Note: The views & opinions expressed in these essays are strictly my own, and not those of any entity I may be associated with as an employee, consultant, promoter, investor, etc.ARCHIVES
Technology Entrepreneurship in India - Teams
Technology Entrepreneurship in India - Generating Revenue
Technology Entrepreneurship in India - Raising Capital
Equities, ETFs, F&O
Oct 2011: Equity Risk Premium for India
Jun 2011: Investing in Indian equities
Technology Enterprises in India
Nov 2010: Technology investment in India - WATER
Aug 2010: Technology enterprises in India - 3 avatars
Risk Capital for MSMEs
Mar 2010: Risk mitigation for investors in MSMEs
Mar 2010: Why don't (Indian) MSMEs get risk capital?
Feb 2010: Angel investing - Will it work for Indian MSMEs?
Feb 2010: What's so special about innovative MSMEs?
Feb 2010: Where do Indian/NRI (V)HNIs invest?
Feb 2010: Funding options for innovative MSMEs in India
Jan 2010: Innovative MSMEs in India
(Last revised Apr-2012, Send comments to firstname.lastname@example.org)
Cofounders have always been compared to married couples - the core team must work well together for a successful venture. Choose with care, stress-test the relationship as early as possible, align incentives, be fair, prefer attitude over aptitude - all are good bits of advice when it comes to picking cofounders.
Since there is so much risk (and potential reward) at stake, how you split equity amongst founders is equally important. 50:50, or a third each, may not be a good idea; it isn't a democracy you are building but an enterprise.
Issues like veto powers, vesting schedules post-investment, exit preferences, risk appetite, personal circumstances, etc. must be openly discussed before incorporation, to minimize heartburn later on.
For various reasons, 2/3 founders seems to be the ideal case; only one founder signals higher venture risk, whereas more than three implies the possibility of confusion and delays in decision-making.
The tradeoff for most entrepreneurs is usually between someone they know well versus someone who is a better fit/complement for the proposed venture. The natural inclination is to go with the former, but the better bet is the latter, IF you can devise a mechanism to work closely together before putting in place a formal structure. Clearly, the success of such relationships depends entirely on trust.