Last night Jason Nazar, my partner and CEO of Docstoc hosted a session on 10 mistakes people make when starting a business. The event was greatly received and I believe was very helpful. In the Q&A session someone asked about how to split equity between partners. Although I briefly addressed this at the session as well, I think the bigger question is how to find the right partner. Having the right partner can greatly help at challenging times like equity splits. Here is the presentation that covers this topic: How to Pick a Partner
What is a Partnership?
I’ve been married for, oh… some time now. As anyone who is married will testify, marriage is a pretty complex partnership with many challenges. I also have three wonderful kids and when you think about kids, think partnership. I’m also Jason’s partner at Docstoc which brings its own challenges, being a web startup at a glooming economy. I think that gives me some perspective on the concept and meaning of partnership. Beside the free marriage consultation I sometimes give, I want to mainly focus on business partnerships.
Over the years I’ve noticed a few principles that are best followed when choosing a partner, being a life or business partner. I break them into these topics:
1. Different with Shared Values
2. The partnership goes both ways
3. Must be a win-win
4. Make sure the roles are clear
5. There will be sacrifices
6. Be good
Different with Shared Values
I think that a partnership is about being with someone different than you. Hey, no one is perfect so what is the point of partnering with someone who is exactly like you? To quote Tom Cruise in Jerry Maguire: “You… complete me”. Someone needs to be the Yin to your Yang and vice versa. Someone has to fill your personality gaps, show you things you don’t see because you can’t see, catch you when you fall.
But not everyone who is different than you qualifies. You must share the same core values and principles. You can’t have a partner who is a greedy MF when you’re a non-profit guy, no matter how good he/she is. You have to believe in the same life values.
When Jason and I just started, he popped at my house one weekend, uninvited when my wife was with the kids and the house was a mess. He said he wanted us to work together on something for Docstoc. We spent a few hours brainstorming and mocking up pages while the kids were pocking their heads through the door every five seconds. I think it was a fantastic idea to see what I’m really like. When you’re with your kids, maybe you can fake it but they will not. You can see ones’ values when they’re with their loved ones.
The Partnership Goes Both Ways
Although someone is usually more dominant in any partnership, it is not to be confused with the fact that a partnership is a two way street. From the beginning, both sides check each other, “interview” each other, trying to make sense of each other, read each other’s mind, see behind the mask, find the skeletons. If you’re the CEO and you’re looking for a partner CTO (sound familiar) you’re not just checking him out, he is checking you as well.
It is even more important later in the partnership, when things become more complicated and more people are involved (employees, kids, friends, investors, etc). A partnership is core, deep, long lasting, relationship with someone you completely trust regardless of your place in the hierarchy, your title, role, salary, etc. It is a two way street that can drive good or bad feelings, it can drive creativity or negativity, it can drive happiness or depression.
People are like energy amplifiers, whatever you put in, you’ll get doubled in energy back. Because it is a two way street, the more positive energy you put into the partnership, the more positive energy you’ll get back, and some. When it’s working, it’s great!
Must be a Win-Win
There has been so much said about “win win” that it became a cliché, but I will mention it anyways. At any point in the partnership, even from the get go, both sides must make sure it’s a win-win situation. When Jason and I started we did not talk about equity split for a long time. This was not me being naive or blindingly trusting or Jason being non-trusting or abusive, we were simply not ready to talk about it. Like marriage. So we each found something else to be the “win” until the time was right. That “win” was good enough even if it will not work out at the end. Let me know if you want to know what mine was.
By the way, I do not believe in negotiation between partners. In my mind, negotiation means finding a way to get the most and giving away the least. Since I believe in win-win, it is in both sides best interest to have the other side satisfied and NOT focus on how you can keep the biggest slice. Negotiation is about ME. ME winning, ME getting the most, ME losing the least. Partnership is about US. US both happy and satisfied. US both giving away something to get much more at the end. Think of partnership as the biggest investment in your life and business. You want to give as much as possible to have a solid starting point, a healthy starting point. Be fair, be realistic, and make sure the “win” of both sides is clear and on the table.
Make sure the roles are clear
I look at the roles my wife and I have in our marriage like a government. We each have specific responsibility in how the family is run. I’m the Secretary of Defense where my wife is the Secretary of State. I’m the Secretary of Commerce where my wife is, of course, the Secretary of Treasury. I’m Homeland Security and she’s Education and so on. Sometimes the roles switch and new roles are added (or removed). One thing for sure it better be clear who is responsible for what or bills will not be paid and the trash will mount outside. Most times, it seems to just work out by itself. Sometimes my wife has to “remind” me…
It seems to be more challenging in business. People do not like to relinquishing control (me included) and delegation is an art not science. Just remember that giving someone responsibility (or taking responsibility) does not mean taking the other partner out of the picture. Just make sure you enable each other and support each other when doing your job.
There will be sacrifices
In any partnership there are sacrifices and sometime it maybe more on one side, for a period of time. If you’re planning on getting into a business partnership and expect no financial, time, and personal sacrifice, don’t do it. But also remember and appreciate the other side’s sacrifices. Just remember that these sacrifices are all for a good cause and a better future. Just make sure it doesn’t leave you without a future…
In every partnership someone is “wearing the pants”. Doesn’t mean anything. Don’t abuse or take things for granted. Be thoughtful and respectful, be appreciative and supportive. Never underestimate ones effort even if it seems easy and simple, it is more likely you don’t see how difficult it really is. Many married guys think “common… how difficult is taking care of the kids?” Yeah right. Many business guys think “Common… how difficult is making the product stable?” Yeah right…
Just one tip, I always find the power of appreciation of little things so amazing. Focus on that.
As someone once said “There is a big difference between knowing the path… and walking the path”. I am still learning how to walk the path and I have much to learn.