The "Day one" Factor: The #1 Task Veteran Entrepreneurs Focus On
Founder-fit Birthed RockitShip Before Product-fit
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This article is a continuation of the previous article entitled “How to figure out what to do next in your career” ( found HERE). You may find it helpful to read it first.
Once I decided to start another venture, I had to turn my mind to what that next business would be. In this article, I will share what experienced entrepreneurs focus on first. Many would naturally think it is product-market fit. It isn’t. Founder fit is what matters first. When I put on my angel investor hat, this is the main thing I focus on when investing in startups.
The initial step is finding the right founder-fit. In my experience, when businesses fail, many times, it is due to partnership problems. When trying to execute on building a great company, the collection of people is vital. This is where the focus should be before anything else. The reasons for this are:
People are the resources that will ultimately lead you to your success.
No one can attain massive success by themselves. It is never a solo effort.
Partners will fight and disagree at some point. It is best to set things up properly at the beginning and select people you can amicably debate with when things get heated.
When starting a new company, two steps proceed all the other popular advice out there. For some reason, those that learn this through the school of hard knocks don’t seem to share it. Those steps are:
Do the work to find great co-founders. In other words, put a huge emphasis on founder-fit.
Put a shareholder agreement in place before you start working on the venture.
Before I delve into executing these two steps effectively, I need to be open and share a chapter in my entrepreneurial journey where I made a huge mistake and did not do this. The purpose of sharing this past blunder is to underscore the importance of the two steps above. What better teaching tool than to shine the light on one of my very own entrepreneurial mistakes.
Learning the hard way
I ran my last company for 17 years. In the early years, it was just my co-founder and me. We were young, inexperienced and full of excitement. We were building a tech company in the city of Toronto in the early 2000s. Toronto had not matured into the vibrant tech scene that we currently see in 2021. There were no SAFE templates, co-working spaces, incubators, or mentors readily available to teach us the method of building a tech company. Before we experienced any momentum in the early years, our lawyer encouraged us to create either a shareholder’s agreement or a partnership agreement. We went to the meetings with our lawyer, looked at the templates and checklists required to draft such an agreement, but we never followed through and finalized it. Our lawyer warned us that one day we were going to disagree on things. He emphatically told us these types of disagreements are natural and almost a guarantee. Our legal counsel tried telling us that simply drafting it, finalizing it and then filing it away would be great. We may never reference it again, but having the agreement in place would keep us in check when things got heated. If needed, we would both know we had a document that outlined our rules of engagement to resolve future conflicts. In our early twenties, we figured we knew better and felt that circumstances would never get that bad. After all, my co-founder handled the software development, and I handled everything else. With that division of labour, we would never conflict. We couldn’t have been more wrong.
Around the seven-year mark of the company being in business, we started to go through what I would have to term a business divorce. There’s no point going into the details as they are irrelevant. We were both well-meaning people with the best of intentions. Our mistake was not following our lawyer’s advice 7 years earlier. The business started to grow, we both had different views of running the company, and we mutually decided to part ways. We even agreed on my co-founder leaving and me staying. So far, so good, right? Well, from that point forward, things started to deteriorate for a myriad of reasons. We moved from face-to-face discussions to him leaving the business's day-to-day operations to eventually only lawyer to lawyer communication. It wasn't enjoyable. I am ashamed to admit that I acted and said things all those years ago that I regret. Releasing my guilt around this is still an ongoing process with my therapist, Tony. Emotions got the better of me, and confusion set in for a long and tense two-year period. We could have avoided all of this if we put a shareholder’s or partnership agreement in place. We eventually parted ways when we agreed to hire a mediator that we both agreed on. We split the cost for the mediator and agreed in writing to abide by the valuation and settlement the mediator came up with. We met in a fancy law firm board room overlooking Toronto’s financial district one morning at 9 am, and by 4:30 pm, we had an agreement in place. We agreed on a buyout that I felt was a little too high and my co-founder felt was a little too low, which the mediator told us was ideal. That day our lawyers and mediator left paid well and with smiles on their faces. My co-founder and I left drained, upset, and with tense hearts because we didn’t think through a proper agreement in the first few months of the business. If you are reading this and you need a checklist of the terms that go into these agreements as a tool to start a dialogue with your co-founders, email me, and I can send you the one we used for our most recent venture. Don’t procrastinate on this. To this day, I wish we handled it differently. I wish I acted differently. I wish my co-founder and I still had a relationship. I often wish we could go for coffee at a Tim Hortons and reminisce about those early days building the company in my Mom’s basement. Or how in our early twenties, we both steam cleaned carpets in a downtown Toronto ScotiaBank on Richmond St. to earn extra seed money for our business from 10 pm to 2 am on Saturday nights while our peers walked by dressed for a night out at a restaurant, a club or the movies. At the end of the day, business is just business and harmony, and civility is much more important.
Let’s explore how to do it correctly.
Put it out there
When you are ready to launch a new venture, you must admit that you will not do this by yourself. To put it in the words of Napolean Hill, you need at least one other person so you can create the mastermind effect. Here is Hill’s definition of the mastermind effect:
“The coordination of knowledge and effort between two or more people who work towards a definite purpose in a spirit of harmony…no two minds ever come together without thereby creating a third, invisible, intangible force, which may be likened to a third mind”.
This third mind is what Hill is calling the mastermind. If you have not read Napolean Hill’s “Think and Grow Rich,” I suggest doing so and integrating the guidance of this 100+-year-old book without question.
In 2020, after a one-year sabbatical, I decided to start another company. My long-time mentor, Pulin, reminded me of the importance of finding a partner to create the mastermind effect. I decided to double down on this search. This may seem strange, but my experience has taught me that the strength and make-up of the human relationships in a venture are exponentially more important than the product or service idea. This is certainly the case if you are trying to build a venture that scales exponentially. If you are a solopreneur, you can certainly establish a small business by yourself, but it will not gain mega momentum and scale to great heights as a solopreneurship.
Date first
My first step was putting it out there to my network that I am looking for partners to collaborate with. My ask was as follows:
I know what I am good at and what I don’t enjoy doing. For example, my strengths in operating a venture are sales, marketing, client success, recruiting a team and building systems. I don’t enjoy finance, operations and I am not an engineer. Therefore I was looking for operational and technical people to ideate with. The operational person had to have deep domain knowledge in the sector we would commit to.
Initially, I asked for introductions to people to loosely ideate with. In addition to looking for complementary partners, I was also looking for people within certain sectors I had pre-qualified my interest in. For example, I was keenly interested in both the e-commerce tech sector and the health tech sector. I didn’t pressure the fact that we needed to force the founding of a company.
I made my asks in a one-to-one manner. For example, I made phone calls and sent emails to the people in my network who are connectors to other people. I did not post on social media with the hopes of connections coming that way.
I met several people. I gave some of my time to ideate with them. Once I knew there wasn’t a fit for us as co-founders, I politely and quickly ended our time together to make room for the right people when they came along. My ideation phase with people that were not a fit lasted days to weeks.
Go Exclusive
When I was meeting and ideating with different people, I searched for people with complementary skills that also worked at the same rhythm as I did. Early in 2020, I was introduced to two amazing entrepreneurs that would end up becoming my co-founders. Here is how I knew we had something special:
They have the complementary skill sets I am looking for.
We have a similar non-bureaucratic/non-corporate style, which is important for me.
We share similar values, motivations and ethics.
Outside of work, the three of us take our health and roles as husbands and dads seriously.
The first thing that all three of us instantly gravitated to as the first step is a shareholder’s agreement. It wasn’t awkward for any of us to bring this up. We are all experienced entrepreneurs and knew that this initial agreement would form the foundation of our future relationship. In that process, we discussed and decided on what to do in the face of minor decisions, major decisions, funding requirements, if one of us dies, if someone goes through a divorce, along with many other what-ifs that all three of us knew was prudent to address at the outset.
Becoming each other’s “Day Ones”
Photo by #WOCinTech (Women of Color in Tech)
The two things that took us from ideating to formal partners and, more importantly, each other’s “day one’s” (if you are not into hip hop culture, here is a definition of day one) was the following:
We signed our shareholder’s agreement. There are many names for this type of document, depending on your jurisdiction. For RockitShip, this was called an operating agreement.
We funded our accounts with the agreed-upon capital to get the company launched.
Stay together
In the ideation phase, the process will test your product assumptions and ideas. If you have found co-founders that will be your day one(s), you have to weather the storm and stay together. There was a moment in the ideating period of RockitShip where all three of us started questioning if, in fact, we found a problem we are in love with solving. For a period of time, it felt like we might NOT be onto something. I sensed the worry from my day ones, and I said right away:
“….guys, this idea may or may not be the thing we launch a company with, but that is not where the value is. The value is the three of us being together. Amazing teams birth great companies. If not this idea, then another, but we have to stay together!”
It wasn’t until after the last exit that I became aware of what I am calling the “Day One Factor.” In my time off, I reflected on all the mistakes I made in the last journey. I noticed a theme that the tensest times and the most dramatic mistakes had in common - people. After reflecting and meditating on this further, I decided that in the next venture, I want to double down on enhancing the fun, harmony and transparency amongst my day ones and all the teammates that join RockitShip.
My experiences are that of an entrepreneur. However, if you are an executive at a corporation, you can extrapolate these learnings to your company, department or team very easily.
In an upcoming article, we will explore how we got the product started and my opinions and ideas on what to spend money on early in the venture and what not to.
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