Do you need a business co-founder?
Or: Is your startup’s first priority reducing market or technology risk?
Suppose you have developed a technological innovation. And something is driving you to start a company around it. But you’ve been trained as a scientist, surely it would be better to get someone with business experience on board as a co-founder, right? And you’ve heard plenty of accelerators, grantors1 or investors even make it a requirement before they support you.
I’d like to question that. Market and customer-oriented thinking are certainly key to startup success but in what format and at what stage you get such skills on board might depend a lot on your specific case. Just finding a person with a business degree or a certain number of years of industry experience is not a catch-all solution.
Proponents of bringing on a co-founder with a business background will emphasize the person’s role to help find and bring in the first customers and create a much-needed customer-oriented counterweight to an oftentimes strong technical focus on the product development. Additionally, some might argue, co-founders with a business background are more likely to have good communication skills to acquire partners and investors and drive the fundraising process.
Though all of the above can be important, every startup is different. Therefore it is useful to analyze:
What kind of skills and roles does your specific company need? What are the milestones for the first year or two? What are the critical factors to being successful?
What skills and ambitions do you already have on board in the current co-founder setup?
So, where are the gaps?
One way to look at the first question is by identifying the character of your startup. I would say we can roughly divide technology-based startups into three categories depending on their level of technological innovation and the type of risk that is most dominant to them. Let’s look at them more closely:
(1) Technology innovation in an existing market
One example I talked to a while back is Anaphite, a battery technology startup out of Bristol. They are significantly improving the cathode materials for lithium-ion batteries, a huge and growing market. But therefore also one with big competition. A multitude of different approaches from university labs or innovating incumbents each improve the existing product. In this case, having the best technology might not be the key to success, but maybe the company that succeeds is the fastest at execution, creates the cheapest process overall or with the best ability to integrate into existing processes.
Valuable to have a business co-founder? Most likely! In a scenario like this, where execution and industry knowledge are key to success it might be the deciding factor.
(2) Breakthrough technology with multiple possible markets
These can be technologies with a wide application spectrum where the beauty lies in the vastness of applications. A startup in this category that I met recently is Agate Sensors based out of Aalto University in Finland. They have developed a truly groundbreaking new sensor (miniaturizing a hyperspectral sensor to fit onto a classic CMOS camera chip in smartphones). This could be used for everything from nutrient detection in fields via drone cameras to detecting more detailed health signals via the sensors of wearables to detecting enemies in the battlefield in military headsets. What is the right first use case? Not easy to say. While the technology still needs significant improvement and de-risking, one of the core tasks and keys to success is finding the right first application fields, experimenting in the market and adapting the product to that.
Valuable to have a business co-founder? Maybe, maybe not. You definitely know your technology and its adaptation possibilities best and could definitely also drive the market experiments yourself. An industry-minded cofounder might propel this forward though. One challenge to consider is working with someone that is generally excited about your technology and brings generalistic industry/business acumen versus finding someone that is very specific to one of your possible application fields (might really accelerate the trajectory or be a mismatch if this doesn’t turn out to be the right direction).2
(3) Breakthrough technology with a clear problem-solution-fit
In this case the market or problem is painstakingly clear - we need long duration grid storage, better ways to treat cancer, ways to replace all plastics with microplastic-free circular alternatives. But today’s solutions don’t cut it yet. And then a scientist comes around proving (at lab scale) a completely new approach. In this case, the crux lies in getting the technology to work consistently, under industry conditions and at a larger scale. I am talking about doing things that no one has done before. At Positron we strive for a portfolio that serves as an example for startups in this bucket. For example, the team behind Senara based out of Freiburg in Germany aims to be the first one to produce a full milk equivalent in a bioreactor at the same cost as today’s milk. This would enable keeping our nutritional diversity and variety of dairy products alive while significantly reducing methane emissions, land use and improving animal welfare.
Business cofounder? Not necessarily. Ask yourself what their role and relevance would be in this early stage. Yes, you will absolutely need to be aware of the market conditions (what are acceptable industry prices, where do I start the first pilot) but overall the majority of the time in these companies in the first year or two will be spent on building a technological moat and getting the technology to work reliably at a larger scale. Can you find first pilot customers yourself? And can you as the core scientist behind the invention communicate the vision and potential of the technology well enough to raise the first funds and get your startup onto a path of de-risking the technology? Then maybe there’s no need to find a business co-founder. Instead such skills can be added to the team later.
But wait! “I’ve never registered a company, done my bookkeeping, created an employment contract. I need a cofounder with a business degree!” -> No, you don’t. This is a misconception I’ve often seen with founding teams coming from academia. Just because someone has a business degree or worked in a larger corporation before, does not mean they have done any of these things before either. These very practical, operational tasks you will either need to take on yourself, get advice on from angel investors or other founders around you or find specialized support if needed. Would you add a founder (i.e. someone that owns a significant stake of the company) on board just for these skills? Unlikely. Think about the equity distribution as a way of gauging what their value to the overall success of the company is likely going to be. Very unique scientific knowhow that you bring is probably a key differentiator. Purely operational tasks are probably less so.
In general, deciding who it might need as co-founders in terms of skills and motivations, and then finding the right characters and profiles that you want to build a company with for the next 10+ years, is not an easy feat. It might even be the most difficult part of getting your company off the ground.
Adding a person with industry experience to the core founding team can be exciting and a real push and success factor for your team, but it could also pose new risks and challenges in terms of aligning on a joint vision for the company.
Maybe the above way of evaluating market and technology risk of your planned startup provides a bit more nuance on considering what skills your team might need. And maybe it also gives you some confidence to trust your own entrepreneurial ambitions and sit in the driver’s seat - no matter what outsiders define as their requirements.
I look forward to sharing some of our portfolio founder’s stories from scientist to CEO/CTO in upcoming posts but for now I am curious to hear about any additional considerations you have as you decide who to bring on board as a co-founder. Let me know!
If you think your science is pretty cool but you are not sure yet if you are cut out to be an entrepreneur: let’s talk. E-mail me or join an upcoming 1:1 office hour for scientists.
If you know someone who you think has the potential to be a great scientist-entrepreneur (although they might not realize so yet themselves), reach out to me at scientists@positron.vc.
Finding the right application and the right cofounder could be fun to experiment with in parallel: does someone get really excited about being a cofounder because they have the corresponding industry experience and see the great demand in their field?