Co-founding: How founders pick their other half

Co-founding: How founders pick their other half

Getting your business idea on track and building a startup can be a lonely process. While the control and steering wheel lies in your hands you will eventually confront yourself with the necessity to pursue your venture with a business partner – and additionally – to create a team with distinct but complementing capabilities and characteristics. Eventually, some might even say that starting a business can be compared with a marriage. Strategic decisions, financial planning and budgets to adjust, not to mention the intensive days and nights that you will be spending together to make your (business) relationship a successful one, can make the process lighter or on the contrary, an arduous journey.

Once you take the decision of making your enterprise a collective effort, what would be then the elements that you need to take into consideration to find and create your founding team / business partner? While many researchers have delved into the group formation process, some of them took a fresh spin on the matter by looking at how the founder teams of startups are formed. Unlike other organized groups, startup assemblages are created with the primary goal of developing a successful business, and with this economic motivation, one would expect that a rational approach into deciding and choosing for the team members would prevail. This would be on the direction of a functionalist theory, where participants have diverse but complementary skills.

However, the results of the study – headed by Martin Ruef from Stanford University – found that the opposite was true. Founders appeared to be more concerned with trust and familiarity than functional capability, indicating that homophily – choosing members based on shared characteristics, such as gender, ethnicity and occupation – is the predominant force when putting together founding teams. “Entrepreneurs seek out trusted alters, as well as those with whom they already have strong interpersonal relationships, while avoiding strangers who could bring fresh perspectives and ideas to the organizational founding process,” the report states.

Throughout the study, researchers identified five general mechanisms that could influence team membership composition:

Homophily: refers to the selection of other team members based on similar ascriptive characteristics, such as gender, ethnicity, nationality, appearance, and the like. Homophily represent a greater level of interpersonal attraction, trust, and understanding and consequently greater levels of social affiliation that would be expected among dissimilar individuals.

Functionality: groups tend to be composed of members with diverse achieved characteristics (e.g., leadership, occupational competency). Researchers argue for the relevance of diversity among members. Entrepreneurs draw on diverse, complementary skills that may lie beyond the abilities of any individual founder, especially in high technology industries and additionally multimember teams enjoy several benefits over solo entrepreneurs, including a more diverse skill set, improved capacity for innovation, and higher levels of social and emotional support.

Status expectations: Individuals with high-status characteristics are more likely to attract other task group members that are individuals with low-status characteristics. The choice of members based on shared identities, functional considerations, or status expectations is inevitably constrained by structural opportunities for social contact.

Network constraint: The presence of prior network ties in a task group affects the extent to which the group exhibits diversity in ascribed and achieved characteristics.

Ecological constrain:  groups tend to be composed of members in the same geographic location and/or industry. “The likelihood that members of different groups will associate with one another is affected not only by their relative proportions in the population, but also by their degree of geographical dispersion or segregation”.

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2018-10-16T11:48:26+00:00 October 16th, 2018|

About the Author:

Diego Albornoz
Diego is a Community manager & Research Intern. He comes to TechQuartier with a Law background and he is currently completing his Master in Management at EBS Universität für Wirtschaft und Recht.