Scaling the Co-founder Relationship

Tim He checks many boxes as a guest on the Founders Sandbox- a 3x founder, now advisor, professor, creator, writer and coffee snob. Tim’s newsletter, "Cherrytree", allowed him to keep teaching entrepreneurship while the pandemic closed the classroom. By providing a newsletter, Cherrytree now offers consulting and coaching to cofounders. In Tim's own words; "I want to actually change how people become cofounders. And then how they stay cofounders."

It is a tough decision to “divorce a co founder” and we find on this episode with Tim He sound advice on getting the pre nuptials in place for just in case scenarios and preventatively preserving the co founding team dynamics.  

Listen to this month’s episode “Choosing the right Cofounder” on The Founder’s Sandbox with Tim He.

You can find out more about Tim at:

https://www.linkedin.com/in/timhe2000/

https://www.dumbfoundcoffee.com/.

 

 

 

Transcript:

00:04
Good morning. Welcome back to the Founder's Sandbox. I am Brenda McCabe, your host on this monthly podcast now in its third season. The Founder's Sandbox is a podcast where  my guests are

00:33
business owners, founders, professional service providers and corporate directors. And we all share a mission  and we find ourselves speaking here on the Founder Sandbox. This mission  is really to work through the power of the private enterprise, be it small, medium or large, to create change for a better world. And each of my guests  tells a story, right? The origin story.

01:03
that touches on the topics that I'm so passionate about resilience, scalable, purpose-driven enterprise, all with good corporate governance. And we do this in a fun sandbox environment here  in the Founder Sandbox.  I am absolutely delighted to have as my guest today,  Tim He. He is joining  us from  Dallas, Texas today. And Tim.

01:33
is  he's going to be speaking to us. He checks a lot of boxes, but today he's going to be speaking from his experience as an advisor to pre-seed and seed companies.  And we share a common kind of subject matter expertise. We  work with a lot of founders that are seeking to find a co-founder or we're working with them to how to divorce a co-founder, which

02:01
Nobody likes to talk about this, but it happens more frequently than not. Matter of fact, Tim has chosen for this episode, the title of Scaling Your  Co-Founder Relationship. So Tim, welcome to the Founder Sandbox and thank you for joining me today. Thanks for having me. This is gonna be a lot of fun because the thing with co-founder relationships is that  when it's bad,

02:28
It's bad. You you think of divorce, arguments, sometimes even litigation, but when it's good, it's pretty magical. You build very valuable companies that change not just your lives, but the world.  And  it creates a type of team and culture and company that people want to root for. And when I get to see that,  that's the best part of my job. And it's  actually pretty magical. It's very fulfilling, isn't it? It is.

02:55
So you check a lot of boxes, but we're going to focus on that. You are a founder yourself, prior founder, advisor, creator, writer, and coffee snob. So we'll get to your love of coffee  later in the podcast.  When you reached out to me,  it did kind of make me giggle because  nobody likes to talk about divorce, right? Let alone your co-founder.

03:24
And you specifically reached out to me because  the work you do and your platform  at Cherry Tree  is around co-founder,  choosing the right co-founder and the like.  I have  experiences with my clients  on making that tough decision to divorce a co-founder. And I  read some of your blogs.

03:52
And you do provide sound advice on getting what I call the prenuptials in place. So kudos to you.  And  more in the podcast today. So  I  love what I do, right?  And my consulting firm where I advise kind of scaling companies  to work with  them on purpose and resiliency.

04:21
advice to founders when working at Cherry Tree and finding the right co-founders, scaling it that, it doesn't crack under startup pressure. It's probably rot with your own origin story as founding a company. Can you share that with us here, Tim today? Of course. Yeah. I'd say almost 10 years ago now, I started a company with five other co-founders. So six of us in total.

04:51
which is pretty unconventional  in the sort of software startup ecosystem,  but it wasn't intentional on my part. I was in college at the time and I was thinking, you know, I want something to do other than homework. So I found a bunch of my friends and asked them if they wanted to start a company with me.  And I didn't expect them all to say yes, but they all did.  And so we were like, sure, let's just do something together. And that was sort of the beginning.

05:21
And you were six co founders.  Yeah.  And  let's carry on. That's good. That's unconventional.  It was a lot, but it was a lot of fun. You know, I was best friends with some of them. And then some of them were mutual friends or classmates that I met in school. And so they also had different relationships with each other. Not all of them knew each other in the beginning. All of them knew me.

05:49
but to varying degrees as well. And so I kind of got to see the entire spectrum of what a co-founder relationship can be.  And at the same time, I was teaching entrepreneurship in Seattle and a lot of my students would ask me the same  questions about co-founders.  You know, the basics like how do you split equity? How do you  choose titles and roles and responsibilities? How do you fight with each other productively?

06:18
All those things that me and my co-founders were going through at the same time. And so  we made a decision to be very open and transparent about it. I shared with my class how I split equity with my team and the reasons behind it.  And I shared with them what we debated about on the product side or the marketing side and how we came to a resolution. And so the students had a very  behind the scenes look  at what goes on with co-founders.

06:47
And then COVID hit. And so I started writing online for my students quite a bit. And then over time that became a book about co-founders. And then when I published the book, you know, more people started reaching out to me, but it wasn't just college students anymore. was people with venture backed companies, companies going through YC and all sorts of industries all over the world.  And then somebody was like, Hey, I don't want to read a 200 page book. I want something quick.

07:16
something easy and actionable. And so that's how I got started with the Cherry Tree newsletter, which comes out every Monday and Friday. And it's nice and easy. It's very relatable  and  actionable. And then people started replying to the email asking for personalized advice because they said that, you know, 500 words is not enough to solve  a tricky situation. And that's how I got started with co-founder coaching. And so now

07:46
the Cherry Tree Company as an umbrella,  comprises of the newsletter, which is free. And for people who are maybe just starting out and want to build good habits, and then also the coaching component as well, for people who are either going through some high growth stage, like raising a fund  or  going through a major pivot,  or they just want to  talk about some concerns or curiosities they have about co-founder relationships. Let's go back to your

08:16
co-founder, your six co-founders.  that company still exists today? What was the, so what was the outcome? Yeah.  It was a software company in the real estate space. And so COVID kind of took us out, but it didn't take out the friendships. We are all still best friends and visit each other over the holidays.  In fact, when I, when I move in a couple months,  I'm moving to a city where two of them already live right now  and

08:43
One of the things I looked for was an apartment that was close to them so we could all hang out together. COVID took out the company, but not the co-foundership. All right. You did speak about the newsletter. why did you choose that medium? And again, I think you said there are typically 500 words. I've read a few of them. I blog myself. And we shared a couple of our blogs back and forth.

09:12
reached out to me, said, oh, I've written about that, and  how to split equity and the like. So  what made you choose the medium of a newsletter?

09:25
Yeah, I mean, I've always liked writing. think it makes me, it forces me to think very hard and clearly about what I wanna articulate. Back when I was teaching, I found that I would have a topic or a concept in my head, but when I went to explain it to somebody, I couldn't quite articulate it the way that I felt, especially when they started asking very thought-provoking questions. I felt I was stumbling. I felt that I...

09:52
had an answer in my head, but I couldn't quite deliver it to them. But, you know, because we all went remote, I was writing for them and that was a forcing function to get everything crystal clear.  And that became a really good habit for me. Plus I've always liked reading.  I follow  several other newsletters as a reader, as a customer of theirs. And so I've always been intrigued by it.

10:16
And then one of my friends who is at a private equity firm specifically focused on newsletters was telling me a little bit about the backend of newsletter businesses and the unit economics for it. And I realized it was a very viable and very scalable business opportunity. And so I thought I would do this practice because it's good for my own just thinking process.

10:42
And I get to update it every every week, twice a week with new information that I find.  And so a newsletter kind of just made a lot of sense. Excellent. And then the show notes later, we'll  put the the  URL is it cherry tree dot v hi.com, right?  We had to access your newsletter. So teaching

11:09
you're teaching  in a university  in  Seattle,  entrepreneurship, you're so young, it's amazing. How did you get into the teaching position?  I got very lucky.  on  my first,  sorry, on my second quarter of college, I was working retail  in the mall selling glasses.  And it was

11:38
at about 9 p.m. right before we were closing and a customer walks in and you know how it is. Nobody wants to deal with a customer two minutes before closing. I'm a new kid so the manager is like, you go talk to them, get your practice. So I go and I talk to the customer and we just make small talk. I'd tell him that I wanna get into business school. want to...

12:04
be a part of startups and all this exciting stuff. I was 18 or 19 at the time.  And he was like, hey, you should talk to this professor.  He teaches at the business school  as an entrepreneurship professor.  And I think you guys will really get along. So he wrote down this professor's phone number. that was it. He didn't buy any glasses. We closed the shop and I walked home.  I didn't think much of it. I was trying to make a sale.

12:34
I had that note in my pocket  and when I got home, this was maybe around 10 PM,  I was changing out of my work clothes and I had that note and I thought, hey, maybe I should give this professor a call  and his name is Alan. And so  maybe I was naive or impulsive, but I called him at 10 PM  with no forethought. I didn't think, hey, maybe I should email him or call him tomorrow morning. I just had the note in my hand and I was like, let me just call him and he picks up.

13:04
And we talked for about an hour and a half. Oh my goodness. About the, yeah, about the classes he's teaching, about how he became a professor  and his alumni.  And it was very clear to me that he loved teaching.  He was in his late fifties, early sixties  and independently wealthy from  running his own companies. He had retired for a number of years and then come back to teach because he just loved teaching.  And so.

13:34
I was like, hey, can I take your class? It sounds really cool. But the administration was not happy with that because I was a freshman and he only taught senior classes. And I was not only not in the business school, I had not taken any of the prerequisites and the class was already overbooked. Oh my gosh. So. We were all stacked against you. Exactly. But he said, just come to the classroom at this time and sit in the corner.

14:01
Like  you might not get credits for the class, but just sit in the corner  and pay attention. And so I did that and I started answering questions in class.  Questions that  some of the upperclassmen  may not necessarily have been able to answer, which was very surprising to me because I had never done well in school. Throughout high school, I barely got into college. My parents were on me all the time, but this was the one class where I felt like I knew what I was talking about.

14:31
And so I went to all of his classes and eventually became his assistant.  And  that slowly changed.  And I,  was an assistant for about 30 courses and then later become a  co-instructor at  both campuses. And so I got really lucky. It was unconventional, but this, this mentor,  Alan sort of gave me that opportunity. And I finally felt like I, I was doing something that I was good at.

14:59
Amazing. That's an amazing story, very unconventional,  but I love that. You heard it here on the founder's sandbox.  My guest, Tim He, got into teaching, and then  eventually COVID hit. You started continuing to teach virtually and started providing your content through a newsletter and your regular postings  two times a week. So bravo.

15:30
You also have time to run another business. I introduced you with many titles, but you are a coffee son of so what is it with the coffee, Tim? Yeah. All right. You taught up in Seattle, right? And we all know he's from Seattle. But what is it about the coffee and it's called dumbfound coffees? Yes, yes. It's a fun story. It's quirky. I

15:59
A couple of years ago,  I  helped this coffee  founder  a little bit with his business. was my friend and I helping this one man show. He was bagging the beans by himself, sealing it, weighing it, driving it in his truck to the post office,  handwriting notes for everybody. And he also had a day job. So he was doing this on top of that. And he had a wife and four kids. And so he really needed some more  extra hands. And so

16:29
We started with helping him literally just bag beans. And then  we got to understand the coffee business  and how to market coffee,  how to optimize shipping and logistics to save on costs  and sort of everything in between. It was really fun. And my friend and I always joked that we would start our own coffee company. And then right after working there, I went to work at a very large coffee chain, global chain,  strategy team.

16:58
And that was very different because there are thousands of people at this company with billions of dollars in budget. And so I saw this  industry from a completely different lens. Right.  And it was very interesting because there are so many similarities between this, you know, global corporation  and a one person coffee shop.  And of course I love coffee. I've been drinking it for

17:25
as long as I can remember drinking a little bit, a little sip of my mom's coffee when I was a kid. I'm Canadian. So I grew up drinking Tim Hortons for those of you Canadians out there, know what it is. so I love Tim Hortons. It's so good. Tim Hortons. Yeah. And of course, you know, Tim and Tim, so I have to get it from them.

17:51
Uh, but yeah, fast forward, uh, three or four years now, my friend and I got in touch again and we said, Hey, let's start a coffee company.  Uh, we've been wanting to do this for years. We've, we finally have the circumstances and sort of the, the, the personal financial, uh, privilege to do this now.  Um, let's, let's get something up and running. And so we're thinking, how do we differentiate? There's a billion coffee companies out there.  Um, there's coffee for, for veterans, for teachers, for

18:21
hippies for everybody, except for founders.  And founders drink a lot of coffee.  I'm a three time founder. My friend was also with founder and we drink a lot of coffee. My friends drink a lot of coffee.  And there's something satisfying about having a cup of coffee  and sitting down at your desk, getting ready to lock in and get a ton of work done. It's just a very satisfying feeling. And so I wanted to capture that feeling plus

18:51
just the fact that founders drink a lot of coffee, but also this idea that the best founders I've talked to take their work very, very seriously, but they don't take themselves seriously at all. And I think that's the one commonality between all the best founders that I've come across. And so the name dumbfound, you know, it starts with dumb, but it actually means amazed or in awe.  And it's the founders journey.

19:21
Right? You start off dumb because you don't know what you're doing. Maybe you're taking a huge risk. are, you know, you're starting a company, you feel dumb a lot. And if you've been a founder, you know exactly what I'm talking about. But you keep grinding and you keep working at it.  And little by little,  it starts to become a really amazing journey. People looking on the outside, they're like, wow, how did you, like, how did you start a company? That's, that's amazing. That's crazy.  And even more than that, you look at your progress.

19:50
Even though some days it feels like you're going backwards, it's really awe-inspiring. And so that's why I wanted to capture with Dumpfound. In the name of the company.  Bravo. I will have to order some from you.  You know,  I  use the term pre-naps. Tell me in your  consulting practice now, because you are working full-time.  This is your gig and the coffee.

20:19
What is it that you found the secret sauce to scaling a co founder relationship? Right? What is it?  What's your secret sauce? Or what have you observed in high performing co founding teams? Yeah. Everybody asks me  what they can do for their co-foundership  so that it improves their company. That's the wrong question. That's backwards.

20:49
the best co-founderships I've seen all use the company as a means to improve their co-foundership. Tell me about that. that one more time. This is important for my listeners. Yeah. Instead of using your relationship as a means to improve your company, use your company as a means to improving your relationship. Okay. And I'll give you some examples.  Back when I was teaching, I would, you know, make

21:18
groups  of students and teams randomly. would  draw stuff out of a hat randomly.  And that didn't guarantee friendships. In fact, a lot of them ended up fighting with each other. And so I thought, okay, maybe they should pick their own teams.  And that didn't guarantee friendships either. In fact, some of them ended up fighting even harder  than randomly assigned teams. And then I thought,

21:47
Why is that? How can we create teams where everybody gets a pretty good experience out of the class? Because we all know group projects,  our group projects, and there's always somebody who  either pulls the team forward or drags it behind.  And so I was looking at the best performing teams, the ones that blow my mind. And I found that all of them, regardless of whether they were friends before the class or they had met for the first time during the class,

22:18
they all saw the class, the course  as an opportunity to hang out and have fun, joke around with each other, but also do something very interesting like building a company. And so that was always in the back of my head. And then when I talked to co-founders, I've talked to over, I believe like 300 co-founders already this year. The best ones, doesn't matter if they were friends before they started a company, but they use the company  as a means.

22:46
to improve their friendship. So what does that look like? Well, it's easy for co-founders to silo and say, okay, you do the engineering, I do the marketing, and we come together and share progress. That works for clarity, but not so much for compatibility. The best co-founders kind of do everything together. Even if they're, you know, one person is not technical, they're still very involved in the product with...

23:13
talking to users or creating documentation or making  wireframes or mock-ups. And for the non-technical co-founder, they're also very involved in the marketing and the sales and the pitching because a lot of people think, oh, it's not my strength. So I'm not gonna be involved in it. You're the expert on it. I'll let you handle it. But if you think about friendships, that's not really how we operate, is it?  You don't divide responsibility so rigidly with your friends.

23:42
You do everything together because it's fun.  Share responsibilities. Maybe somebody is better at it. Sure. But that's, that's part of the fun. And so when I realized that, and I, I communicated it to people  who were asking me how to do the opposite, do it the wrong way. When I told them what I thought was the right way, all of them had a light bulb moment go off in their head.

24:10
And I would ask you how does friendship scale? If I'm going to pressure test your your your the, the,  guess the empirical data, right?  You've taught  many, many  classes, you've worked with co founders, you've worked with co founding teams, let's say.  How do you scale that?

24:40
If you can imagine like a staircase  model at each step of a co-foundership, there are different levels of sacrifices that you have to make. So for example, when you choose co-founders, you sacrifice the ability to become co-founders with anybody else. And then you start working on your product and you sacrifice maybe some nights and weekends. Maybe you're sacrificing some Netflix time.

25:09
And then you go up a step, maybe your company has some traction and you've got some users and you sacrifice  having a day job or having a stable income, or maybe you sacrifice some sleep some nights. And so the sacrifices become more demanding. And if you translate that to a friendship, it's kind of the same. you become friends with someone, you're not necessarily  eliminating all other friendships.

25:36
but you are eliminating some options for how you spend your time. Now let's say you  have families or you  move to different cities depending on your stage of life. The sacrifice is the effort that you need to stay in touch. Now, how many friends have we had in high school that we don't talk to anymore  because we just never stayed in touch because we didn't make that sacrifice.  And so back to the co-foundership, a lot of times the company might be progressing.

26:05
You have your product and then some users and then some funding and then some more users.  one co-founder decides that the next level of sacrifice is not worth it. Maybe they cannot quit their day job. Maybe they have kids that they have to spend time with and want to spend time with. they have, you know, whatever the situation is,  it might not be malicious. It might just be circumstantial,  but for one reason or another.

26:32
they decide that the sacrifice to move to the next level is not worth it anymore. But that usually doesn't mean that they quit. That usually means that they stay at their current level of sacrifice and they keep doing that. And so the other co-founder or the other people are  continuing to do that. And that's a case where it doesn't scale. And so  to be able to scale, I'm not saying you have to sell your house and  free a personal runway or never spend time with their kids.

27:01
The important thing is to understand where each co-founder is on which step and where the company is  at which step and to recognize what are the milestones  and the sort of achievements and the effort needed to unlock the next step. And so when you're very clear about that, it becomes very  simple  and apparent what you need to scale the co-founder show. Excellent.

27:30
And I'm certain that not not all  relationships have happy endings. And that's when we get to  splitting the equity, right.  And hopefully, with your advice,  there were there's been, you know, a stakeholder agreement, a priori, and there's cordial negotiations.  And that's for another episode. So Tim, how

27:58
Can my listeners contact you? I'm pretty active on LinkedIn.  You can find me  by searching my name, Tim He. Yes.  I also have the newsletter, the Cherry Tree newsletter.  I read every reply to that myself.  And it's really fun to see what people are saying. So if you want to email me or reach out on LinkedIn, I'm available on both.  So that's Cherry Tree.  And the coffee.

28:27
coffee company? What is it again? It's dumbfoundcoffee.com. Excellent. Excellent. Is it dark roast or you do that? Do you have several roasts? It's a so it's a medium roast from Costa Rica. Costa Rica. It's delicious.  I've tested over a dozen different coffees for this. My girlfriend and I we were way over caffeinated  many days to find perfect bean and I think we did.

28:55
All right. I'm more of Guatemala and  darkerist than we have, but willing to try. Thank you. Thank you. You know,  I do like to  bring all my guests back to the sandbox  to touch on  the three cornerstones of the work that I do,  which is around resilience, purpose driven,  and scalable growth, and ask each of you to  describe

29:25
what does the meaning  what is the meaning of that word for you?  And  here's to you, Tim, what does resilience mean to you? That's a good question. I've been thinking about that a lot lately.  And by default, you know, we all think of the  get knocked down seven times, give back up eight,  or  keep going when it's hard. And those are really inspirational when you feel like being inspired.

29:54
but on the days that you don't feel like you're being inspired, on the days that you're knocked down and everything sucks, I think it can be frustrating to hear stuff like that, you know, because you're like, just go away, give me a minute and  just leave me alone.  And I think that's also  a sign of resilience, just taking the time and the space you need. You don't need to be motivated every day. You don't need to grind every day, despite what startup culture tells you.

30:22
sometimes being resilient is just recharging.  And I've been doing a lot of that lately myself, and it's been helping me stay on this path.

30:32
I'm an entrepreneur and working with entrepreneurs. I like it recharging. How about purpose driven enterprise? Yeah, very purposeful. I'm a bit unconventional, but purpose. I, I like this company, my company, because you're right, I am purposeful. There's, there's a magic that happens when I do my job, right? And co-founders have the relationship that they want.

31:02
and the company that they want to build. And I think if you do your job right, and you're genuinely happy because of a magical feeling, and I use the word magic because there's really no way to describe it. It's  not the pay, it's not the hours, it's not the freedom, it's not any of that. It's a magical feeling. And if you have that, I think the purpose is good.  And  no other...

31:31
purpose-driven company that I've talked to  denies the magic that happens when they do their work, right?  I often,  you describe it as magic, right?  It's the flow, you're working with your clients and just seeing that  your inputs valued, right?  I call that  joy, right? So when you discover  or feel joyful,

31:59
in what you're doing with your clients that  is resonated and  purpose. Thank you. That's an amazing description of magic. What about scalable?  The  title of this episode that we chose together once I understood your practice is scaling your co-founder relationship. So what does scaling mean to you?

32:30
I mean, change is inevitable and scaling is just adapting to those changes.  And in the startup world, we think of scale as growth, as more users, more money, more funding, more profit.  And that is a type of scale when  you're getting out more than you put in and it's leveraged and that's all great  as a technical term. But I think scale doesn't have to be confined to that. It can be if that's the context in which

32:59
We want to look at it,  but scale is just adapting to changes and hopefully that change is good because you can also  scale down depending on your priorities.  know a lot of founders who'd rather build a million dollar company than a billion dollar company. They're much happier that way.  And so everybody is obsessed with growth for the sake of growth  and scale gets a bad rep because of that. But if it's just changing and creating the circumstances that gives you purpose, then

33:28
It's, yeah, it's all good. Fantastic. Very refreshing perspective, Tim. Thank you. Last question. Did you have fun in the sandbox today?  Yes, I did. Thank you for asking. And that's just where I find joy.  Thank you for spending time here in the Founder's Sandbox. To my listeners, if you liked this episode with Tim Heat, sign up for the monthly release.

33:58
of the Founder's Sandbox, where business owners, corporate directors, professional service providers provide their stories so that you learn how to build your company with strong governance as a resilient, scalable, and purpose-driven company to make profits for good. Signing off for today, thank you for joining us. Thanks, Tim.