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
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.
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.
Question asked by
May 4, 2020, 11:15:34 AM
Related Picture Note Cards
Related Quote Cards
Startup Lingos To The Point
How to turn an interest into a money maker. How to attract people, how to stimulate people to pay, how to make profit, how to make relations, how to keep relations.
How much do I have to give my audience so they can pay me something in return? What do they value? what problem do they search for answers on your own? I want to solve that problem.
Brand means name recognition. A lot of people knows what your company does and what you stand for. Brand is result of long campaign of consistent value provision and media cultivation. Brand helps a company reduce marketing cost.
Whether there are buyer willing to pay or not. For that to happen you must provide extreme value. The entire startup process would be based on guess before the validation. Validation happens in a market, not on the street.
Value is what you give customers beyond the price you charge. Value is effective solution to a problem. The price your customer pays reflects whether the problem is big for them and whether your solution is uniquely effective. Value stems from quality and detailed work.
Marketing means bring your product to the market and bring your message to your customer. Marketing is not salesmanship. Marketing is to penetrate the world of commerce through many barriers and existing networks.
Minimally viable business, or MVC, minimally viable company. A company that scrapes by, full of guess and hope and no traction and sales. When you give your customers things for free they all take it. But they never pay and you can never rent a table at the market.
Minimal viable product. A full artifact of a real product. Something that works ALL THE TIME. You can demonstrate the real effect on real people - not to sell hope. The MVP may not have certain non-essential bells and whistles, but it needs to have appeal value.
Customer is king
A business lives at the mercy of its customers. You provide your customers 10 dollars worth of value and they pay you 1 dollar, not knowing that your company only costs 99 cents to provide the item. The value is not the item - the value is what is attached to the item.
Company culture is based on a company making money. Once your workers are paid, they need to have a mission and aspiration so they are not bored everyday and make trouble in the work place.
A company valuation is cash investment divided by the percentage. As long as your story is good, the valuation will keep coming, and the investors will keeping falling into the line.
Return on investment
Investors are either behind family fortune (never work with them) or for rich clients as investment vehicle. Both need returns 2-3 times better than stock market darlings.
Having found what people want, not just what people may need. Your offering and their acceptance is sure, no longer a guess. You can provide it for profit, and you can indeed making living on it. Traction is sometimes called validation. You are no longer a theater. You have touched nature, and found cash vein.