There’s at least one metric by which cofounding is more like a marriage than a marriage – the amount of time you spend with your business founder will usually dwarf the amount of time you spend with your wife or husband, unless that significant other is also your business partner. According to an article in Inc., by year four of a startup, 45% of founders have split up. The divorce rate in marriages runs about 50%.
Here’s some guidance on building a partnership:
- Date before you marry – one of the major mistakes I see with early stage companies is that the founder with the idea is in too much of a hurry to find a
co-founder and as a result they act opportunistically, not strategically. By acting strategically I mean doing a very serious self-audit, preferably with a mentor or advisor, so you truly understand your strengths and weaknesses. Once you have done that, you will know what key attribute your partner must have: complementarity. That is their strengths complement your weaknesses and vice versa. In my case, sales is my weakness – I’m a strict introvert and have social anxiety to boot. But I’m great at recruiting talent and helping them be successful. So as a Mr. Inside I was always looking for a Ms. or Mr. Outside and vice versa. Don’t act opportunistically, which means partnering up with someone because they are available (just got their MBA) and have a seemingly valuable credential (have their MBA). This happens a lot at universities with both strong engineering and strong business schools. So as I’ve written elsewhere, go for some test drives with your prospective partner. Traveling together is a great way to see how your partner-to-be handles the frustrations and hassles of today’s air travel. Creating the venture’s presentation together is another good way to test compatibility.
- Make sure you are aligned – alignment doesn’t just cover business goals (like go public or be acquired in 5 to 7 years) but personal goals as well (build a company that will last for decades, not just years). Alignment starts with shared values. You need to have tough and deep conversations about values and goals. If you find out you are fundamentally out of alignment either personally or with respect to business goals, then it’s time for a graceful parting. Poor alignment is a leading cause of death in startups – that covers partner alignment, customer alignment, staff alignment and even vendor alignment. Without all going in the same direction even heroic efforts won’t result in success.
- Deal with the equity issue early on – Dividing equity is the number one on the tough issues for founders. And it covers not just valuation and equity division between the company and investors but how the founders allocate equity amongst themselves, members of the team, and very importantly, super start contributors. Equity a zero sum game. As a VC once said to me, There’s 100% of equity – they don’t make any more, so be very careful how you allocate it. This can be a difficult and painful discussion but you need to have it early on, resolve any differences, and be extra careful that there are not lingering resentments.
- Leave your ego at the door – founders must have large egos to undertake the ventures that everyone thinks are crazy and to withstand months or even years of rejection. But once you step inside you startup’s offices you must leave your ego at the door. Your company is not an extension of your ego – it’s a team game like football, not an individual sport like swimming. Managing strong egos must be a strength of at least one of the founders.
- It’s all about trust – we all know how important trust is, but how do you garner it? You have to earn it, it can not be bestowed by your position or relationship to the founders. Trust is built by actions, not just words. So the sooner you build trust with your partners the better. Trust is one reason that a Y-Combinator study showed that founders who had known each other for a long time and/or had worked together tended to found more successful ventures. Trust is also necessary for team building, not only must your partner trust you and vice versa, but the organization must trust in the vision and mission of the founders.
- Agree on how to resolve differences – I had a co-founder who had a simple rule he used in business and in his marriage: whomever was most invested in the decision got their way and in the event of a tie, a coin was flipped. Practicing this resolution mode will make for a strong and fast acting partnership. Obviously there are other ways to resolve differences, but make sure you have a way before you get underway with a partner. Disagreement between partners on important decisions is why studies have shown that sole founder ventures are more successful than ventures with two or more founders.
- Communication is vital – communicate with your founder early and often. I’ve found that a majority of problems in startups stem from either poor or lack of communication. Better to over-communicate than under-communicate. You can always dial it back a bit.
- Compromise doesn’t always work – while it may be tempting to compromise when differences occur that may not be the best path – you may end up compromising the venture’s core values. Better to outline the pros and cons of each conflicting decision and go with the highest ratio of pros to cons. Compromise can just water down a decision so it’s worth less than either of the two conflicting paths.
Deciding on a partner is one of if not the, top decisions you will make as a founder. Be careful and deliberative. This is an area where speed kills. And if you can’t find a founder who is a good match there are many successful companies with solo founders.