Like any relationship, business or personal, a co-founder relationship has its ups and downs. It’s essential to understand what it means to work alongside a co-founder, how to find the right partner or team for you and your business and the questions you have to ask before you can realistically move forward.
Why should I consider working with a co-founder or a cofounding team?
You may have executed your previous business ideas as a solo entrepreneur. There are a few key advantages to going it alone like:
- Control. You determine the course of the business both creatively and financially.
- Efficiency. You don’t have to run decisions by anybody else.
- Preference. You pick who you work with, who you hire and which customers you pursue.
- Equity. The awkward topic of money is avoided when you have sole ownership.
However, that control you find in solo entrepreneurship can have some significant challenges:
- The solo entrepreneur can be a lonely gig with no backup and no one to share in the business.
- You might lack the full skillset needed for your idea to prosper.
- Investors are reportedly hesitant to invest in solo efforts because of the stress it puts on one person.
Brittney Hodak, co-founder of ZinePak, wrote an article published on Forbes where she listed the benefits she saw in starting ZinePak with a partner. She said it allows you to:
- Take ‘breaks’ and have someone to back you up on ‘off’ days
- Reach better decisions
- Focus on what you’re good at
- Have double the representation in meetings and tasks
- Share the victories (and defeats) with someone
In an article by Chris Hevly on Inc.com, he writes, ‘I have done the startup thing both ways and the bottom line is it all depends on the business and of course it depends on you.’
A new business idea marks an exciting time for an entrepreneur and working with a co-founder could drive a business farther faster. However, entering into a partnership should not be done lightly.
What can I expect from a co-founder relationship?
Over and over again, entrepreneurs who have been in a co-founder relationship compare it to marriage. Like marriage, not all of them make it to happily ever after:
- Dating. You pick who to talk to about joining your venture, risk rejection and spend time getting to know each other to figure out if it’s a good fit.
- Marriage and baby. Your co-founder will be one of the first people you see in the morning, the one with whom you spend most of your day and some of your evenings. Your startup is your baby, but instead of decisions about what to feed it and which school to send it to, you talk about finance, marketing, product management and everything in between.
- Couple’s counselling and date nights. Some co-founders will be fickle and some will lose interest. If you’ve found the right partner, you’ll be able to maintain the relationship and move the business forward simultaneously.
- Empty nesters. Whether you sell the business or it grows to have 65 employees, the baby phase of the startup ends. If you and your co-founder or founding team are still at the helm, you have to adapt to the changing relationship to each other and to the business.
You’ll make some of the biggest decisions of your life with a co-founder and talk over a lot of the small ones. It’s vital to understand the long term commitment of a successful cofounding relationship and carefully consider who you want for a partner.
What should I look for in a co-founder?
The size of a cofounding team will have an effect on its dynamics, but you are looking, first and foremost, to fill the gaps in your personality and skillset based on what your startup will require.
Maida Fortune, co-founder of Cureeo, says, ‘You don’t want a team of people who are all similar to one another because then you have groupthink problems and affirmation bias and all that junk. You want people who are different.’ Knowing what type of skillsets you are looking for starts with a keen understanding of the skills and experience you bring to the table. For example:
- You might be a tech person, but not be business-minded
- You might know about marketing and product management, but need an analytical, numbers person in the mix
- You might be detail-oriented and task driven making an outgoing, customer-focused personality helpful to have around
This complementary skillset might exist in a friend, co-worker or former colleague. If the right skills aren’t in your network, you can look outside of it for a friend of a friend, a professional connection or someone from your online network. However, you not only want someone who will fill out the skills on your team, but also someone you would be willing to work with day in and day out.
How can I tell if we are a good fit?
The challenge of finding the right co-founder is not as simple as a checklist of skills. It’s also important to answer other questions about your prospective co-founder like:
- Can you be around this person for eight or more hours at a time without losing your mind?
- Do you trust this person to have your back through the highs and the inevitable lows?
- Would you work for this person given the opportunity?
- Will you be the smartest person in the room or can you count on them to be a partner, not another employee?
- Do they buy into the idea and the work that will go into it or is it just another job?
In a co-founder relationship, you have to get along with, respect and trust your co-founder and their commitment to the business and to you. Respect and trust can grow as you work together, but it’s imperative to start with a solid foundation for a healthy partnership.
How and when do we assign roles and responsibilities?
You’ll hear stories of startup teams who scribble makeshift job titles, responsibilities and ownership on a coffee shop napkin. The business grows into a success and the writing on the napkin never becomes an issue. However, plenty of veterans of the co-founder relationship will tell you it’s the marriage which requires a clear prenuptial agreement.
At the beginning, a startup can be a bit chaotic and a lot of crossover in roles can occur. Roles and clear responsibilities are important though, because as the company grows you’ll need to know who is responsible for different tasks and decisions.
This is especially true if your founding team is larger and if you’re looking to bring on financial partners. Investors will want to know how you reach decisions and if you have a clear system or chain of command before they agree to put time and money into your business.
How do we divide ownership fairly?
Admittedly, it’s awkward to talk about finances, but scratching a bunch of percentages together or splitting the business right down the middle is not necessarily the way to go.
The company might be worth nothing now, but the goal is to make it very worthwhile for everyone involved. To determine what each member deserves, you want to create a method that considers things like:
- Whose idea was it?
- Who’s funding the business and what percentage of the funding is on them?
- How important is the role they were assigned and how many hours will they be putting in every week?
- Are they getting a salary or waiting to get paid?
Essentially, higher equity typically goes to those bearing a greater risk. The point is that you shouldn’t casually approach the issue of ownership and equity, but rather spend the time hashing out an agreed set up so you can move on to executing your idea.
How do I protect my idea and company in a partnership?
You divided the company 50/50, but your partner walked away a few months in and you soldier on. Three years down the road, you sell the business for a few million. After the deal goes through, that partner who flaked sends a lawyer to collect his 50 percent.
According to an article by Güimar Vaca Sittic, the safeguard is vesting where ‘the company has the right to purchase a percentage of the founder’s equity in case he or she walks away.’ Over time, the amount the company can buy back decreases depending on the schedule you set up.
You’ll most likely want to talk to a legal professional (because I’m not one) and work out a formal agreement, no matter how much you trust each other.
Happily ever after or another horror story?
The beauty of the connected age is that you don’t have to learn everything about cofounding a business through trial and error. Instead, you have access to the stories and advice of those with experience in a co-founder relationship.
While not every co-founding relationship or business idea will be a success, you can enter into every venture and every partnership armed with your own answers to vital cofounding questions.
(Hat tip to JD Hancock for the photos)