Andrew Pierno & Mikey Howe meeting in person for the first time in London.

Starting companies with people you've only interacted with online sounds like it shouldn't work. Or at best (worst?) you crypto heads will think "Oh yeah there should be a DAO for that to coordinate between parties who don't trust each other fully". This is all super interesting, but it's also super complicated. My preferred response is, "Screw it, let's try it!".

It's one thing to start something from scratch together with very little capital overhead and a willingness to toss the whole thing in the trash if it doesn't work. It's quite another to do that with a business making $10k MRR. Getting to $10k MRR is a low probability outcome (statistically). Similarly, co-founder matches working out long term are also low probability outcomes.

Last week I was in London and was able to meet Mikey, the co-founder of Cold Email Studio in person for the first time. Similarly, for XO, Danny, Henry, and I flew to Dallas late last year to meet in person for the first time before Danny decided to go full time with XO.

Origin Of Cold Email Studio (CES)

Cold Email Studio does cold email as a service. It's a productized service started by Mikey and I in late 2020. 

Mikey and I had been chatting for a few months before he came on full time as CEO of Cold Email Studio. The team back then was just myself and one other person helping out on a part time basis. When Mikey came in, we decided he would be CEO. It was an odd moment for me personally. Picture this, you just started a company, brought it to ~$10k MRR, and then hand it over to someone you've never met in person. Madness! Reckless!

But, as reckless as that sounds, what I ended up doing was even worse. I had never been in a situation like this before where I was bringing someone in as a full partner into something with cashflow. I had a hard time letting go. It almost killed the relationship. And frankly, I'm lucky Mikey stuck around until I figured out I needed to hand the reigns over completely and give him the space to do his work. But not being able to let go was far worse than letting go completely.

Now, of course, Mikey is actually great at what he does. And it wasn't until perhaps month 3 or 4 that I realized he is a better choice to run CES than I am. And the proof is in the pudding, he's built out a robust team and quadrupled the business. There is no doubt that luck was involved. Timing too. Mikey was looking for something new, I had something that was just starting to show promise, and had a little cashflow to play with to offset Mikey's risk by being able to pay him at least a little bit at the start. This was 100% a trial by fire. But the blessing is that now that there is a high level of trust, who knows how many more companies we will start together!

Origin of XO Capital

XO has a slightly  bumpier story. Perhaps the reason is that problems increase exponentially with the number of humans involved. For whatever reason, XO has always been 3 people. In the very beginning, I was running a little community of boot-strappers whom I was trying to convince that becoming a co-op would be the revenue maximizing choice for everyone involved. I couldn't cross the chasm between self interest and collaboration... people just wanted to work on their own thing.

But along the way, there were a few people that I got connected to through various private communities, and the idea of buying businesses formed. Not long after we settled on trying an acquisition, myself and one other person formed XO's first LLC. There was quickly a third that joined us and we wired money to each other and bought for $24k. This is pretty miraculous in and of itself. But we also managed to re-write the product together and 5x the business.

Over the next 12 months, the original two people that started out in XO went different ways and I was (desperately) trying to find others to join to continue the experiment. Even as the partnership was in flux, we continued to acquire 2 more businesses. We successfully flipped one (we probably should have just kept it), and didn't acquire anything for a few months. One partner left about 6 months after inception. Another after 12 months. That's 100% partner turnover. Definitely not as smooth as Cold Email Studio. But again, despite the turnover, the model was working! We were operating these businesses profitably and (fingers crossed) hadn't killed any of the companies in the process.

Friends vs Business Partners

I've never started a company with a friend (i.e. someone who I regularly hang out with). Maybe it works, I'm sure at some point I will and will let you know how it goes. But with an N of 2, I like finding business partners first. You obviously should not hate your business partners, but I don't think you need to be friends necessarily. Now if friendship doesn't naturally blossom out of the trials and tribulations of starting a company, then I'd be suspicious, but so far, I'm suggesting you start with a business partner and maybe that turns into friendship vs the other way around.

With friends in normal day-to-day life, the relationship never gets tested. I think this is true of romantic relationships too. People can go years without an actual stress test and my belief is that actually the divorce rate is 50% because most people don't stress test the relationship before tying the knot. Covid was a stress test. Lots of relationships made it, lots didn't. So my theory is that you need to jump to the stress-test with business partners before you know anything about the strength of the relationship. (Can't be an artificial test either).

Finding Your Tribe

The more I think about it, and the more evidence I can point to of this system working, them more i think it's crazy to  limit yourself to the current pool of people you may be able to start a company with.

I feel this way about dating too. Let's talk about love for a second. I'm a bit of a Shakespearean when it comes to love. I don't believe in the concept of "the one". 8 billion people on earth and you think only 1 is the "right" answer? No! Silly! You choose "the one" for you, but to say there isn't a single other person on the planet that you could make a relationship work with long term shows a tremendous lack of imagination.

Back to startups. At any given time, I have N friends who I'd potentially start a company. Of those N friends, maybe 5% of them would be willing to ditch whatever they're currently doing to start a company. It's just too small of a number (unless, idk, you're an extrovert and have a shit ton of friends.).

Part of this co-founder process is self selecting. I realized last week that I start all of these things by shouting into the void. I'll throw something up on Twitter, Indie Hackers, anywhere, and everywhere declaring what I'd like to do and then I see who responds. With those people that respond, try trusting them by default or unless the data shows you shouldn't. I think by and large most people don't want to screw people over. Not that they wouldn't necessarily, just that they generally don't.

If I were to summarize how XO and CES came together (w/r/t co-founders), it might look like this (outside of getting super lucky, which I did, and I'm super grateful for):

  • Cast a wide net
  • Trust by default
  • Put skin the game and stress-test the relationship.

I think the rest will shake out naturally.