Three's Company

Why three co-founders is better than two.

This article was published on November 18, 2009.
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Nivi and Naval of Venture Hacks wrote an article last Thursday entitled "How to Pick a Co-Founder" that provides lots of useful advice and also argues that two co-founders is better than three. Having founded startups in all three ways — solo, with one co-founder, and with two co-founders — I'm going to provide my take on things and argue that three co-founders complementing each other's skill sets is ideal for today's Web startup.

Three's Company

Triumvirate: The Power of Three

The word "triumvirate" is Latin for "of three people" and historically a triumvirate was a political system led by three powerful individuals. In Roman times triumvirates always led to civil wars, but Antony and Caesar did even worse after they got rid of Pompey, and for me three has been the ideal group size. In a three person founding team you've preferably got (1) a person to write backend code and do system administrative tasks, (2) a person to design and write frontend code, and (3) a person to handle the day-to-day operations of the business (see "What's a Non-Programmer To Do?").

There's a lot to do in a startup, so having three people rather than two or one should make things go more quickly. If you designate specific tasks, then you'll get better results across the board, too. Neil Patel talks about "dividing and conquering," which perfectly fits in with my triumvirate analogy. With three people you've got more things that you can divide and focus on.

One of the most difficult transitions is going from the founding team to your first hires. I experienced this with TypeFrag when we hired two full-time programmers, and it's something I'm about to go through with Carbonmade as we begin the hiring process for our first full-time employee. Hiring is not an easy process. Having three people can buy you more time, as three people can share the workload for longer.

Along those lines, two people can only put in, say, 12 hours a day for a total of 24 whereas three people can put in a total of 36 hours. These simple figures don't lie, and may help your team avoid being burned out too early on.

Too Many Chiefs, Not Enough Indians?

A common argument against having three or more co-founders is that with three there are too many people making decisions. "It's hard enough to get two people to agree, let alone three," many people argue. Having worked for nearly five years with one co-founder on TypeFrag and now three years and counting with two co-founders on Carbonmade, I think the "too many chiefs" argument is easily refuted in many co-founder situations.

Here's how I see it: If you and your single co-founder don't agree on something, there's no third party to mediate. You're left in a deadlock with nowhere to turn. Having only one other partner with TypeFrag often led to good ideas being left on the table, because neither of us would budge on some important decisions. We were both stubborn. We'd even try and pull friends into the mix to help us settle disputes, but friends are never impartial. Anyone I'd bring in would argue my position and anyone he'd bring in would argue his.

Having a third co-founder to mediate any important decisions is crucial for ending deadlocks and allowing your startup to move forward. Major decisions don't come up every day, fortunately, but it's important to have that third person there when they do. True, with one co-founder you could have an advisor trusted by both parties to help mediate decisions, but without a salary, or large equity stake, most advisors don't live the day-to-day part of the business and won't really be up to speed on things.

Neil Patel argues that with more than two co-founders you'll "notice that you will waste too much time making decisions and bickering over small things." That has certainly not been my experience. With Carbonmade, all small things are left to their department (Dave on user experience, branding and design; Jason on server infrastructure and code; and myself on everything outlined in "What's a Non-Programmer To Do?"). So small things are never an issue.

When anything game-changing comes along, I want time to be set aside for decision-making, and I don't see any advantage in keeping that time to a minimum. When there are three people involved it's easier to get through any deadlocks, so I'm not sure time is even lost. But no matter what, I wouldn't call spending time on big decisions a waste of time. Dave, Jason and I may be more fortunate than most people because Carbonmade is profitable and has no investors to date, hence we are free to take our time making careful decisions; but maybe if we hadn't taken that time we wouldn't be here today.

The Equity Dilemma

There are a few small disadvantages to having three co-founders instead of two. The main one is that your equity distribution is 33.33% each rather than 50% each. But the thing to remember here is that equity is meaningless unless you're bought out or you parcel out year-end distributions to shareholders.

As I argue above, I think that with three co-founders you're more likely succeed long-term, so I'd rather have 33.33% equity in a company that's going to see a buy out or be profitable enough to give distributions than 50% in a company that's less valuable. It's the same dilemma you have to think through when you're giving away 20% of your company to investors: will my smaller equity share yield me a bigger return in the end? You can never say for sure, but after all people take on investors because they believe the short-term personal sacrifice is worth it.

Whatever Floats Your Boat

The problem is that it's impossible to know whether things will work out between the two (or three) of you without trying it. That's why once you've found a group of people you're successful with, you're more likely to start up your next company with a similar co-founding/management team, or even the same one. You've successfully gone through it before and there are no more learning curves: you already know each other inside and out.

Whatever size team you choose, you've got to be fully comfortable with your co-founders. It doesn't matter whether it's with one other person or with two, if the vibe of the group is off then you're not going to go far. It's foolish to think that a complementary skill set and shared ambition is enough to get you through. It may get you past the early stages, but when times get tough — and they will — you need to know that the two (or three) of you can stick it out together. Revenue and user growth will help reconcile you at first to almost any bad chemistry, but in the long term there will be trouble.

If you're starting a new company with one or more other people for the first time and you see any personality conflicts or even divergence of vision developing, you need to break ties early. Anything small early on will fester and turn into something huge down the line. Small disagreements can be smoothed over for a while, but major differences in opinion or drastically different work styles may stand behind even the early signs, and should not be ignored.

So I'm not saying that having three co-founders will resolve chemistry problems. You can only mediate so far, so make sure you feel comfortable in your new partnership. Don't catch yourself feeling that you have to hold back your emotions, thoughts, or creative ideas. Leaving something you care about unspoken will typically lead to blow-ups down the line.

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