Most companies start with a founding team working in partnership to navigate the hard road to entrepreneurial success. Partners help balance the workload, bring a diverse set of perspectives, and share in both the highs and lows of the journey. However, data on long-term business success seems to suggest otherwise. According to research cited in a recent Wall Street Journal article*, “solo ventures were nearly 2.6 times more likely to stay in business than companies with 3 or more founders.”
This is because entering into a partnership is easy; being in a partnership is hard. It is hard because you have to maintain trust. And trust is a choice.
At Frame, we help founding teams align as a partnership on their vision and strategy. Where we most often find a breakdown, is a lack of trust. While everyone understands the importance of trust, what they fail to realize is that trust in a partnership is not automatic. You have to continuously choose to trust - whether the moment is big or small, whether the decision is easy or difficult, whether the answer is obvious or contended.
Signs that trust is eroding include disrespecting other opinions, claiming higher worth, saying one thing and doing another, and avoiding accountability. Conversely, signs you are operating in a trusted partnership include respecting others, maintaining equality, executing consistently, and sharing ownership of both the good and the bad.
One of the best examples of a successful long-term partnership is Benchmark, a venture capital firm, whose hallmark is egalitarianism. At Benchmark there is no CEO, no senior or junior partners, only partners. Over 20 years, Benchmark’s partners have maintained equal profit sharing and collaboration on all investment decisions. This partnership approach has yielded significant returns with Benchmark’s eight funds paying out $22.6 billion* to their investors through 2015. While more current data is not readily available, Benchmark’s success has continued with recent IPOs of notable companies including Snap, Stitch Fix, and Uber, the latter of which generated $900 million* for Benchmark when it sold a portion of its investment in Uber to SoftBank.
In our work with leadership teams we have similarly observed that trust among founders builds organizational trust leading to long-term business success. This is corroborated in a Harvard Business Review article* by Stephen Covey and Douglas Conant connecting employee trust and financial performance. The article cited research that showed companies with high trust between managers and employees have outperformed “the average annualized returns of the S&P 500 by a factor of 3.” Another study referenced in this article found that “high-trust companies are more than 2½ times more likely to be high performing revenue organizations than low-trust companies.”
Put simply, it is a choice. Trust or bust.
What do you choose?
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* https://www.wsj.com/articles/entrepreneurs-are-better-off-going-it-alone-study-says-11556503320
* https://www.wsj.com/articles/ubers-venture-investors-set-for-a-windfall-11555032345
* https://hbr.org/2016/07/the-connection-between-employee-trust-and-financial-performance