Building Your Founding Team—Is There a Magic Number?
During our recent webinar on seed fundraising, questions were raised on the ideal size of a company’s founding team and if there was a magic number that may be more attractive to investors. Jere Doyle, Managing Director of Sigma Prime Ventures, had this to say:
“There's no magic. Ten founders will be a lot of founders. It really depends on how long they’ve been together—a company that has come together in the last six months or so will probably have two or three founders at the most. I prefer to have more than one founder because I think that's a good thing as an investor—you've got backup. But I think any more than three becomes pretty complicated.”
There was an interesting study recently that looked at the size of founding teams and whether this had any correlation to its success. Surprisingly, because this would be inconsistent with what most investors would say, single-person founding teams have almost the same percentage rate of success in terms of exits. Furthermore, there was a very high rate of success for these companies, with more than half of the companies they defined as “successful” founded by a solo-founder.
Of course, there is no magic number, but having a team of two to three founders can help divide responsibilities and provide balance. A technology company may want to have an engineer on the founding team or may want to have a sales and marketing expert. Balance and diversity is important and every company, every situation and every group of founders is different. Having a strong product or service offering is key to any successful , but it is important to keep in mind that investors also want to know that your founding team (s) can actually deliver on the vision you set out to achieve.
Learn more about issues related to founding teams, including allocating equity, tax implications, compensation and more by visiting our Founders resource on WilmerHale Launch.
If you would like to hear the entire on founding teams from our QuickLaunch University webinar on seed fundraising, be sure to listen to the webinar recording.