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The Half Life of Co-Founders

Check out Ngaio Merrick's latest article on The Half Life of Co-Founders!

He aha te mea nui o te ao

What is the most important thing in the world?

He tangata, he tangata, he tangata

It is the people, it is the people, it is the people

The half-life at the core of everything we do is the Half-life of Co-Founders.

As a physicist I’ve always been fascinated by half-life – the time required for any specified property to decrease by half. It’s usually spoken of in terms of radioactivity but it applies to literally any specified property. The concentration of a substance in the body – for example – is relevant for the half-life of alcohol in the blood stream and indicates the time passing before it’s safe to drive.

As a partner of Nuance Connected Capital we invest in early stage deep tech teams providing solutions to global problems which improve the earth or people’s lives. Those teams come in a variety of forms but all – especially in deep tech – involve more than one founder. Co-founders.

“In 2012, Harvard Business School professor Noam Wasserman studied 10,000 founders for his book ‘The Founder’s Dilemma’. His research found that 65% of start-ups fail as a result of cofounder conflict. That’s higher than the divorce rate.”

Founders split for all manner of reasons on the outside and the more founders there are at the beginning, the higher the chance of a split in a shorter time. Enter the phrase, “The Half-life of Co-Founders.”

Co-Founders kick off with the best intentions. They are often friends first who decide to go into business together to share a fabulous idea which solves a significant problem with some incredibly cool technology. Intentions are genuine for a long-term relationship and shared spoils when the company is eventually super successful. They are generous with one another as they divvy up the shares in the company, seeing only the long term good.

The next step is to bring in some capital – some-one else’s money – and add to that stress the challenges of deadlines, technical glitches to resolve, product market fit to evidence, go to market plans to strategise and execute and long, unforgiving hard work.

Co-Founders are people. Like all people they accept one another’s intellectual differences. They accept personality differences – in fact they often celebrate these. My co-founder has exceptional attention to detail for which I’m eternally grateful, my own being sorely lacking.

Where co-founders (and all other people) come unstuck is when they have a fundamental difference in their approach and/or values. Differences in values are usually nutted out before co-founders agree to go into business together. Differences in approach are often a surprise – and not always a pleasant one – once the hard work starts.

A difference in approach causes a prickle of resentment every time it’s evidenced in a partnership. Over time this resentment builds until – like the proverbial toothpaste cap which is left off for the 3,256th time – it explodes. Things are said which are unforgettable and not always forgivable. The resentment manifests a long list of things being added to the original approach difference and often – right there are then – the founders differences are irreconcilable and they experience founder split.

Some will stay and some will go. Those who go take with them some of the expertise and experience necessary for success. Those who stay will have to pick up the extra workload which does little to reduce their resentment. The company suffers, the investors suffer and mostly the co-founders suffer – both those who stay to carry on and those who leave their passion project to find other work.

The Half-life of Founders is a very real problem in the start-up world. As with anything concerning people, the half-life times differ wildly but there are patterns. In the deep tech world, the half-life of four founders tends to be less than two years. The half life of three founders leans to three or four years and the half life of two founders is roughly five years. Plenty of companies beat these odds. More don’t.

So what can we do to increase the Half-Life of Founders?

At Nuance Connected Capital we have a way of assessing the ten key approaches to work which founders have. We identify potential areas of resentment before the resentment has built to untenable levels. We work directly with the co-founders to address these areas. A regular response when we do so is “do you have cameras in our boardroom?” or “yes, we already conflict there” so we know our tactics are accurate.

The antidote for resentment is open, clear communication addressing the problem. We facilitate this providing tools to assist co-founders to manage the situation as they go. We have way below average Founder Split in our portfolio companies. It works.

And when co-founders stay together the company is more likely to succeed, the global problem is more likely to be solved, the investors are more likely to get a return and the co-founders themselves are more fulfilled and happy in their work. And what more could a fund manager ask for than these three returns?

We advocate for - and provide support for - a very long Half-Life for Co-Founders.

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