A VC in Vacationland

Paul Graham, founder of Y Combinator, a “new kind of venture firm specializing in funding early stage start ups”, recently was asked in an Xconomy interview what founders can do to improve their odds of being funded.  His answer was “get good co-founders”.

I have often recommended to entrepreneurs that your team is the most critical part of your business model.  I repeatedly see entrepreneurs with interesting business concepts, but with no or little background in the proposed industry and/or no one on the team that has ever done a start up.  Funding, except from possibly friends & family, would be nearly impossible in these cases. Who wants to double up your risk with an unproven team on top of an interesting, but untested business plan?

What can a founder do to attract “good co-founders”?  Here are a few suggestions:

1. Rewarding Key Resources. Although you may not have any real money to pay required talent, many experienced experts or business professionals will work for equity if they like your idea.  Figure out how much you are willing to give away, then be prepared to have to offer a lot more to get the right resources.
2. Expand Your Network. A broad network of experts, some you just know and some that can act as advisers, also helps improve credibility of a start up.  Usually, the key resources mentioned above bring with them a broad network of industry contacts that you can exploit in refining your business model and in getting introductions to potential customers. Use Linkedin, or some similar business networking site, to keep track of these network partners.
3. Refine Your Story. Like with venture firms, you will only have one chance to make a good impression with a potential co-founder.  Although you do not want to act as an expert in their space, you do need to be able to ask the right questions, so bone up on their area of expertise and ask intelligent questions during your discussions. And be able to discuss the business concept clearly and concisely.
4. Get Local Experts. Local experts, ones that you can meet in person, are preferable if available.  You will need substantial face time to define the right business model to match your innovative idea.  Effectively communicating over long distances with advisers can be difficult, in spite of Webex and other technologies.

Where can you find these experts?  Local CEO/business round tables, industry conferences, and recommendations from friends are the best sources for finding co-founders.  Do not try and convince a stranger during a first meeting.  Find a way to continue the discussion if they are interested and set a meeting with other team members to explore the ideas in more detail.  Remember that everyone likes to be asked their opinion about an idea and not preached to about your pet idea.  Do not be angry or defensive if a potential co-founder craps all over your idea. They may be give you valuable insights into refining your ideas and making them more fund-able.