2. The co-founder: What to look for? The Story of a Startup in Palestine

I’ve been dreaming of starting my own company ever since I was 17, maybe even before that time.  There have been numerous attempts to execute on the great ideas that pop into my head while I’m lying in bed at night or staring at the television in the evening.  The one common theme is that all these ideas ended up fading away, some in as little as 15 minutes and some took weeks before they left.  In some cases, I would actually register a domain name and start working on a prototype and try to write up a brief business plan.  Looking back, one of the reasons that I didn’t pursue these ideas wasn’t that they were bad ideas or they didn’t have a market, but what I feel were due to a lack of a co-founder.  We all need someone to talk to when the going gets tough, which it definitely will, someone to bounce ideas off of, and someone to help carry the burden of creating and running a company.

While I had known my co-founder, Ibrahim, for a while, we never really thought of starting a company together.  Like me, he had a lot of ideas that he was trying to bring to life.  We would sit together every once in a while and discuss ideas and talk about how we each individually wanted to create something for ourselves.  It wasn’t until one evening that we were sitting down together that he said he had this idea and asked if I was interested in joining.  He had the name and the idea, but still hadn’t really started execution.  He had validated the idea with a few people and saw this as a pain that we can address.  As we began to talk about the idea, we both saw amazing possibilities.  We both agreed that we’ll work on this together, and that’s how the partnership was born.

In my view, having a co-founder is a must. Many investors won’t, or are at least hesitant, to invest in a startup with only one founder.  Having more than four is usually a bit too much as well.  Even the big names that we think of like Yahoo, Microsoft, Apple, Google and Facebook all had more than founder.

If I had to look for a co-founder all over again, here’s a quick checklist that I would use:

Not a “Yes man”, someone to challenge you

The last thing anyone needs when starting a company is people around them agreeing to everything they say.  It’s crucial that someone plays the role of devil’s advocate and brings up all the what-if situations.  Remember, that if the co-founders themselves aren’t 100% convinced of what they’re building, it will be extremely difficult to convince customers.  Having someone to challenge you can cause serious headaches, but will also result in a much better product.

We have had many discussions where the whole team wanted to pull their hair out.  I think that’s normal as long as people know how to resolve their differences and not be sensitive if someone critiques their ideas.

Someone you can get along with

As co-founders, the two (or more) of you, are going to spend a lot of time together, and when the real work begins, such as incorporating the company and getting an investment, a split-up is a nasty thing that could destroy many things, including the company.  Having someone that you can get along with is crucial.  If you can’t stand the person while you’re still starting the company, chances are you’ll hate them even more in the coming weeks or months.  Save yourselves from the agony and headache and think of other people you could partner with.

Someone who you can rely on

Building a company is hard enough as it is.  Having to hold someone’s hand along the way will most likely cripple the company you’re trying to start.  A clear telltale sign that the co-founder isn’t right for you is if you have to tell them what they need to do and assign tasks to them.  If your co-founder treats the startup as a job, chances are they’ll leave you the moment things take a turn for the worst, or when they get a better offer somewhere else.  You need to be able to trust that your co-founder will take care of their part and help you carry the company in the same direction that you both agreed to.

In our case, we decided to divide our roles.  My focus would be outside the company and Ibrahim would focus more on the internal operations.  I’m more involved in sales and marketing, talking with customers and the finances, while Ibrahim is taking more responsibility over product development, working with the team and making sure the inner house is in order.  This doesn’t mean that I don’t know what’s happening with the team or Ibrahim doesn’t know where we are terms of finances or doesn’t help out with marketing.  Quite the contrary, we’re both aware of and involved in all aspects of the company, however each person has a different list of tasks that they need to complete.  It’s very important that, as co-founders, we’re each aware of what’s happening in the company.

Someone with experience who can complement your skillset

If you’re a developer, finding another developer as a co-founder will probably help you create a well-structured application, but you’ll have a hard time building something customers will buy and you’ll probably find it difficult to sell to customers that don’t understand how great your product is.  If you’re a marketing expert, finding another marketing person as a co-founder can help you sell like crazy, but you probably won’t have anything to sell.  It’s very important that you find someone with skills that compliment your skills, and you’re each able to focus on different areas.

One of the problems that we ran into was that we would do everything together.  When we were meeting with potential customers, we would both work on the presentation, then we would realize that we needed to work on the platform, so we would both run off to development for the next couple of weeks. If we were talking with a potential investor, we would both leave everything and spending the next week or more preparing answers and spreadsheets for the investor.  We quickly realized that when we start to work on one thing, everything else gets left behind.  That’s when we decided to split the work, agree on tasks and have each one of us focus most of their time on specific areas.

The Palestinian Entrepreneurial Spirit – Part 1 Funding

Lately, I have become extremely interested with the Palestinian entrepreneurial scene and am trying to understand where the problems are.  There’s so much talk about encouraging Palestinian startups.  I’ve even heard that there are 78 organizations within the Palestinian areas that support Palestinian startups.  I’ve heard this number mentioned in a meeting once, so I’m entirely sure how accurate it is, although I don’t think it’s far fetched.  It also seems that not a week goes by without some event talking about startups and entrepreneurship.  My question is with all these events, initiatives and organizations dedicated to supporting aspiring entrepreneurs, why haven’t we heard of any success stories?  Assuming there are 78 organizations dedicated to supporting startups, why haven’t we seen 78 success stories, or seven or even one really successful story?

Now there are a lot of factors that come into play here and I’ll try to go over each one and I would really appreciate any feedback, comments or questions to make this a lively discussion.  While I probably won’t discuss all the factors, I’ll try to cover the main ones I can think of, namely: funding, ideas, business environment and education.

In this first part, I’ll talk about investment options and funding for Palestinian startups.

Funding: I’ve heard over and over again that there aren’t enough investors in Palestine that could support the startup community. There are actually two problems here, one that people don’t believe there is investor money and the second is that most would-be entrepreneurs don’t want to give up part of their company when they take outside investments.

What I’ve seen so far is that there are a lot of investors here in Palestine.  I believe that from many of the 78 organizations that support startups, many would be more willing to support them financially.  However, the assistance they receive usually isn’t more than $20,000 USD, which in most cases should be sufficient to help a smart startup run for up to 6 months.  From what I’ve also heard is that these funds are usually grants, i.e. the entrepreneur doesn’t have to give up part of his company.  But what if someone needs much more than$20k?  Well, there are VCs, Private Equity funds, angel investors and more.  While the number may not be equivalent to that in the US or Israel, demand will generate supply.  If we start to see a huge demand for VCs, others will start to appear.  Angel investors are out there, but they don’t label themselves as such, so they can be a bit harder to find.  There are many people/organizations that would be more than happy to invest in a startup team with a great business model.  But it is the responsibility of the startup to pitch the idea properly and get the interest of the investor.  I don’t think it’s fair to conclude that no one will give money when you haven’t really approached enough people or there are serious flaws in your business model.  I’m sure that if one is really persistent, they could also find outside investors who would be willing to help (again assuming that they have a solid business model).

You can’t have your cake and eat it too:  The second problem related to funding is that startups don’t want to give up a stake in their companies.  While understandable that we would all like to keep as much as we can of the company, an investor’s interest is to maximize return on their investment.  They’re not a charity giving out money, and they won’t invest unless they truly believe in the business idea and the team around it.  That’s how the investment system works, they invest and buy a portion of your company.  Usually, the bigger the risk the more of a stake they’ll take.  If you can de-risk your startup, you might be able to get more money or get to keep more of your company.  So I don’t switch focus of this blog post, I’ll try and talk about de-risking in another post.

Personally, I would prefer to have 70% or 50% or 30% of a company that’s worth $1 million rather than have 100% of a company that’s worth $1000.  Investors are partners in the company and one has to choose them accordingly.  You shouldn’t just look at the amount of money they’re offering, but also ask, can this investor add value to my startup?  Will they be helpful in promoting the company and discussing the vision/strategy and helping tackle the problems we face?  If not, then maybe you need to keep looking for other investors who will.

Of course, there are two other options when it comes to funding, FFF (friends, family and fools), but from my experience, while this maybe easy at first, it gets more difficult later on when you’ve borrowed from everyone you know and unless you have some really rich friends/family or fools that you are close to, the amount each person gives won’t cover much.  In some cases, I know people have treated FFF as investors and given them a small amount of shares in their company.  The second option is bootstrapping and tightening the belt (more than it already is).  This can be a powerful method if you have a side job, which can serve as your primary source of income until the startup is able to walk on its own, or if your startup is already bringing in revenue and you don’t need vast amounts of funding to grow your operations.  The bright side here of course, is that the entrepreneurs get to keep all of the company of themselves.  I think that startups differ in their financial requirements and each startup should determine how much they need and when they need it.

There’s more money than we think, but again these are investment funds, not giveaways, so for someone looking for investors in Palestine, be prepared to give up part of your company, and more important keep pitching.  If one investor doesn’t like your idea, that doesn’t mean others won’t.  Keep pitching to anything that moves, listen to feedback on your business and continuously evaluate.