Today’s guest post features an interview between Colin Kinner, founder and CEO of Startup Onramp in Brisbane, Australia, and Ian Gardiner, an Investment Partner at early-stage venture capital fund Jelix Ventures. Ian also works with founders through Innovation Bay, a community that supports founders through peer networks.
Colin: Ian, I want to start by asking you about what I think might be one of the most difficult aspects of building a startup: dealing with co-founder conflict.
How common is co-founder conflict, and what advice would you give founders about managing it?
Ian: The number one issue I see in early-stage teams is breakdowns in co-founder relationships.
No one starts a company thinking they’re going to part ways with their co-founders. But it happens more often than people realize. And it can happen for a lot of reasons. Maybe one of the founders isn’t performing, they’ve lost interest, or their skillset is no longer right for where the company is headed. Or it can be that one founder has financial commitments and has no choice but to leave and get a salaried job. Or it can just be that the co-founders can’t agree on a way forward and the relationship breaks down.
If this results in one founder leaving, the company ends up having a passive shareholder who’s got a meaningful equity stake but is no longer involved. This is a terrible situation and can cause irreparable harm to the company.
This is where the concept of founder vesting is really important. It enables the company to keep the departing founder’s equity so that if a founder does leave, that equity—or at least a large portion of it—can be returned to the company.
(For a primer on founder vesting read this.)
Founder vesting is also important to investors as it protects their investment in the event that a founder leaves. It’s crucial that founders realize just about every early-stage investor will insist that you have vesting in place, so this is definitely something you should have addressed before attempting to raise a funding round.
Colin: You’ve worked with a lot founders, and have no doubt seen a range of advice—good and bad—being given to founders. I’d like to know how you think founders should go about looking for advice, and whether investors are a good source of advice.
Ian: Since there’s generally no absolute right and wrong in startups, I like to think of advice as either “helpful” or “unhelpful.”
I’ve seen a lot of early-stage founders struggle because of unhelpful advice. It’s often well-intentioned, but unless the person giving the advice has direct experience that’s relevant to the startup, they can inadvertently be doing more harm than good.
I think the best people to give advice to startup founders are other founders, ideally those that have been through the startup cycle at least once themselves.
The other group of people who can give great advice is early-stage investors. A number of good investors were founders first, so these folks bring an understanding of both sides of the game.
Generally speaking, the more experienced the founder or investor, the more helpful their advice is going to be.
I think of an experienced founder as someone who has started, grown, and exited more than one company. It’s great if those founders also have experience of failure. Although I wouldn’t advocate taking advice from someone who has started ten companies that all failed!
Similarly, I think of an experienced investor as someone who has invested in at least ten companies and been meaningfully involved in helping some of those companies to grow, raise more money, and achieve an exit.
I get really concerned when I see founders taking advice from a freshly-minted Angel investor who’s made their money in another industry—such as property investing—and thinks they’ll try their hand at Angel investing.
Colin: Getting advice from an experienced founder or investor sounds like a solid strategy. What about founders in ecosystems that are still maturing? How can they find helpful advice when there are fewer successful founders and experienced investors?
Ian: The next best option is to find a great founder who’s still working on making their company successful but whose startup is a few years further advanced than yours. They’ll have a lot of learnings they can share and can probably also connect you with other founders outside your network.
Even better, find and join a structured community of founders who meet regularly to support each other. I’ve found in my work with Innovation Bay that this can be transformational for new founders. It gives you a support network that you can lean on, meet up with regularly and share learnings.
Other founders are also some of the best people to support you as a person, which is vital for your mental health and being able to protect the other relationships you have in your life.
Colin: I always think of building your network as an activity that increases your surface area for luck. But there are still a lot of founders who shy away from this, particularly when it comes to building relationships with investors. Sometimes there’s a perception that investors don’t want to hear from you until you’re ready to raise a funding round. Do you have any advice on how to overcome this?
Ian: Investors are humans, and almost all investors like meeting founders—even if it’s many months before they’re ready to raise a round.
As the adage goes: If you want advice, ask for money. If you want money, ask for advice.
I know a lot of founders who’ve built relationships with investors over a year or more, just by asking them for occasional advice. The investor gets to know the founder, can see how they work, they see that the founder is making progress, and that they’re relentless in their approach. Then, when it comes time for the company to raise money, those same investors are the first ones in.
Founders shouldn’t underestimate the compounding value of those regular informal discussions with investors.
The same principle applies more broadly to building your network in your local startup ecosystem. You should be talking to as many people in the ecosystem as possible, whether that’s at events, pitch nights, founder groups, or through more targeted introductions.
Not everyone you meet is going to be helpful, but if you meet enough people, the odds are that some of them will turn out to be incredibly valuable at some point in the future.
My advice to founders, particularly those who aren’t naturally outgoing, is to go to lots of events, even if they’re online, tell people what you’re working on, and most importantly tell them what help you need.
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