Dear Founder

1. Starting a Company: Passion, Motives, and Reality Checks

There’s nothing more fun than creating something out of ether.

Passion and motives. Starting a company should stem from a deep passion for an idea and a clear understanding of one's motives, whether for financial gain or social impact. It's crucial to recognize that entrepreneurship is not merely a "cool thing to do" but a challenging endeavor with a high failure rate. Aspiring founders must honestly assess their motives, ensuring they are driven by more than just the allure of being an entrepreneur.

Team and risk assessment. A strong team, comfortable with risk and willing to make sacrifices, is essential for success. Founders should evaluate their team's capabilities, their own risk tolerance, and their financial stability to withstand years of potentially low income. The importance of having a supportive network of family and friends cannot be overstated, as the entrepreneurial journey often demands significant personal sacrifices.

Commitment and focus. Once committed, entrepreneurs must pledge total focus and dedication to their venture. Building a company is a long-term proposition, requiring a decade-long commitment to navigate the inevitable challenges and turbulence. This long-term perspective provides the necessary resilience to persevere through tough moments and stay true to the company's vision.

2. The Co-founder Equation: Finding the Right Partner

When it works, the equation looks like this: 1 + 1 = 3.

Benefits of a co-founder. Having a co-founder increases commitment, provides sanity checks, and enables greater productivity. A co-founder can offer complementary skills, different perspectives, and the necessary encouragement to persevere through challenges. The right partner acts as a sounding board, therapist, and cheerleader, providing invaluable support in the often lonely and demanding journey of building a business.

Finding the right fit. The best co-founder relationships often stem from prior collaborations, shared values, and complementary skills. Founders should seek individuals they know, trust, and have worked with before, ensuring they bring unique strengths to the table. It's crucial to spend significant time together, assess chemistry, and seek references to gain a comprehensive understanding of their potential partner.

Alignment and structure. Clear communication and alignment on values, goals, and expectations are essential for a successful co-founder relationship. Founders must discuss work-life balance, compensation structure, growth aspirations, and exit strategies upfront to reconcile any differences. Defining roles and equity structure is also critical, ensuring both parties are comfortable with the working relationship and long-term implications of their decisions.

3. Navigating Co-founder Conflict and Uneven Contribution

It’s upsetting when you’re working your tail off and someone else isn’t as engaged or committed.

Addressing uneven contribution. When a co-founder isn't pulling their weight, it's crucial to address the issue immediately. The first step is to investigate the underlying cause, whether it's related to work, personal issues, or a shift in motivation. Approaching the situation with an air of wonder and exploration, rather than criticism, can lead to a more productive resolution.

Identifying the root cause. Common reasons for a co-founder's disengagement include resentment over ownership, strategic disagreements, or personal crises. Open communication is essential to uncover the source of the problem and determine if it's recoverable. Bringing in coaching or an outside advisor can provide valuable insights and help facilitate a constructive dialogue.

Moving forward. If the partnership is unsalvageable, it's important to move on with dignity and grace. This may involve recasting the co-founder's role, formally changing the equity structure, or agreeing on a fair way to part ways. The key is to avoid assigning blame and focus on what's best for the company's future, ensuring a smooth transition and minimal disruption to the team.

4. Recruiting and Hiring: Attracting and Retaining Top Talent

Always be recruiting—even when you don’t have openings.

Recruiting as a continuous process. Building a great company hinges on attracting and retaining top talent. Founders should always be on the lookout for exceptional individuals, even when there are no immediate openings. This proactive approach ensures a pipeline of qualified candidates ready to step in when critical positions become available.

Creating an attractive employer brand. To attract top talent, companies must cultivate a reputation as the best place to work. This involves fostering a culture of inclusion, valuing employee growth, and providing opportunities for meaningful contributions. By prioritizing employee well-being and creating a positive work environment, companies can become magnets for exceptional individuals.

Focus on quality over quantity. When hiring, founders should prioritize quality over quantity, seeking individuals with a track record of success, a chip on their shoulder, and a profound desire to excel. It's crucial to look beyond big names and focus on candidates with the skills, motivation, and diverse perspectives needed to contribute to the company's culture and success.

5. Building a Strong Company Culture: Values and Practices

A culture develops whether you design it or not.

Culture as a deliberate design. Company culture is not something that happens by chance; it's a deliberate creation that requires thoughtful attention and consistent reinforcement. Founders must define their company's purpose, values, and desired behaviors from day one, ensuring these principles guide all decisions and interactions. Authenticity is key, as copycat cultures will never last.

Defining cultural elements. A strong culture is built on a foundation of clear values and practices that celebrate and extend them. This involves asking a series of questions about frugality, employee care, office space, learning environment, and work-life balance. The answers to these questions help define the company's identity and guide the development of practices that reinforce its values.

Evolving with growth. As the company grows, its culture must evolve to remain relevant and effective. What works for three founders may not work for fifty or five thousand employees. Founders should regularly check in with their team, asking if they still believe in the company's values and practices, and be ready to adapt as needed to attract and retain top talent.

6. Fundraising Realities: Persistence and Strategic Planning

Fundraising is all about building and maintaining momentum.

Targeted approach. Fundraising requires a targeted and measured approach, focusing on the right investors who understand the market and can provide valuable advice and connections. Building an investor list and categorizing investors into different "sorties" allows for a more strategic and personalized outreach. This approach enables founders to incorporate feedback and build momentum as they move through each successive group.

Leverage and honesty. Having plenty of runway and a compelling "ask" are crucial sources of leverage for founders. It's important to be honest about the state of the business and fundraising progress, as investors will eventually uncover the truth. Transparency builds trust and demonstrates the founder's integrity, making investors more likely to commit.

Plan B and resilience. Fundraising can be a grueling process, and it's essential to have a Plan B in place. This may involve raising a smaller amount of money, seeking alternative investors, or exploring potential acquisitions. Maintaining a positive attitude and focusing on the business, rather than dwelling on setbacks, will ultimately increase the chances of fundraising success.

7. Setting a Startup Valuation: Balancing Act and Long-Term Vision

In eighteen months, you want your new investors to look smart—just not too smart.

Valuation as a long-term game. Setting a startup valuation is a delicate balancing act that requires a long-term perspective. While maximizing valuation may seem like a win in the short term, it can lead to problems down the road if the company fails to meet expectations. It's crucial to set a valuation that is fair, achievable, and creates a foundation for a win-win outcome.

Market dynamics and dilution. Understanding market trends and comparable company valuations is essential for setting a realistic price. Founders should also consider dilution, aiming to give away enough equity to attract great investors without losing control of the business. Typically, companies give away between 15% and 25% of their company for most rounds of funding.

People over valuation. Valuation is not the only term that matters. It's often more important to prioritize the people involved, seeking investors who are aligned with the company's vision and can provide valuable guidance and support. Building a strong, collaborative board is crucial for long-term success, even if it means accepting a slightly lower valuation.

8. Executive Onboarding: Setting Expectations and Providing Support

Now it’s time make them successful.

Active engagement. Successfully integrating a new executive requires active engagement and clear communication from the CEO. It's not enough to simply hire the expert and expect them to know what to do. The CEO must actively participate in setting expectations, defining success, and providing ongoing support.

Alignment and documentation. A winning onboarding strategy entails a lot of dialogue for alignment around what success looks like, what is expected of the new executive, what authority level they have, and what the expected behaviors are. Codifying these expectations in a document provides a reference point for ongoing check-ins and ensures everyone is on the same page.

Listening and support. While setting expectations is crucial, it's equally important to listen to the new executive's insights and provide support. Soliciting input on what is going well and where improvement is needed can help identify potential challenges early on. Assigning a "buddy" to show them the ropes and monitor their progress can also facilitate a smooth transition.

9. The Art of Delegation: Empowerment and Accountability

Delegation is not abdication.

Effective delegation. Delegation is a crucial skill for leaders, but it's more than just assigning tasks. Effective delegation involves ensuring the task gets done with the desired results. This requires assessing the team's capabilities, communicating clear expectations, providing guidance, and establishing checkpoints to monitor progress.

Accountability and support. While delegating tasks, leaders remain accountable for the outcomes. They must provide support and guidance to their team, ensuring they have the resources and knowledge needed to succeed. Delegation is not abdication; it's about empowering others while maintaining oversight and accountability.

Celebrating success. When the team delivers, it's important to celebrate their success. Recognizing and rewarding their achievements reinforces positive behaviors and encourages future excellence. Effective delegation frees up leaders to focus on innovation and strategic initiatives, driving overall organizational growth.

10. The Importance of Diversity and Inclusion: Building a Better Workplace

The performance of your business will be better if you are more diverse because a diverse company is more representative of society as a whole.

Diversity as a business imperative. Building a diverse and inclusive workplace is not just the right thing to do; it's also the smart thing to do for business. Diverse companies are more representative of society, better understand their customers, and perform better financially. A report from McKinsey & Company indicates that the top racially diverse tech companies are 35% more likely to have financial returns higher than the tech sector’s national median.

Quantifying and addressing the problem. The first step in improving diversity is to measure it. Companies should track diversity across genders, races, religions, and other facets, examining how it varies by department, job role, and tenure. Addressing the issue early, while the company is still relatively small, is much easier than trying to fix a problematic culture later on.

Taking concrete steps. Creating a diverse and inclusive workplace requires deliberate action. This includes making inclusion part of the corporate culture, prioritizing skills over unnecessary criteria, removing subconscious biases from the hiring process, and looking for talent in unlikely or overlooked places. By taking these steps, companies can create a welcoming environment where all employees can thrive.

11. Leading Through Crisis: Transparency and Decisive Action

You have to figure out how to change the burn rate to extend your life.

Acknowledge and assess. When faced with a crisis, it's crucial to acknowledge the situation and assess its magnitude. Determine the root cause of the problem and its potential impact on the business. This involves gathering information, consulting with experts, and developing a clear understanding of the challenges ahead.

Communicate and act. Transparency is key during a crisis. Communicate openly with employees, investors, and customers, providing regular updates on the situation and the steps being taken to address it. It's also essential to take decisive action, implementing a plan to mitigate the damage and restore stability.

Learn and improve. Every crisis presents an opportunity for learning and growth. After the immediate threat has passed, conduct a thorough postmortem to identify what went wrong and how to prevent similar situations in the future. This involves examining processes, systems, and decision-making, and implementing changes to improve resilience and responsiveness.

12. The Founder's Journey: Inspiration, Resilience, and Legacy

You are willing to trade a big salary, security, and 99.9% of your time because you can’t imagine doing anything else.

Inspiration and purpose. The founder's journey is driven by a deep sense of purpose and a desire to make a meaningful impact on the world. This involves identifying intractable problems, seeking inspiration from diverse sources, and maintaining a learner's mindset. By staying curious and open to new ideas, founders can unlock innovative solutions and create lasting value.

Resilience and perseverance. The entrepreneurial path is fraught with challenges and setbacks. Resilience is essential for navigating these obstacles, requiring founders to embrace failure as a learning opportunity and maintain a positive attitude in the face of adversity. This involves developing a strong support network, practicing self-care, and maintaining a long-term perspective.

Legacy and impact. Ultimately, the founder's journey is about creating a lasting legacy. This involves building a company that not only achieves financial success but also makes a positive contribution to society. By prioritizing values, fostering a culture of giving back, and inspiring others to achieve their potential, founders can leave a lasting impact on the world.

Last updated: March 2, 2025