The Scenario: Your friend David, always has been talking about being his own boss. He currently has a good job with a Verizon, but has several ideas for new products that he cannot make the company interested in. He has over $150,000 saved, and now decided to take the plunge and start his own business.
Is it worth it for him to take a partner? What would you tell him?
There is nothing in this scenario that suggests that David needs to take on a partner in order to begin his own business. As Kaplan and Warren (2013) point out, the primary reasons for taking on a partner are to complement the original founder’s skill set or to provide additional starting capital. There is no evidence that David is in need of either. Mark Suster (2011), the noted entrepreneur and venture capitalist, argues against adding a partner as the conventional wisdom of teamwork and load-sharing does not “account for all the things that go wrong in partnerships over time.” To increase his chances of success, David must begin using his network to find a mentor. As this is his first venture, an experience mentor will greatly increase his likelihood of success (Kaplan & Warren, 2013). If David still feels he needs assistance with his business, he should consider bringing on a partner as a first employee. The key to success with this arrangement is allowing the partner a high equity position, though less than David’s, and includes a reasonable vesting period. This will give David the complementary piece he needs, while still protecting his interest in his company (Suster, 2011).
An example that supports this recommendation.
Evidence of failed partnerships is abundant. One of the most dramatic, and dangerous, was the failed partnership between brothers Adolf and Rudolf Dassler. The Dassler brothers began making shoes before World War II. During the war, the brothers had a falling out. At one point, Rudolf was captured by American forces and held in an internment camp. After his release, Rudolf took half of the shoe-making machines and started the manufacturer now known as Puma. Adolf used the remaining equipment to manufacture shoes under the company name Adidas (Tagliabue, 1981). Clearly the equal distribution of ownership of the original shoe company nearly led to its demise when the brothers could no longer operate as business partners. Without clear leadership in place, it was inevitable the brothers would split the company’s assets and put the existing firm at risk.
Kaplan, J. M., & Warren, A. C. (2013). Patterns of Entrepreneurship Management (4th ed.). Hoboken, NJ: John Wiley & Sons.
Suster, M. (2011, May 9). The Co-Founder Mythology.
Tagliabue, J. (1981, Feb 15). Adidas, puma: The bavarian shoemakers. New York Times (1923-Current File).