This post originally appeared at First Round Review.
Steve Blank‘s biggest failure as a startup CEO was at Rocket Science Games. The team lost $35 million because the business model and the founding team didn’t match. When he looked around at the executive staff, there wasn’t a single founder who was a gamer. Worse, there wasn’t a single person who had come from a game company. Nor was there anyone with this experience on the board. In the end, it made beautiful looking products that weren’t much fun to play.
That said, if it’s possible to decode the ineffable magic of Silicon Valley success, Steve Blank has done it. His book The Four Steps to the Epiphany is considered one of the founding tomes of the lean startup movement. He’s taught a generation of founders at UC Berkeley, Columbia University, NYU, and UCSF. And even the US government uses Blank’s entrepreneurial models to commercialize the work of scientists at the National Science Foundation, The National Institutes of Health and The Department of Energy.
For the students and founders who regularly seek his counsel, though, Blank’s greatest credential is simply that he’s been in the trenches himself for decades, working at eight startups, four of them as a co-founder. By his own admission, there have been both craters and home runs—and along the way, he’s worked alongside 16 co-founders. When it comes to understanding the tricky amalgam of science, business, and psychology that shapes the most successful founding teams, he’s the closest thing there is to a guru.
In this exclusive interview, Blank, now an associate consulting professor at Stanford’s Engineering School, explains how to search for the best co-founder using a tool called the Business Model Canvas, and other tactics he’s picked up along the way. He reveals that, when it comes to fit, finding the right skill set and personality may not be enough—just one of the lessons he’s learned during 21 years working with teams to get great ideas off the ground.
Use the Business Model Canvas to identify who you need
One of the earliest and most critical decisions a founding CEO makes is who to bring on board to help realize their vision. It’s daunting to conceive of building a team from the ground up, but here’s some good news: If you’re familiar with the Business Model Canvas, Blank says, you probably already know who your cofounder should be.
But let’s back up. Created by entrepreneur Alexander Osterwalder and Swiss academic Yves Pigneur, the Business Model Canvas is the go-to tool for lean startups (and an ever-increasing number of Fortune 500s looking to stimulate fresh ideas). By distilling the elements of a business model into nine building blocks—arranged to represent how they influence each other—this surprisingly simple grid challenges leaders to identify everything they need to make their business operate successfully. If there are resource gaps or flaws in logic, they are quickly revealed all on one sheet of paper.
Here’s what it looks like:
(For a more in-depth description for how to use it, check out this video.)
When founders are getting started with the Canvas, they tend to focus on the right side. And rightly so, Blank notes—that’s where product/market fit will unfold. But it’s the oft-neglected left side of the canvas that will tell you what your founding team should look like. On a successful Canvas, the two sides should mirror each other; the right is all about customers, and the left tells you what you need to reach them.
“Filling in the Canvas is level one. But understanding the interplay of the boxes takes you to level two. That’s when your Canvas goes from a checklist to a strategy.”
Finding the right co-founder is one of the most instrumental pieces of that strategy. Start by looking carefully at your Key Activities box. Of the nine modules on the Canvas, it most defines what you need to do to build your product and deliver it successfully to consumers. Then jump down to the next box labeled Key Resources, where you’ll list what’s required to execute those activities. Is there a gap between what you’re going to need and what you bring to the table yourself? That delta reveals the expertise you need to find in your co-founder.
Consider, for example, any mobile app startup. At this point, it’s understood that a founding team in this space should include three people: a hacker, a hustler, and a designer. It’s a catchy aphorism—and one that’s quickly explained by the Business Model Canvas.
First, imagine the Key Activities box for that company. Getting a mobile product off the ground almost certainly requires three things—software development, user interface design, and demand generation. Clearly, then, the most crucial resources for this startup will be people: a developer, a.k.a. the hacker; a designer; and a natural hustler who can lead the team, drive interest and sales, and, in most cases, generate capital.
“Anyone can derive their own needs—arrive at their own version of hacker, hustler, designer—by going through this exercise,” says Blank. “When you’re considering bringing on a co-founder, look closely at your Activities. Who do you need to accomplish them, and are they missing from your existing team?”
In hindsight, at Rocket Science, it was glaringly obvious that they needed a hardcore game developer as a co-founder, not just as an employee. They needed someone who could go toe-to-toe with the existing team and tell them what they didn’t understand.
That’s not to say that everything you list in your Key Resources box needs to be owned by a founder. You might, for example, find that it’s more efficient or cost effective to execute some activities with help from third-party partners like freelancers or contractors. (You can capture that in the Canvas’s Key Partners box.) But when it comes to activities that are integral to your company’s DNA or success, never outsource them.
Take the commonly cited advice that a non-technical founder needs to find a technical co-founder. While Blank acknowledges that, as always, there are edge cases that prove the adage wrong, he concurs.
“To found a tech startup with an entirely non-technical team would be like opening a restaurant without a chef.”
“Could you succeed with a group of restaurateurs that doesn’t know how to cook or appreciate food? Maybe. You might get lucky and hire a great chef later. But it would sure help if you’d been a cook at one point, or had experience running a restaurant.”
Focus on the right milestones
For an early-stage startup, committing to Key Activities and Resources may feel overwhelming. It’s hard to know what you’ll need to keep your company thriving for the long haul. But Blank has reassuring news: You don’t need to. When your founding team is still coming together, focus on what it will take to get the business started, not all the milestones in a three- or five-year plan—or even a year down the line.
Instead, choose an early objective—that could mean making a revenue goal, hitting a target number of users, or achieving regulatory approval. What do you need to get there? “Some founders will say, for example, ‘I need a world-class VP of sales and marketing.’ No, you don’t. Some day you will, absolutely. But that’s probably not one of the resources you need to make it through your first six months,” Blank says.
So, your first thought when vetting a co-founder should be: Does this person have skills and knowledge that are essential to the success of my business from day one? Do I need them to get this thing off the ground?
“Essentially, your first question is, do I have a company without this person?”
That said, you don’t want to be giving equal stock to a one-trick pony. So how do you know if you’ve identified a candidate who can grow with you as a co-founder—or if you’ve simply landed on your first employee? “Your next question is: Can this person keep giving?” Blank says. Again, that doesn’t mean you need to foresee every step you will take as your company grows. But you need to believe that a potential co-founder will scale with the organization, that they either have the knowledge and skills to last long-term or can learn them.
Here, too, the Business Model Canvas is a uniquely valuable tool, not just for the questions it asks but for the spirit in which it asks them. One of the tenets of the Canvas is impermanence. At its core, it’s a tool for establishing and testing hypotheses—a way for a startup to iterate quickly, learn what the customer wants, and adjust accordingly. In fact, the Canvas’ own creator advocates completing it with ever-movable post-it notes. There’s no better way to quickly and easily change answers and watch them ripple through the grid. So play around with your Canvas. Imagine that one of your customer segments goes away, or that you add a new distribution channel. Adjust your Key Activities and Resources boxes as you go, and see if your prospective co-founder still rounds out the team in those scenarios.
Date first to optimize for good team dynamics
For all the efficiency and flexibility of the Canvas, though, when it comes to assessing the next key factor in choosing a co-founder—personality—you’re going to need to leave it behind.
“I’d say a third to a half of startups melt down over team dynamics before they ever get funded.”
In the face of that sobering statistic from Blank, how can a founder steer clear of calamitous personality conflicts?
He doesn’t have a diagram for this one, but he does have decades’ worth of startup experience. And he’s learned that many of the questions you’ll want to ask sound a lot like how you might talk about a personal relationship:
- How does this person fight, and how do they resolve conflicts?
- How do they work? Do they work as hard as you do?
- Are they insightful? Dogmatic?
To get to the bottom of these core traits, he advises that any prospective co-founders “date first.” Start with a hack weekend, or some other period of intense activity that requires plenty of decision-making. Follow that up with, at a minimum, a provisional 30-day working period.
“Agree on whatever terms make sense—you both get to keep the code, for example—but give yourselves some time before you fully commit. You’re about to get married and have kids, and the consequences of divorce here can sink the entire venture,” Blank says.
All of these relationship analogies, though, are just that—analogies. Blank is quick to caution that your co-founders need not be your friends as well. In fact, they probably shouldn’t be. “You might have a great time out at a bar with your friends, but that’s not the same as making a five-year commitment,” he says. There is a huge distinction to be made between “We have a good time together,” and the amount of teamwork and skill required to get a startup working and growing. “I’ve seen a lot of founding teams felled by naiveté about the work required to get their idea from one good weekend of coding to a viable product,” Blank says.
As difficult as this sounds, remember there is strength in numbers
But what about founders who dread the thought of professional “dating” and feel confident they have Key Activities covered all on their own? What does Blank say to someone who asks: Can I be a solo founder?
“A single founder is like one hand clapping,” he says. He has seen startup founding teams sized one to 10, and acknowledges that the graph of successful enterprises would no doubt form a bell curve. “The sweet spot is somewhere between two and four,” Blank says. Because at the end of the day, effective team dynamics come down to human nature—and most people get better and smarter when they have foils with whom to spar and hone ideas.
Unless you’re 100% certain you’re that outlier who can go it alone (and willing to risk the chance you’re not), the co-founder search is worth it. Keep at it. Remember that a startup is really a work in progress, an incubator for testing hypotheses until you converge on a scalable idea. Over time, your product is likely to evolve, and your business model will inevitably shift. A solid founding team is what gives you the agility to iterate, and to make a good idea great—and it ensures that you have a well-rounded skill set in your arsenal.
Select for the startup mindset (i.e. love of chaos)
So once you’ve found, say, the ace coder you need—and the thought partner you want—is the search over? Not necessarily, Blank warns. Startup culture is a different beast than any other business environment. When it comes to fit, if you stop at personal synergy, you’re stopping short. You also need to consider whether your prospective co-founder is, simply put, a match for startup life.
To assess a candidate’s true feelings, you can create your own ‘founder test.’
For all the apocryphal stories about what makes a successful entrepreneur, the startup world has yet to produce any real tests or self-assessments for potential founders to determine whether they’re cut out for the job, Blank says.
“The best-trained founder would be someone from a dysfunctional family who has served as an army platoon leader.”
In a dysfunctional family, he explains, a person has to shut out everything else and focus on survival—otherwise put, that person must learn to operate in chaos. And that platoon leader? He or she doesn’t have time to read a war-fighting manual in the middle of battle; without sharp combat instincts, that leader’s troop will fail. “There is no clear way to measure a person’s potential to be a good founder, but I can tell you anecdotally what you’re looking for: You want someone who exhibits intense focus in chaotic situations, keen decision-making skills when faced with little data, relentlessness, agility, and curiosity.”
Blank pictures a sort of spectrum of professional types, starting with founding CEO on one side and the employee who will perform best at a multi-billion-dollar corporation on the other. He encourages founders to haul out the whiteboard and start understanding those distinctions for themselves: What general skills or sensibilities does a founder or co-founder of a startup need? What’s the difference between that and being a later employee at that startup? And how are they all different from someone working at a large company? “Founders need to take time to understand what’s important about being the founding CEO or co-founder of a startup before they go out looking for the rest of the team,” Blank says.
Blank knows what his own whiteboard might look like. “Founders are crazy,” he says. “They’re closer to artists than engineers or marketers. A great, world-class founder has the vision and passion to create something that never existed before.” If you don’t have that drive, he argues, you’re at a maximum a co-founder—and might want to be an early employee. “I was never the one with the idea,” he notes. “I was always the guy standing next to him saying, ‘Whoa, say that again? Let’s do that.’ That was my role, and I was good at it.” There is a hierarchy of skill sets in business, he argues, and it benefits founders to develop their own pattern-recognition skills when filling those crucial early roles.
Finding the right co-founder isn’t just about this mix of traits, it’s about their past experience that proves they have these traits too. Because culture shock is very real.
If you’re considering teaming up with someone fresh out of an established corporation—a Google or Facebook, for example—there is yet another layer to assessing cultural fit. “Startups operate with more urgency than any other organization in the world,” Blank says. “And because of that, the startup’s decision-making process would appall most employees of large companies.” Early-stage ventures are fundamentally different than other businesses, and people who have never lived that way don’t always know what to anticipate.
“When I became an entrepreneur, the behemoth was IBM,” Blank says. “The conventional wisdom was that you didn’t want to hire someone out of IBM. You waited until some other startup hired and fired them, and then you snatched them up.” Of course, that’s not to say that a co-founder fresh out of a larger, more established company isn’t the right fit, it’s just another big factor worth considering.
“At an early startup, you’re not executing. You think you are, but actually you’re searching for a business model,” Blank says. That’s a very different environment than a large company, where employees are executing an established business model with processes, procedures, key performance indicators and incentives, all organized around execution. “The skills for search are very different than the skills for execution. That’s true for engineering, too. Startups are focused on agile development and minimum viable products; corporations write specs, do waterfall development, and arrive at a product two years later.”
Some people can seamlessly make the transition from corporate life to startup chaos, but for most, a period of acclimatization is key. “When you make that change, everything you know is wrong, from how to write memos to how to navigate company polities,” Blank notes. Don’t shy away from discussing this radical culture shift with a co-founder candidate, if it applies, and keep a close eye on it during your 30-day audition period.
Whether you’re considering a big company veteran or someone who’s never set foot in an office, your co-founder needs to be someone who can help you build a product—and a team—in an environment of managed chaos. Decision-making needs to be rapid. There won’t be time to gather all the facts. You will inevitably have to ship imperfect architecture or code.
“Startups are uniquely time- and resource-limited. The ones that survive understand that burn rate is a ticking clock.”
“Successful startups need to be benevolent dictatorships, with a single clear decision-maker at every turn. And you need a co-founder who understands that, and can keep up,” Blank says.
Pitch based on the person
After you feel like you’ve found the ideal person, there’s one more major step—because it won’t matter how spot-on your analysis is if you can’t convince that candidate to join you. They might not share your conviction in the idea, or believe you’re worth the huge career commitment. In landing the right co-founder, Blank says, your number one priority needs to be knowing your audience. What drives this person? What will make them say yes?
It’s a lesson Blank himself learned the day he almost failed to recruit the crucial third co-founder to his last company, E.piphany. They needed the brilliant engineer who was going to make the idea a reality, and they came close to missing out.
“Greg Walsh had just become available, and we knew he’d be recruited in no time. So I took him out to dinner and painted him a great picture. I told him all about money and scale and customers. And he listened very politely and said he’d think about it,” Blank says. “I hadn’t even made it home yet when I got the call from my co-founder, Ben Wegbreit who sounded panicked and said, ‘What did you say to Greg? He decided not to work with us.’”
Blank had no idea what had happened. What could he have possibly said that was so wrong? Luckily, Wegbreit tried again, this time taking a different angle, and Walsh was on board the next day.
What changed? “Ben told him all about the architectural challenges of solving this particular problem, how hard it was technically and that no one had done it before,” Blank says. “I had told him about all the things he didn’t care about. It was a great pitch—but I was recruiting a VP of sales or marketing, not the engineer in front of me.”
A successful founding CEO, Blank explains, is someone who can create the largest possible reality distortion field for a candidate they really want.
“One of the goals of a startup is to get people to do things that are truly unnatural—it’s convincing customers to buy an unfinished, buggy product, or enticing venture capitalists to part with money on nothing more than a slide deck,” he says. And you can’t do all that with just one pitch, as any seasoned founder knows. Going after a co-founder is no different. “Your reality distortion field needs to match the passion of the person you’re pursuing. Be thoughtful, consider what motivates them, and tell them why your company is the ultimate place to do exactly that.”