Cofounders vs. Founding Team Members: How do you decide the right titles for the right people?

Derek Dukes Business Development, Startups at Amazon Web Services

January 15th, 2015

As an entrepreneur one of the hardest things after finding cofounders is finding the right people to be employees 1-4 or 5. Of late I've seen a lot of people calling them (And calling themselves) "Founding Team" or "Founding Engineer." I think we'd all agree there is a pretty big difference between the first 5-10 hires.

I'm wondering from other entrepreneurs what you think the difference is between cofounder and founding team member and where should the cap be on # of employees on a founding team? If number of team members isn't the gating factor, is there some other inflection point where new hires move from 'Founding Team' members to 'employees'?

Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

January 15th, 2015

There is a weird fetish these days with anything to do with "founder" in the title. I, personally, never refer to myself as a "founder" of my company, and the folks on the team are on the team...just like I am. While we all have varying degrees of equity and variable option prices, we are all on the team. There is zero functional difference between a founder and an employee. Being a "founder" is a necessary step in creating a company. That work is DONE. Incorporation papers are signed - that is no more special than choosing which payroll service to use. Stop the founder fetish - all of those folks on the "founding team" should focus on what happens next rather than the act of "founding". Being a founder is easy - being sustainable and successful is hard. Skip the concept of "founder" altogether.

In terms of ideal team size on day 1, it all depends on what you have to do and what you can afford - day 1 requires the same thinking as day 10000 - do I have the resources to do what I need to do as I need to do them...

Corey Blaser Sailor. Mormon. Entrepreneur.

January 15th, 2015

I definitely refer to my original team as founders, but in humble terms. I believe as the leader of our company that my partners deserve the respect of coming in before we had money, customers, and even a fully fleshed out idea. They took a huge leap in trusting that the idea would work. They quit good jobs and gave up other opportunities to be part of something they believed in.

Anyone else who comes in after the 'hard work' of the 'startup' has been done is an employee. Plain and simple. They are part of our team and we value them just as much, but they are still employees. They did not want to or did not get the chance to sacrifice and risk everything. That is not to say that being an early employee of a startup is easy or risk free, far from it. But that is why they generally get options from the key hires pool. Because we want to reward them, but they are not founders.

Steve Simitzis Founder and CEO at Treat

January 15th, 2015

For me the dividing line is when the startup has been sufficiently de-risked. That could be at revenue or traction or the first round.

Here's another dividing line: You're hiring employees when they ask "what health benefits do you offer?" on the interview. You're hiring your founding team when they ask "is this for pay or equity?"

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

January 15th, 2015

I believe founders are really, IMHO, people who captured the essence of the business at the start, no matter what their expertise is nor what sector it is in. You could have someone who works in fast food come up with a new app concept that applies to retail in general. Can he/she code - not likely. Can he/she put together a pitch deck - not likely. Doesn't matter - the vision was founded by he/she.

However, if it is to have a chance to go from there to being a reality, the "founder" must build a core set of resources with functional expertise to "make it so". These resources are co-founders, and typically have far lesser equity positions than the actual "founder".

In this situation what is the "founder's" role? He/she does not have the expertise to move it forward and is entirely dependent on the co-founders, not just for functional expertise, but also to provide credibility and assurance to funding sources that there is a chance it can work. Point being that for all the focus on the founder, it may be the co-founders who actually make the real difference.

Florian Pestoni

January 15th, 2015

I'd like to offer a different perspective. Some people don't care about titles, but many other do and want to manage perception. On their LinkedIn profiles, I've seen people list "Head of [X]" pretty liberally after their formal titles, (in some cases even if they also happen to be "Tail of [X]") as a way to juice up their position.

If you're a founder/exec at an early stage startup, attracting talent is a (arguable "the") key activity that will consume much of your efforts. If an engineer gets value from saying they are part of the "Founding Team", and it doesn't cost you anything, then that seems to me like a win-win. Occasionally at larger companies people will say they were part of the founding team that worked on a given product. That seems OK to me, no harm done. Maybe if you're employee #200 it's disingenuous, but not enough to crack down.

The role of startup founder is somewhat more narrowly defined. To me, a founder would be anyone who is willing to forego all/a significant portion of their cash compensation in exchange for a good chunk of equity in the company, and is expected to play an important role in the ongoing success of the company. Even if they weren't there on day 1, eg if you hire a key member of the exec team post-launch or after a seed round, and they want to call themselves a founder because they see value in the label, why not let them have it? The ultimate truth will be in the cap table.

One last comment: often you see another kind of title inflation, such as founders who adopt grandiose sounding titles, only to have to take a step down (or be pushed out) when the company grows and needs more experienced people (eg don't call yourself CFO if all you're doing is maintaining the Quickbooks Online account). I'd recommend that, once the required officer roles (eg President) are allocated, often to the same person, everyone else should adopt a reasonable/defensible title that you can grow with over time.

Hope this helps, but feel free to disagree.

Arlen MBA Co-Founder,President and CEO, Society of Physician Entrepreneurs at ceo@sopenet.net

January 15th, 2015

Start up teams need players in the skill positions: problem finders, problem solvers, business builders, story tellers, money finders, score keepers and legal protectors. They should be appointed to accomplish the next critical success factors. Then, you might have to change the line up.

Richard CSO Sales Process | Operational Optimization

January 15th, 2015

There are Founders & Co-Founders. Everyone else has a title. Period.

Jake Carlson Software Development Manager at Oracle

January 15th, 2015

I think I fundamentally disagree with attaching anything with the word 'founder' other than its literal, plain meaning. That is, a founder is someone who established the business from the beginning or very close to the beginning. Until I read this thread, I had no idea that 'co-founder' was anything but its literal definition, which is 'one of two or more founders'. Honestly the discussions around equity vs salary seem very strange to me. Compensation has nothing to do with whether or not someone, in fact, established a business.

To me it's absolute nonsense to say the title 'founder' necessarily has anything to do with risk. Risk is relative. A tech startup with zero overhead started in the spare time of an engineer -- who takes it slow and tests the waters -- is not really risky. Aggressively expanding an established business can be extremely risky. % equity should not necessarily be determined by title or vice versa. Obviously those in charge divvy up the equity and get to decide, but beyond that there are no rules.

If a founder (literal definition) isn't in a position to not be paid for his/her efforts or has a combination of equity and salary as compensation, that does not impact his founder (literal definition) status. Maybe an investor came in and financed the operation such that the founders can take a salary, maybe not. That has nothing to do with who actually founded the company.

I think the only reason for any of this is so that people can puff up their resumes -- which is fair but not necessarily useful for conveying actual fact. I think we need to get away from romanticizing a set formula and canonizing buzzwords that don't make any sense.

So to answer the original question: it depends. I wouldn't listen to anyone about tying the 'founder' title to risk or equity. It's really more about timing and role. If the person was there at the beginning, he/she is a founder. If a superstar CEO joins in year 3, he/she is not a founder no matter how good he/she is or how much equity he/she gets. What's not clear is how much leeway there is in defining 'the beginning.' 'First year' or 'first 1-10' workers seems to be up the right alley but I don't think there are any hard and fast rules here.

Kerry Davis

January 15th, 2015

Founder (s) - where the core idea(s) originated and were prototyped (prior to any pivots or money) to fulfill a needed product for a key market they have identified compelling use cases for.

CoFounder(s) - significantly enhanced the core idea(s) or pivoted towards a better market OR brought key synergistic financing/partners into play

Founding Team - Superstars in implementing the above, with 150% ownership of getting their part done no matter what.

I've worked for 2 startups where the CEO/Founder came 2 name changes in and1 or 2 pivots. But he brought the A round with him and was somewhat a burden for the rest of the run. Those 2 companies both failed, but not because they gave them the title (which helped them land future failures and financing). The title of founder is important because perception is value (unfortunately) and in the case of being on the founding team, helps with retention and a feeling of ownership.

Joe Johnston Co-founder at Loop (California Labs)

January 15th, 2015

Peter Thiel in his Zero to One book and Sam Altman in this blog post talk about equity splits between the first 20+ employees.

For me, "founding team" represents the first few employees that warrant early stage equity packages (5-10% combined). A title of "founding engineer" or similar doesn't really mean much, but it can be used as a hiring hack and badge of honor. I title of "first five" would probably be more accurate and meaningful.

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