Startup Studio: the 3rd Co founder Model

[This is a re-post from our old blog. We figured the information displayed is still up-to-date and can benefit startup-studio people. Enjoy!]

What’s behind the startup world’s latest buzzword: “Startup studios”? “Startup Studios” is a term that refers to structures that build startups, on the contrary to incubators and seed investors who focus on mentoring and financing startups. Among the startup studio model, we can distinguish 2 successful methods.

1. The first one focuses on building projects. Managers work at accelerators with internal resources and the studio’s team to develop ideas, and get incentivized with bonuses and stock-options. The startup is then internally financed, which make it easy to structure. The main drawback is that this model makes is highly difficult to build stand-alone and independent companies.

2. The second one focuses on building companies, just like the “regular” way. Co-founders, who own a substantial part of the capital (CEO and CTO get 50% of the shares), work on a product and build their own team and company culture. The studio focuses on bringing the right ingredients at the right time. The company can be then normally financed and be totally independent from the studio at a given time.

The best example of the first model is the (in)famous Rocket Internet. The second model is eFounders’ model. As a studio, we bring our magic to startups by acting as a true 3rd co-founder. Here is what we mean by that, how we proceed, and what challenges us, step by step.

1. Bring the essence of the idea

I find it impressive to observe the volume of newly created startup based on bad ideas. Any kind of entrepreneur can find him/herself in the position of creating products that nobody wants or businesses that address tiny markets.

At eFounders we search and find our ideas using a wise process, because we know they make most of a startup’s success. For us, an idea is basically an addressable market and a way to smartly address it.

Once we find a first idea, we spend weeks assessing it and getting over our first excitement. When confirmed, this idea is what the co-founders will work with. Starting with an idea, even if it is bound to evolve, saves a lot of time and creative energy that can be harnessed for other tasks.

Mention’s birth is a right illustration of this process: we started by creating a tool to make information sharing easier between brands and journalists. Co-founders then realized the most interesting feature was the monitoring: the idea shifted into today’s Mention, who is now a standalone.

2. Find the perfect co-founders

There are as many ways of meeting your co-founders as there are companies. AirBnb’s founders were roommates, ZocDoc founders were colleagues, Google’s founders were classmates, Sugar and Typepad’s founders were couples.

In a startup studio like eFounders we recruit co-founders. Getting a salary does not mean that the co-founders are simply employees: being an entrepreneur is not defined by your work contract. It is a very efficient way to remove an unnecessary discomfort that a lot of entrepreneurs face.

We spend a lot of time interviewing people and looking out for talents. We are taking time and attention because we know that it is critical for a startup’s success. Founders are keys and starting with the right one considerably increases the chance of success.

For instance when eFounders hired Mathilde Collin, we anticipated she would join a certain project. Yet, she met with Laurent Perrin, who was just drafting Front’s idea, and they were the perfect fit. Now Front is just getting out of the current Y Combinator batch.

3. Control the budget

“Spend as little money as possible” is one the three things to create a successful startup according to Paul Graham (along with starting with good people and making something customers actually want). eFounders provides the budget needed for the first expenses, including the co-founders salaries (before seed funding). Knowing that you have money to spend and that you have to spend it efficiently makes you very strong and ultimately, gives you a great advantage against competitors.

Although we provide comfort to the co-founders, we spend money very, very carefully. Without being control freaks, we make sure to implement management accounting at the very beginning.

We define a provisional budget from day 1, when the company is still in incubation phase. It hardly takes more time than it takes in a regular startup, and puts the company is a very stable economic and healthy situation. We targetted Mention’s marketing and user-acquisition budget at zero from day one. The company today has 295k users.

4. Bring the best resources

Finding the best people to work with you is not an easy task, especially when you are a very small startup. Even in a startup with smart founders and a great ambition, talented people come as expensive, rare and picky.

At eFounders, as “3rd co-founder”, we are in reality a team of brilliant people to assist our startups on execution. All of them have both an expertise — either in tech, design, business or marketing — and the mindset of a doer, who are targeting output.

With numerous and high-quality human resources, co-founders don’t have to choose where you put your focus on. It dramatically increases the speed and quality of the work done. For instance, eFounders now counts one Creative Partner and four highly talented designers. Knowing how tough it is to find skilled designer at a reasonable price in the first stages of development of a product, this resource comes significantly handy.

5. Be a permanent support

The path to entrepreneurship is paved with challenges. After the exciting starting phases begins the long development tunnel. After the exciting launch starts the long and real work. It is not always easy to keep the good spirits, especially when you have to pretend everything is fine in front of your team.

In our experience as entrepreneurs, we’ve walked through several pitfalls. We ensure our startup un unwavering support, we celebrate all great achievements and help during the bad times.

As co-founders, we work all together in the same office, and manage all matters at hand on a daily basis. We commit to achieve our project no matter the difficulties. When Aircall’s first CTO left the project, for instance, we put all our efforts into finding someone else to be the right fit.

6. Master time management

Building a company is a both a sprint and a marathon. It requires speed because the tech world is continuously changing; it requires stamina because it takes time to build a strong company: the average exit time is 7 years in the SaaS industry. Meanwhile, and especially at the beginning, it is important to have a sustained pace to get focused.

At eFounders, the experience, structure and process we provide help our companies finding the right pace. The advice we share is based on the founders’ experience as entrepreneurs and the team’s expertise in key fields: technical, product and business development

In practical terms, master time management is a set of processes, tools and habits. We like to start with a kick off week, organize regular product committees, being committed to a monday team meeting, and avoid meeting-mania. We also use handy tools like Trello for planning and Github for project management. These methods have enabled us to launch the beta version of our latest project next week, after only a month of work.

7. Provide a dynamic network

Providing a true useful network is certainly the most over-promised thing in the startup ecosystem. Accelerators, Vcs, Business Angels, Incubators… they all guarantee their startups to leverage their network while in reality, only a few do so.

At eFounders, because we’ve already created several startups on the same vertical (SaaS and marketplaces), we really do bring a very broad network: clients, providers, partners, investors, employees and experts. But certainly the most effective network we can provide to our startups is what we called “the Network”. The Network is the true sense of community we share and a set of tools to maintain our Network alive.

All members of the Network are accessible any time through a dedicated messaging and face book system that we’ve customized to make more fun and friendly. We’ve also created our own virtual money called Briqs to trade rewards, thankyous and congrats.

As a conclusion, I would add that in facts and figures, we are the 3rd co-founder. Not only do we act as such in the daily life, but we are also capitalized this way. The cap table looks like any 3-founders startups who get seed financing. 25% of the startups belongs to the CTO, 25% to the CEO, 25% to eFounders and 25% to eF Capital. eF Capital is a financing vehicle that brings the money to the table. eF Capital is today funded by eFounders and might be funded by external investors in the future. When our startups raise their funds, equity dilution is made just like any other startup: between all co-founders.

To sum up: the 3rd cofounder’s role is to find formidable founders and to bring all the needed ingredients to transform an amazing idea into a successful and independent company.