a co-founder if their value goes down over

time. Because what I've seen happens is

time. Because what I've seen happens is you've >> you bring on a tech co-founder now the tech is not a big driver and you have someone with all this equity that's not as important day-to-day or for driving

the future of the company. And then

that's where animosity is also. So does

people's importance stay over time? And

then the second part of that which I see happen a lot is if you bring people on too quickly a lot of times it's early your strategy changes. Right? I'm B TOC now we're B2B or we're and you bring

someone on with a skill set that's no longer needed. Like again if I'm a B TOC

longer needed. Like again if I'm a B TOC company and I hire a B toC marketer I bring on a CMO who's a B toC specialist and then we realize that's not the right thing and we pivot. You now have someone

with the wrong skill set. So, I've also had teams have to talk to co-founders or people they've hired and like your background is now no longer relevant and that's a really hard conversation to

have.

>> That founding team probably like defines a lot of the elements of the culture and culture is just not something you put on a nice website, my values are blah blah blah. It's actually lived and it has to

blah. It's actually lived and it has to be practiced. The thing is over time

be practiced. The thing is over time your team grows, more people come in, etc. So I think what's important is that many of the foundational elements like values for example have to remain

constant whereas like the rituals like how you work together or how you run your meetings how you document things etc is what changes over time and for

someone who's a founder has to be really deliberate about you know thinking about what's the plan here like at different times things change you know how do I go about maintaining the foundational stuff

the anchoring solid but also or like modifying everything else so that the dynamic can still uh of the work like can can continue in a in a productive way etc.

>> Yeah. I mean the conversations I've had

>> Yeah. I mean the conversations I've had with founders as it relates to culture is culture comes from the top and you may not know it but everyone on your team is watching you and mirroring your

behavior. Are you work? What time do you

behavior. Are you work? What time do you get in in the morning? Are you working during the day? Are you on your phone?

how fast you reply to emails or slacks or whatever it is like you whether you want to or not you set the tone and you create the culture and you need to have some awareness for that because people

are going to start mirroring your behavior whether you want it or not >> and I think like successful teams is when everybody can bring themselves into the team and some elements of their

culture as well. Yeah. So the question is always like how do as the team grows how do you continue to build like this mosaic right all along and it might be

different from T0 to T1 to T2 etc while like okay you are the still the leader trying to push for certain way of doing things culture etc but as new people

come in they actually they can infuse some of themselves in it and I think that's really more on art than science >> and it's but it's super important And if you want people to still, you know, want

to continue to work and feel ownership of what you're building and want to like push things forward, etc. So, that's really really tricky, but it's super important.

>> Yeah. And it goes beyond just hey every Thursday we go to lunch together or we have these standup meetings and everyone gets to talk it even to the things and I've had to walk a founder through this

like letting someone go like that's a really hard thing to do but how you do it and how you communicate it to even the rest of the teammates >> has a big impact on the culture and

that's no one goes into this thinking about letting someone go and how they would do it and that's not normally people's strong suit. they're about

building their product or understanding their customer, but those have really big impact on the team and how people feel about working for that venture.

>> And I think having finding a way also to show how that everyone is super valued and like really you know highlighting their contribution etc whether it's on

social media or during like old stuff or you know it's very important as well.

Again, it's a matter of can your team feel feel that they also own, you know, this thing that we're building and they wanted the success of that thing is their success. You know, how do we get

their success. You know, how do we get to that point?

>> Yeah, >> we deal with a lot of AI companies here, right?

>> AI seems to be like now also a team member. Yeah. Right. Or a co-founder

member. Yeah. Right. Or a co-founder sometimes, right? You see like some

sometimes, right? You see like some people talking about we might end up with a single founder building this billion dollar company. So like no team,

no interns, no co-founder, none of that.

How have you seen things shift over the last few years when AI become a little bit more dominant I guess in in the way they adopt it.

>> The bigger impact is probably me and my relationship with them because instead of getting advice from me, they're going to get it from chatbt. Um, teams can be smaller, but I'm already dealing with teams of one or two

>> and so they're leveraging it to try to test their ideas quicker, like using a website generator or other things. I've

yet to have a student come in who's like, "Oh, I was going to hire a co-founder dox, but now I'm using >> um AI." I mean, it's certainly around the corner, but I think what it means is that students can just try stuff faster,

fail faster, and, you know, hit on what they want to do, but there's still that social element because entrepreneurship is so hard and it can be lonely. Like,

the biggest issue for solo founders is how isolating it is cuz it's a lot of ups and downs. So, I think there's always going to be a need for other people. It just might be a co-founder,

people. It just might be a co-founder, not two or three, and they use technology to sort of fill those gaps.

Yeah, it would be interesting to see like >> they could look a lot different three years from now, the teams than today.

>> The other model we're seeing more and more now is um hiring a fractional >> Yeah. fractional COM,

>> Yeah. fractional COM, whatever, etc. Are you seeing many of those or >> I mean that takes a budget. So like the teams I deal with, they just don't have the money for. But it makes sense,

especially as they're continuing to flush out where they want to go. And

there are VC firms who will say we have good access like we'll help supply this or we'll direct you to good ones. So I

think they're seen as a really positive >> um addition to a to a venture that's really early.

>> Yeah. We're seeing it more often obviously on more advanced teams. >> Yeah.

>> Also like I think for many founders is really kind of how they plan.

I mean in terms of cash flow like what they have in terms of maybe at this point they need all these people to help but then here is only you know much fewer people you know and how do you

deal with the fluctuation of you know hiring and maybe holding some of the hiring uh you go you know uh downsizing etc is really tricky also for them

because they're still in a very >> fluctuating mode and they don't have the means you know to uh to spend that money. So they resort to these types of

money. So they resort to these types of things as well. So it's temporary.

>> Yeah.

>> Percentage base or whatever.

>> And gives flexibility because like we talked about by bringing on a co-founder, a full-time CMO or CFO is not cheap both financially and from an equity standoint. So the fact that this

equity standoint. So the fact that this role now exists is great. The question,

the teams I've seen that have used them have been real people. Are they going to look to AI to be their fractional CMO, CFO, and is that gonna displace those

that role? I'm sure someone's going to

that role? I'm sure someone's going to build something and try. It'll be

interesting to see if it gets traction.

>> Pete, this was an amazing conversation.

>> Yeah, we have to do it more often.

>> I know. I know, right? Yeah. So, uh,

thank you for listening and, uh, hopefully we'll see you next time.

>> Yeah, see you next time.