Why 'three' is the magic number for a start-up's founding

Arundhati Bakshi Dighe

While one is lonely, two is better and three is NOT a crowd! Howzzat? Well, if you’re planning to launch a start-up, listen up! There’s plenty of number-crunching up ahead but before you get to seed capital, projections and bottom lines, there’s one number you have to get right – the ideal number of people it will take to found your start-up. According to industry experts, including serial entrepreneurs, venture capitalists and angel funders, the most successful formula, in terms of numbers, is three. Three Cheers! “In a three-partner founding team, decision-making is a lot quicker than when there are two partners. It ensures there’s never a tie,” explains Sunil Goyal, co-founder, fund manager and CEO, YourNest Angel Fund. Goyal should know. When he launched his fund in 2011, Goyal was one of three founding partners. Not just that. One of their successful portfolio companies, Just4Kids Services founded in 2010, also has three co-founders at the helm. Two To Tango It’s obvious why being the sole founding member is hugely challenging. “Decision-making becomes difficult since there is no one to fall back on when things go wrong,” says Sanjay Kamlani, co-founder of 1991 Ventures, which advises, funds and builds new cross-border businesses in the US and India. Kamlani points out that with just one founder, the person would have to be an exceptional multi-tasker since everything and everyone in the organisation would be dependent on him. “He would have to take charge of business development, marketing, sales as well as oversee all other functions. If there are three members in the founding team, each one will bring a different skill set to the table and each one would have an equal stake in building a successful start-up,” says Kamlani. Who’s The Leader? Rajul Garg, director, Sunstone Business School, says that, ideally, a good founding team would have an operations person, a market-facing person and a general management-oriented person. “With three founders, the team is forced to pick one clear leader, which is critical. With two members, clear leadership is usually not established,” opines Garg. But there are some who believe three is a crowd. Gaurav Saraf, director, Epiphany Ventures, says, “When there are three or more members, the shareholding pattern may be unfavourably skewed towards one person. Also, shareholding gets diluted when the company opts for a second or third round of funding,” he says. Lonely At The Top With a single founder, it could get lonely at the top. “There will be no one to bounce ideas off. You could consult employees, but an employee will not have an equal stake in the company. With a two-member team, ideas can be discussed among two equal partners who have an equal stake in the venture,” Garg says, adding that, should the start-up flounder or fail, each member would be equally responsible. Why Less Is More But why not more than three? Well, more is not merrier when it comes to start-ups, say VCs, who are investing in the business. “When you have more than three members, operating costs are much higher. It could also lead to overlapping skill sets and that may not be conducive to the organisation,” points out Goyal. And, finally, the crucial aspect of remuneration. Saraf firmly believes each of the founders must be treated equally because each one brings equal equity to the table. You can send your feedback to smementor@moneycontrol.com or simply post comments below