Sometimes the biggest startup mistakes occur on the day the company is founded

Photo by Agent Orond_ © Creative Commons

When co-founders disagree about the type of business they are building things get ugly. Really ugly. I’ve experienced it firsthand, the destructive power of disagreements which decimate long time friendships, destroys perfectly sound businesses and cause totally rational people to make really bad decisions.

So I often advise co-founders to make sure to sync up about the type of business they want to build. They should take a careful look at the role each of them will play and agree on the type of exits that will make them happy. I just had that sort of meeting today with two young eager startup founders who seemed to be struggling with this very problem.

At issue was whether or not they should raise money from a VC to accelerate their business. One of the two founders wanted to raise money and the other did not. At issue wasn’t so much raising money but what type of business did each want to build. After counseling them for a few minutes I asked them:

Are you creating a lifestyle business or a large corporation?

The question gets right to the point. Do you want a business which fuels a great lifestyle or do you want to build a big company that creates lots of jobs, takes on many investors and has global reach?

Once the two founders agreed that they wanted to create a lifestyle business the question on raising VC money was very easy to answer. In this case it didn’t make sense to raise it and both were in agreement.

There should be no shame in going after a lifestyle business. Not every company is destined to become a large corporation and many types of business especially those connected to the arts are better suited as lifestyle businesses.

Knowing which type of business you want to build at the start will help you sync up with your co-founders and those future decisions — the really hard ones, will be much easier to decide.

By joshkerr

Josh is an 8x startup founder and angel investor.

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