Co-founder disputes are among the most common causes of early-stage startup failure, so your choice here is among the most important you’ll ever make.
This is someone you’ll likely spend more time with than your family. Someone who will share with you the responsibility for the success of your business and the rollercoaster of emotions that is startup life.
And it is a relationship that will have a huge impact on your quality of life for the duration you work together.
It’s no surprise that it is a relationship most commonly equated with marriage. The one plus side is that, as a business relationship, you can be more openly (and unashamedly) pragmatic when it comes to your criteria and decision-making process!
Answers to the questions in the following areas will help ascertain whether your potential co-founder has the personality and the outlook to complement yours, and help take your business to the top.
It’s crucial to understand your co-founder's motivation for the project and ensure they align with your own. For the next few years, they need to match your passion and commitment, or you are setting yourself up for friction from day one.
Everyone will have their idea of what ‘success’ is, you just need to make sure you are on the same page - that you are not looking for a quick cash-out while they have dreams of a billion-dollar IPO.
- What attracted you to this venture?
- What motivates you?
- What is success for you here?
- What role do you expect to play in the company?
- What are your biggest concerns?
- How do you see us complementing each other's skillset?
- Where does this opportunity fit into your overarching career path and aspirations?
The answers here should start to give you an idea of whether this could be a workable partnership.
Responsibilities (and equity)
And then down to the nitty-gritty…
A proper equity split, that fairly reflects each party's contribution, goes a long way to dousing resentment further down the road. First, you need to know who will be responsible for what, especially in the early days.
- Who will be CEO?
- Who will fundraise and pitch to investors?
- How much time and money will each person put in?
- Who will develop the product/service?
- Who is in charge of day-to-day operations?
- Who will supervise/lead each team?
Essentially, what is each founder contributing and what value do they add to the company? This is a subject best broached sooner than later.
Then you can design a fair equity agreement otherwise known as Agile Partnerships - or a founder prenup if you like. This will remove any ambiguity and ensure that each founder is fairly rewarded for their efforts.
Preparing for success
If your company succeeds then the likelihood is that it will outgrow one (or both) co-founders - the right executive team for a six-person company may not be the best to lead a 500-strong organisation.
Of course, you may have the capacity to grow with the company's needs, but it is worth contemplating the eventuality where it makes sense for a founder to step aside. How do you reach that decision? And how would any transition be handled?
Awkward or not, get these questions out in the open before the journey starts, so you can develop a clear exit plan.
Working style and culture
It’s essential that your co-founder not only has a working style that gels with yours, but that you share a compatible vision for your company's culture. Ask your future co-founder the following:
- How would you describe your working style?
- What kind of culture do you want to create?
- How will we encourage and reward employees?
- How much equity will we set aside for future employees?
- How do you deal with conflict?
You can even ask for references. Think of it as due diligence to fill in any gaps and feel confident in your choice of co-founder.
Any potential issues from their past
No one’s past is without its share of embarrassments and failures, but omissions that only come to light when you’re both already pot-committed, or worse, in front of potential investors, can be a real bone of contention.
Not to mention any potential legal or PR implications.
By meeting this head-on, right from the start, you can not only control the narrative (if need be), but you can build a solid foundation of transparency and trust for the future.
Remember, if you are waiting for your perfect partner, you’ll never find them. What you are aiming for is compatible - with you, your personality, your skillset and your goals.
Now, go and find them…
How to find the best co-founder for your startup.