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How important is number of co founders to Venture Capital investors?
I’m part of a startup and we are a total of 5 people. We got an interview with an early VC and for our next interview we’ll probably be asked more details like team structure and stuff. Some of the team is worried that we can’t go in there and say we have 5 co founders as that may be a red flag.
Right now it’s like 2 product/sales people who can do some dev if required and then 2 full on devs and one designer. The designer is important because the application really needs a good design to consolidate itself in this space. I can see why a designer probably shouldn’t be a co founder but the issue with someone not being a co founder anymore is that the equity will go down since most VC or startup accelerator assume a person is a go founder when they own a certain amount of equity.
Is it worth it to create some internal dissatisfaction in the team by choosing say 3 co founders and reducing the equity a good deal for the others just to potentially match a VC’s idea of what the team structure should be? Or does the number of co founders not make much of a difference?
By the way this is very early stage VC like we don’t even have an MVP built yet
Best Answer
VC asks two questions. One, have you all quitted your job. Two, what does each bring to the table and are they the who's who. That is it.
Other points
Accurate. They will ask, and if they're thinking about investing and you haven't quit your job and don't want to, they will probably make it a condition of the investment. If this is an angel investor or pre-seed then maaaybe not. If you're looking for a CVC then they will absolutely make you quit your job if you want to be part of the startup moving forward, unless you're an irreplaceable rockstar. They may even up their investment to pay salary to make it happen. Some investors are better at asking upfront questions than others and care more about the team, some care more about the track record and may have faith in the team and will extend flexibility.
And to the person you're replying to: It is remotely accurate, it's quite accurate. If you've only worked at a couple startups then all you have is personal experience, not insight across hundreds or even thousands of startups. I've ran corporate innovation programs at world-renown accelerator and know CVC teams, innovation teams, product teams, IT teams, exec teams, etc and they have the power and the money and the customers and regulatory know-how and the distribution and the brand and everything else but the one piece of tech. If they want you full time on the startup, then you're full-time on the startup or gtfo. Also something isn't implied when it's spelled out and written out clearly in the deck, and explicitly writing it out i agree is normal and best practice.
That sounds great but it should be clear that everyone has a real skill reason to be on the team (not just friends) and you should pick a CEO because at the end of the day decisions have to be made.
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Date
May 4, 2020 at 11:15:34 AM