Why 3 or fewer founders?


6

Most Internet startups have 3 or fewer founders. Why? What are the main drawbacks of having more founders?

Founders

asked Nov 4 '09 at 19:07
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The Rational Entrepreneur
43 points

5 Answers


9

More founders = more opinions, conflicts, meetings = less getting done. Someone has to make the tough decisions and steer the ship.

There also the $$ aspect. "Founders" are expected to get founder shares in the business. If you plan on raising money and putting some shares aside for employee options, you're left with say 50-60%. If you dilute that too much amongst founders, I think you're demotivating what should be the most important people in the business.

That's not to say you can't involve a dozen people in the early stages of a business, but they should not (for any reason I can imagine) be founders.

When you get a few really talented people together, if you've got the RIGHT founders - you should have the skills, expertise and leadership you need in just a few people. If you need more than that, it's probably not the right team.

It's not a democracy, it's your baby. I don't need 6 parents to raise my baby =)

answered Nov 4 '09 at 19:25
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Justyn
892 points
  • "More founders = more opinions, conflicts, meetings = less getting done" this sums it up nicely. – The Dictator 9 years ago
  • This does seem to be the consensus. – The Rational Entrepreneur 9 years ago

1

I agree with Justyn, and would add one more thing:

Alignment of interests is much harder with more founders.

A big one is often: "What do we want to get out of the business?" If one founder wants to raise capital, shoot for the stars, etc. whereas the other one wants to be more conservative, make profits quicker, etc. -- there's a conflict. The more founders there are, the higher chances for conflict.

Even when the founders might agree in the beginning as to what each is looking for, circumstances can change over time.

answered Nov 7 '09 at 05:29
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Dharmesh Shah
2,860 points

1

Theoretically, more founders should mean more resources are available to the venture.

Practically, problem lies in the execution part. When you have many humans, more time will be spent communicating to and fro and less time towards the work. Humans factors step in and hence conflict of interests. As a result, resources go waste and business suffers.

2 Founder equation is always preferable.

3 Founder equation is preferable when working on larger than life things.

answered Nov 4 '09 at 23:59
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Arpit Tambi
1,050 points

0

When I began with a startup website financial project in 2007, we were initially 2 founders. We got a lot done in a few months, and we managed to make snap decisions and got along fine.

After a few months, we introduced a third partner (in exchange of some seed capital but called him a founder as well). It all began to get pretty bureaucratic and I found that we usually needed to call for a meeting for every decision no matter how small it was. This was the beginning of the end for our little project.

I would recommend to keep partners to a minimum, especially if you are going to let them have a vote in the company's direction.

answered Dec 17 '09 at 04:51
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Newyuppie
441 points

0

Justyn makes some excellent points but the other thing to consider is the skills that usually come together to form a company. The three most common are:

  1. A CEO Type
  2. A Technology Type
  3. A Marketing Type

So, it's natural to have three founders that cover these areas. Why? Well, those are the three most important pieces of a venture. Raising money (CEO), technology and the market place. Anymore than this, in terms of founders, gets muddled.

One other thing is the issuing of founders stock. Typically, at founding, the worth of a company is really low. In fact, a typical founding evaluation, with little to no money in, can be like $100k to $300k (just based on the talent). Since the founders do want some reasonable amount of equity at the start, the typical amount of shares issued to founders (the founders pool) is anywhere from 1M to 3M shares.

Three founders would each get 1/3 of the founders pool. If it's 3M, then they would each get 1M shares. A nice number that's easy to multiply by.

answered Dec 17 '09 at 05:54
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Jarie Bolander
11,421 points

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