Founding Partner

What is a Founding Partner?

The shareholder or shareholders of one of the first businesses bought by an equity-backed platform company are sometimes referred to as founding partners.

The standard practice is for the platform company to first buy a sizable company with a strong management team, good infrastructure, and future plans for bolt-on acquisitions.

The founding partners of the original, major company are those who bought stock in it because they were there at the beginning before mergers and acquisitions took place and stock prices changed.

Many targets in the sector are identified for potential acquisitions and integrations when a platform company is in the process of being built.

Typically, a larger company with established management and infrastructure is purchased first, followed by additional bolt-on purchases.

Along with the investment from venture capital or private equity, the original larger company's shareholders "get in from the ground up" and typically retain some or all of their interest in the business.

Usually, it is advantageous for a seller to enter a company roll-up early. Being such a partner entitles the sale to stock with an original cost value.

Bolt-on businesses that are later tacked on are often sold for shares valued more than the initial partner's.

The private equity firm will likely revalue a properly performed roll-up in a strong market higher with each following transaction.

Less stock at a higher value needs to be issued for each transaction; thus, current owners experience less dilution due to the higher stock price.

They frequently hold top managerial positions in the roll-up and have the option of sitting on the board of the platform firm.

Expanding on Founding Partners

Shareholders must participate in a roll-up from the beginning of the process. These partners bought their equity at the first share price, because they joined the project early.

When the company grows and stock prices rise, shareholders of bolt-on firms frequently obtain stock shares at significantly higher prices, because they joined later.

The private equity firm in charge of the roll-up often revalues the share prices higher as the platform company's market domination becomes more successful when the roll-up proceeds smoothly.

Additionally, the value of their own shares frequently experiences less dilution. As other deals close and the corporation completes more acquisitions, fewer stocks are needed for each deal owing to the shares' higher value.

In addition to the advantages of increased stock valuation, another thing to keep in mind is that many of these shareholders have the opportunity to join the management team during the roll-up process.

They occasionally continue to hold board positions for the platform company. Being a company's founding partner pays monetarily and also offers the shareholder positions and responsibilities within the business.

Writing a partnership agreement is the best way to avoid miscommunication and failure in a collaboration. Additionally, it is a tool designed to safeguard your company from the damaging effects of upcoming changes.

A lawyer should assist you in drafting your agreement or, at the very least, examine it once the terms have been agreed upon.

Others can contribute to a limited partnership without the company being incorporated or stock being sold. Most limited partners are close friends or family members. They do not run the company. 

Limited partners receive a portion of the company's revenues, but their risk exposure is minimal; if the company fails, the limited partner only loses the money they invested.

Founding Partner vs. Co-Founder

When people mention the title "Founder," it usually refers to the organization's sole founder who established the business.

As an organization's founder or sole founder, they would be the only one who holds this title. In contrast, the term founding partners or co-founders only sometimes indicates a single person.

In other words, if more than one person has helped to create the business, they are all designated as founding partners or co-founders. 

However, if only one individual has been in charge of setting up the business, that person will be known as the founder.

A founder and a co-founder may exist at once in a given company. In such a case, the person referred to as "the founder" is the one who may have had the original concept for the business.

They can extend an invitation to others to assist in transforming the fresh notion into reality. Co-founders are everyone who contributes to the idea, builds on it, and aids in the establishment of the business.

Being such a partner has benefits, including

• One might be given a position of authority in the management team.

• One might become a corporate board member in the future.

• One might obtain a stock valuation at the initial in-cost.

Less dilution for the original shareholders results from a greater stock valuation. A founder is remembered forever in the annals of the organization. CEOs come and go, but Jeff Bezos will always be remembered as the man who started Amazon.

Launching a successful business as a sole proprietor is difficult, so in this situation, qualified personnel who can oversee various startup operations are required.

However, for co-founders, equity and responsibilities are shared rather than taken alone. This can be important, because the various co-founders could enhance each other's functions within the team.

If one person is skilled at management, then the other person can supplement it with his abilities in other business functions such product development, marketing, etc. Working "together" is a responsibility that each co-founder bears.

A "co-founder" typically helped launch a company in its very early stages before it could afford to pay salaries and worked full-time as a leader there.

At least one other individual meets the description; therefore, the "co" component indicates that you are not the only one. 

The term "co-" can also mean that while the aforementioned is true, you are not one of the principal founders. This usage is less prevalent.

This is primarily used for new businesses, although it applies to almost any project, business, or endeavor, such as the "founders" of a city, country, or religion.

A founding partner is a co-founder of a partnership or a company with a structure or operation similar to a partnership, such as a law firm, an architecture firm, a consulting firm, a software developer, a real estate developer, or something similar.

Therefore, creators of service-providing enterprises are a distinct subclass rather than venture-backed startups.

Founding Partner Qualities

When starting a new firm, people who wish to locate a suitable partner might use some characteristics to determine whether the person is decent, workable, and qualified.

1. Qualified with skills you may not have

Consider a situation where some activities you excel at and greatly like, while others interest you. You don't have to handle everything if your co-founder is more qualified in these areas, even if you can handle them.

If you've started and grown your own firm before, you know that some management techniques are more significant for a leader as time progresses. So let your founding partner take responsibility for issues that need other skills.

2. Be a Companion to the Entrepreneurial Journey

Starting a business is challenging, and challenges will appear. Dealing with this is made much easier and more pleasurable by having a co-founder.

Nothing is more beneficial than having a conversation with someone experiencing the same things as you, including the same risks, problems, and potential advantages.

Although many great tools are available, such as advisors, board members, and mentors, nothing beats having a person sharing the same passion and vision.

3. Cover for you

You must leave the office after spending the previous week shackled to your computer programming, but you still have to sign these irksome checks. You or your co-founder may sign them.

Everybody encounters those moments when they feel exhausted, irritable, and only want to slouch on the couch and sob. Yet, we periodically yearn for a little extra time with our family.

They can fill in for you when you need a break, so you will not worry.

4. Be able to point out flaws that no one finds out before

Every person has blind spots in managing projects, navigating their lives, and making management decisions, which can lead to errors. 

In a founding partner, you get a peer who can point out these blind spots. Additionally, they will assist you in noticing details you might not have considered such as customer worries and product launch tactics.

How and Where To Find a Co-Founder?

A solitary entrepreneur will typically need help to make his startup successful. He requires the assistance of capable individuals who can oversee the startup's many operations.

As an illustration, one founder might excel at management while another might excel at product development. Similarly, one founder might excel in marketing while another might excel at development.

These complementary abilities are essential for successfully producing and marketing a product.

Selecting the right co-founder can be just as important as selecting the right spouse. You'll share a lot, so you need a reliable partner with complementary talents.

Many people have a co-founder from the beginning, someone they've spent hours sitting around with, talking about business and trading ideas. Additionally, founders occasionally go out of their way to seek others to travel with them on their startup journey.

In either case, locating the ideal match who shares your passion for the project can take time and effort.

Understanding the motivations behind considering partners or investors for your business is also important. For example, do you require money, or is another element missing from your company? 

Besides bringing on a partner, you can raise money by taking out loans or selling stock in your company. Other than financial support, partners may contribute new skills or productive capacity.

It can be expensive to borrow money, and selling equity may limit your freedom as a business owner. 

However, adding a partner or partners will inevitably alter how you conduct your business. Therefore, every decision has a price – financially and in terms of how you scale your organization.

Two main ways people hunt for co-founders are:  

Search Online

Fortunately, you're not the only one who has this issue, which means there are a lot of resources already in place for you to use. Many websites have been developed to help businesses find appropriate matches:

• CoFoundersLab offers entrepreneur matchmaking services and networks.
• Founder Partners, a group of serial entrepreneurs and M&A experts, invests in and actively supports successful entrepreneurs as they launch and sell their businesses.
• Founder2be can help you find all kinds of people you may need, including co-founders, designers, marketing, engineers, and others looking for the right partners on its website.
• FounderDating is the best website for entrepreneurs to find possible co-founders. Like the TechVentures Cofounder Network, access is through an application and payment of a fee.
• Techcofounder is a great resource if you are seeking a technical partner. You can locate the ideal individuals for your startup by posting an ad here.

Search in a Face-to-face Manner

As it might be challenging to tell if someone is the right fit for being your co-founder based solely on their online profiles, many people prefer to meet in person before deciding.

Here is some advice for these face-to-face situations:

1. Ask people around you

See if anyone in your networks is aware of outstanding technical individuals seeking co-founders. Be on the lookout when you attend family reunions, weddings, and parties, browse through LinkedIn, your university's alum network, and ask around.

2. Join startup events

Choose the one that is right for you among the numerous startup events and conferences worldwide.

Attending a BarCamp could allow you to interact with people from various backgrounds. For example, one of the people attending might introduce you to or make a suggestion for a possible co-founder.

3. Join meetup groups

People with similar interests can meet up on the websites Meetup.com and Startupdigest.com.

By searching for words like "entrepreneur," "co-founder," "hacker," "startup," and other relevant terms, you can find some groups that could lead to relationships.

4. Join a startup camp

You'll meet others who share your enthusiasm for business if you attend a startup camp like Startup Weekend to work on one project for 54 hours.

Researched & Authored by Xinyue Xu

Reviewed & Edited by Krupa Jatania | LinkedIn

Free Resources

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