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Ask HN: What's 'Due Diligence' when vetting co-founders?

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Ask HN: What's 'Due Diligence' when vetting co-founders?

#1
Hi,

I need a co-founder with a certain skillset to help my startup be successful when it launches, and have registered with 'Pro' accounts on 2 websites that claim they can help me find a co-founder. I've also placed an ad on another that claims it can help me find a technical co-founder. Then I put an ad with links to each of these campaigns on my company website (superspeedyservers.com).

Of 8 people I initiated contact with on the sites which I have a 'Pro' membership, none so far have seemed interested enough to get back to me, which is discouraging, 1 person has reached out to me, but hasn't followed up with a new reply after I got back to them, and on the other site with the ad, I got 1 reply from someone who's interested.

Part of me is inclined to start working with the first person who appears to be qualified and interested, out of fear that there won't be any more 'applicants' for lack of a better word for them. But I know the act of finding a good co-founder is akin to marriage, and I don't want to partner up with the wrong person.

So I'm wondering how this vetting process should go, considering that I have 6 months of 'Pro' account remaining on these sites, and don't know how many 'applicants' I may or may not see.

I don't want to squander the opportunities I do get, but I don't want to jump the gun & take the first 'applicant' for the sake of taking the first 'applicant'.

What are HN readers' thoughts on this?

Thanks.

Re: Ask HN: What's 'Due Diligence' when vetting co-founders?

#2
Clearly you will want to validate their skill set - this may mean acting like an employer about to recruit a new employee before offering to partner.

You might also need to check that their history will not be a problem when you come to raise finance. Are they an undischarged bankrupt for instance (in the UK - are they disqualified from acting as a company director).

Then it is all down to - can you work with this person? Plus, is this person likely to represent the business well in their selected role?

Re: Ask HN: What's 'Due Diligence' when vetting co-founders?

#8
I can quickly tell you why you've had 0 luck finding a co-founder.

My background: I am both a web hosting industry veteran, with a successful high-end hosting company under my belt (see http://www.erica.biz/2009/the-end-of-an-era/ for my story)...and my current co-founder and I also did a presentation at SXSW this year on "How to Find the Perfect Co-Founder."

You've made 2 classic mistakes here:

1) You haven't started building the business without your co-founder.

There is absolutely 0 reason why you need a developer co-founder to build what is essentially a high-end hosting company. Put up a WordPress site, set up a Stripe account, collect payment (3 months in advance for new customers will help you buy the server) and you're in business. This is EXACTLY what I did when I started my hosting company. There are many options available to lease high-end hardware (I'm not talking about leasing hosting; I'm talking about leasing the hardware and colocating it) and there's no reason for you to not build and prove out this business.

2) You are looking for a co-founder and not a particular skill set. When my co-founder of my current startup and I met in June 2010, I wasn't looking for a co-founder; I was looking for a developer. We worked together for several months and I paid him to develop the site and back-end for our customers. We signed our first customers and only then did I offer him a co-founder position with equity. But I paid him the entire time.

Can't afford to pay someone? See my first piece of advice. You don't need anyone else. When I built my hosting company in 2001, I had just started to learn how to write code. I taught myself PHP, wrote my own shopping cart, set up an integration with Payflow Link (now owned by Paypal), and I was in business. You need to do the same thing here.

The bottom line is that no one wants equity in an idea. You have to prove the model. Things like WordPress themes and Stripe make it easy to do so, so anyone even remotely technical who doesn't do that doesn't appear to be serious about the business. (I'm not making a judgment call here, but that is the perception when you don't even have a simple website with products for sale and a checkout process before looking for a co-founder.)

On top of that, the hosting industry is exceedingly difficult (I've written about it on my blog at http://erica.biz extensively) and you're really going to have to prove that you have something awesome and different to succeed in that business.

Think you've got it? Here's the challenge: Get a site up with a checkout process in the next 24 hours. When the first order comes in, put that server on a credit card and deliver to the customer. Then repeat 100x more in the next 6-12 months. You may find you don't need a co-founder, or you may find your business idea was wrong. Either way, you won't be banging your head against the wall saying things like "I can't move forward without a co-founder!"--you will have taken control of your business and moved forward to prove the idea with the skills you have right now.

Re: Ask HN: What's 'Due Diligence' when vetting co-founders?

#9
'I don't want to partner up with the wrong person.'

This runs both ways. You need to prove to all your potential cofounders that you're the right person to partner with too. They will want to know that you're qualified and interested

Do your ads explain exactly what skills you bring to the startup? Can you show any validation? Have you already found people who would be willing to pay for your idea once it's built?

You haven't mentioned exactly what your idea is (and keep in mind it will probably/definitely change as your startup grows) but if it's possible to start finding customers with a solution that requires little or no technology then absolutely do that. In other words, try to find a way to run it yourself.

This will either prove your idea has merit, and will make it easier built a team around, or it will let you weed out any gaps in your business model until it does. It's better to find problems before everything is complicated by having two personalities to manage.

Re: Ask HN: What's 'Due Diligence' when vetting co-founders?

#10
Honestly I find it awkward and unnatural to search for a co-founder. It's comparable to searching for a wife. Well...you kind of need a girlfriend first. Put another way, hire a web developer, which honestly it doesn't even look like you need yet, grow a relationship with that person(s) and work them into a co-founding position if the opportunity presents itself. From reading the info you've posted I'm really confused as to why you need a co-founding web developer so bad that you've yet to put anything on the web. That may be deterring people away.
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