Co-founder relationships: the dos and don'ts.

Co-founder relationships are NOT easy… and even less easy to get out of if the right provisions aren’t in place.

It really isn’t an exaggeration when people say they’re more like your significant other than your husband, wife, boyfriend or girlfriend.?

You spend every waking moment of your life with them. That’s why it’s so important to get co-founder relationships right.?

I had co-founders in my last company RealSport, and have ended up as a solo founder at my current company Connectd. I’ve also seen every error there is when it comes to co-founders and co-founder relationships, many experienced first-hand, and lots as an observer/investor.

Here’s what I’ve learned:

1) Be wise about who you bring on.

If you feel the need to bring on a co-founder, or you don’t want to go on the startup rollercoaster alone (I feel you), make sure they are the right person.?

This is both a personality and skill set thing.

Personality:?

Imagine working with this person every. single. day. 15-16 hours a day (in the early years at least). Do your personalities gel, do you trust this person with your life, can you see yourself disliking them in a way that you can’t get over? If you can, don’t do it.

Skill set:?

Make sure they fill skill gaps that you are lacking and don’t have the same background as yourself.?

I’ve seen in a couple of companies co-founders who are both commercially-focused with a similar skill set. This meant both were trying to control the same parts of the business.?

You need a co-founder who can fill gaps, and you need to be super clear on who leads what. Tech and commercial co-founders work well for this reason because it’s very clear what they are leading.

Just don’t, under any circumstance, bring a co-founder on just because you feel you need one or are desperate… I’ve seen it end very badly.??

2) Never bring in a co-founder after the fact.?

In my opinion, it’s impossible to successfully bring on a co-founder after you’ve launched and are down the road with your startup.??

Often bringing co-founders in after, especially if there are already more than one existing co-founder, means the new co-founder hasn’t seen it from napkin idea to actuation, hasn’t structured the values or culture, and can be less invested.?

They need to have bled the vision from the very start and been part of the founding vision and culture. It’s hard to commit your time and energy to something you haven't put your soul into - and it always shows.

3) Each co-founder must have equal equity?

I have never seen it work (first-hand) when co-founders have different levels of equity.?

Your co-founder is like your life partner, you have to have equal equity in that relationship. If you don’t and you own a different amount of equity,?you're going to have differing intentions when it comes to fundraising, or when it comes to selling your company.

What may be a great deal for one co-founder, may be far less appealing for the other. This can make the tough decisions 10x tougher.

Equal co-founder equity always.?

4) Be careful about the number of co-founders you have?

The number of co-founders is very important to the business dynamic. Really any more than two can be really tricky to deal with… and we’ve all seen those companies that have 8 ??

Typically, I’ve seen companies that have three co-founders end up in an unfortunate 2 vs 1 situation, and eventually co-founder breakdown.

Any type of misalignment or imbalance with the influence of a co-founder will lead to big issues down the line. And too many cooks… you know the rest.?

I would say the best combination is two co-founders with two different backgrounds.?

5) Vest immediately (even pre-funding)

Yes, vest immediately… even before any funding.?

I would recommend 20% a year, for 5 years, with annual cliffs.?

Reason being, I've seen everything that can happen with co-founders (literally everything) between companies I've been involved with and have invested in - you may think it will never happen to you, but it happens!

6) Always have bad leavers provisions (even pre-funding)?

I’ve advised companies that I have worked with to put in bad leavers provisions from the start and it has saved them big time. Co-founder splits are expensive and time-consuming, two things you don’t have a lot of. That’s why they are one of the top reasons startups fail.?

If you're a good leaver, you leave with the amount of equity you've vested. This is a great way of ensuring everyone is rewarded fairly.

If you're a bad leaver - usually associated to gross misconduct, you need to make sure this person is off the cap table and unable to cause havoc/chaos and kill the business before its even started.?

This is a step no startup should skip!?

?Co-founder relationships are not to be taken lightly. I’ve seen everything that can go wrong and right with them.?

Think of it like a marriage, you wouldn’t rush into that, so don’t rush into marrying your co-founder.???