How to Pick a Co-Founder
Picking a co-founder(s) is the SECOND MOST IMPORTANT DECISION after deciding to start a startup.
WHO do you start is almost as equally important as WHY do you start.
BE THOUGHTFUL about who you partner with!
Here is all you need to know about co-founders.
1. STARTUPS ARE LIKE A MARATHON + MARRIAGE
Why is it important to pick the right co-founder?
Because IF you are successful, you WILL be working with them for MANY YEARS.
So why pick someone who isn't a good match or someone you don't like? Pick the best and don't settle.
2. BEING A SOLO FOUNDER IS HARD
First of all -- like with relationships, it is better to be solo than with the wrong person.
That said, STARTUPS ARE REALLY HARD!
It’s difficult to make progress on product, sales, fundraising -- everything, just by yourself.
There is a myth that VCs don’t want to back solo founders. Thats false. VCs don’t want to back teams who can’t go fast and grow quickly. For example, a lot of times two non-technical co-founders may have trouble raising as well.
It all boils down to execution and growth, and it is harder to it all by yourself.
3. PICK SOMEONE COMPLEMENTARY
This is obvious - pick someone who has a DIFFERENT SUPER POWERS!
If you are awesome at engineering, partner with the best sales person. If you are great at sales, partner with an amazing engineer.
1 + 1 should be = 10x!
4. MORE THAN 2 CO-FOUNDERS
Some of the best startups have 3, 4, or even more founders. Depending on what you are building it may make sense.
The basic test is - does everyone add a super power?
If you add a second engineer there should be 10x improvement on the product.
Each founder should provide a 10x return.
The downside of having more co-founders is that equity split becomes more tricky.
33% split between 3 founders is fine, but later, as you scale, you will RUN OUT OF EQUITY. If you have 4 co-founders each starting with 25% thats even more challenging.
Dilution is a serious problem as it causes founders to no longer be incentivized. As with everything there should be a strategy and a balance.
5. THINK THROUGH EQUITY SPLIT
You need to be fair but you also need to have a clear decision maker.
Dividing up equity is complicated!
50/50 split may not be ideal, as then technically no one is really in charge!
In my opinion, the CEO should always have a bit more equity.
BUT....
If you have 3 founders and the CEO has 40% they still can get fired by the other 2 co-founders!
This may or may not be a good thing!
Read this blog post on Startup Hacks for more details: The Myth of Equal Startup Co-Founders
6. FAKE CO-FOUNDERS
On the other end of the spectrum are 95/5 or 90/10 splits.
These are NOT co-founders.
To be clear, 5% or 10% of a startup is HUGE.
But please don't call them a co-founder, call them an employee with lots of responsibility!
7. VESTING SCHEDULE
If there is one thing you take away from this thread it is EVERYONE SHOULD HAVE A VESTING SCHEDULE!
If you don't have one, please stop reading immediately, call your lawyer and setup a vesting schedule.
It is absolutely critical - NO EXCEPTIONS.
The Vesting Schedule is put in place so that instead of co-founders having equity right away they instead have to earn it / vest over time.
This is done so that if there is a conflict, and someone leaves, your company is not dead in the water.
For example:
CEO 60% / CTO 40%.
In 2 months they have a massive fight and the CTO quits.
If there is no vesting schedule then the CTO walks away with 40% of the business and it is dead.
If there is a vesting schedule, with a 1 year cliff, the CTO leaves with nothing.
8. FOUNDER ISSUES
Startups are really hard and founder conflict is real! Paul Graham is famous for saying:
Startups don't die from Homicide, they die from Suicide.
This is true, and founder issues are a big part of it in addition to poor execution!
Founders argue over the direction of the business, especially when things aren't going well. Founders get on each others nerves -- all humans do!
Startups are a true test of any relationship.
So what to do about it?
First of all - HAVE A VESTING SCHEDULE.
Secondly, DON'T HOLD IT IN -- talk things through.
Be OPEN ABOUT HOW YOU FEEL.
Schedule time just to CHECK-IN WITH EACH OTHER.
Yes, it is like MARRIAGE.
9. SPECIAL CO-FOUNDERS - COUPLES AND SIBLINGS
For the longest time, VCs would NOT fund couples. The thought is - a fight at home would impact the business.
Same thing with siblings.
BUT!!!
The times are changing.
Here is how to think about it…
HUSBAND/WIFE or a SIBLING or a FAMILY MEMBER -- are they really your BEST PARTNER for this business?
Why are you CHOOSING THEM?
Is it convenience or true partnership?
Think it through!
10. SHOULD I START A BUSINESS WITH A FRIEND?
We hear this a lot - we met in University, we've been childhood friends, etc.
When someone is your friend that means you KNOW THEM SOCIALLY, but startups are about THRIVING PROFESSIONALLY.
Are they really the best PARTNER for you?
11. PREVIOUS CO-WORKERS
The best people to start the business with are YOUR CO-WORKERS!
WHY?
Because it is someone you previously
WORKED WITH
GRINDED ON THE DEADLINES, AND
ARGUED WITH!!!
2+ years of working together increases the chances (but not guaranteed!)
12. WHERE TO FIND A CO-FOUNDER?
So what do you do if you don't have a co-founder? Where do you find one? This is a complex topic that is beyond a blog.
The short of it - it’s complicated but possible with lots of THOUGHTFULNESS and DEDICATION.
But... ideally - an old co-worker.
Another common thing I hear - I have a great idea, if I could only find an engineer to build it! That’s the wrong way of thinking. You are looking for a true partner, not just a coder. Again, ideally - an old co-worker!
SUMMARY
Picking your CO-FOUNDER is EXCEPTIONALLY IMPORTANT.
Be THOUGHTFUL.
The most likely ideal CO-FOUNDER is YOUR OLD CO-WORKER.
Founder VESTING IS A MUST!
Read this post => The Myth of Equal Startup Co-Founders
