How to find a co-founder

Finding a cofounder is not easy. It needs a lot of introspection, thought, and analysis.

It can be answered in two contexts as presented below:

1. The first Founder – you are the first founder looking for a co-founder. You fall in the blue path.
2. The co-founder (also, all the subsequent co-founders) – you are looking at a startup or a team to join as a co-founder. You fall into the orange path.

Here are some tip-of-the-iceberg points to keep in mind:

Case I – You are on the blue path, the first founder looking for a co-founder:

• The prospect should be someone from within your network. Preferably your first connection (preferably not a mutual connection) – an old friend, an office colleague, or someone with whom you have been in touch for a significant amount of time.
• Complementary traits, skillsets, domains – do they bring skills that complement yours?
• Alignment on the long-term business potential, the vision, mission, and values.
• Alignment to the path in the pursuit of your goals and vision. This includes strategies and tactical plans, team building exercises, managing operations, choosing the sales channels, metrics to track the progress of the start-up and many more. The more exhaustive the list the better. Keeping things clear from the day-1 helps in forming the foundational bedrock for lasting prosperity.
• Alignment on the financials and founder compensations. Including, founder salary, equity distribution, and maintaining investor relations. This is very important as every decision between the founder and the cofounders has financial repercussions and things go awry if there is a lack of clarity.

?

Case II – You are on the dark orange path, looking at a startup or team to join as a co-founder:

• Evaluate the founding members on their complementary skills and map them against yours. Evaluate whether you form a MECE (mutually exclusive and comprehensively exhaustive) with their skills.
• Seek clarity on your roles and responsibilities. – What is expected of you and in how much time?
• What would be your compensation? – in most startups, it is a mix of equity (or ESOP) and cash. The equity value should be at least 2 times the amount of the cash component it is replacing.

?? So, for example, if your CTC at your last employer was 20 lakh.

?? If this start-up is offering you 10 lakh in cash then it should offer you 20 lakh in equity. For the following reasons:

? This is simply to offset the risk you are taking by offsetting the liquidity offered by the monthly monetary returns with a long-term highly volatile, relatively illiquid (in the short term), component. Which comes with a cliff and vesting period.

? A huge percentage of tax is levied at the time of liquidation of your equity/ESOP which would significantly reduce your earnings further.

? While the above is just an indicative number. The relative numbers may be influenced by qualitative factors like the sector or domain of the startup, the market potential, product-market fit, the founding team, the investors, etc.

? But whatever the case, when you finalize a number, be very sure of that and try to leave no scope for any resentment in the future.

If you have come this far; Congratulations you’ve found a cofounder!

But so far you have just scratched the tip of the iceberg. Now it is time to underscore and formalize the handshake. That is, to make a rock-solid agreement between the two parties.

Irrespective of whether you belong to case I (founder) or case II (co-founder); next up is weeding out the possibilities of co-founder conflicts. It is the second biggest reason for startup failure, the first one being a lack of funds. Draw as many lines between the partners as possible.

Follow the key points below:

• Please draw clear solid lines between the roles and responsibilities. Avoid hatched and dotted lines.
• The leader gets a proportionately bigger pie – no matter how much you try; one partner will always take a lead over the other. It should be incorporated as a design and even bolstered by noting it into the founders' agreement to avoid any future conflicts.
• It is high time you align the long-term and short-term vision, goals, strategy, timelines, and milestones. Even tactical & operational nuances if possible. Etch it on the rock, if NOT done yet.

?? If both are not aligned on the timelines and milestones over the next six months, 1 year, 3 yr, & 5 yrs goals. Conflicts are bound to arise. I exited my previous startup even when we both were aligned with the long-term goal. But, completely lacked alignment with the path we take to reach there. Neither of us saw the merit in the other’s approach.

• Mutually decide on a list of mentors or guides you would reach out to for conflict resolution in any such instance in the future. The list must include some of your key investors.
• Once the partners have started working together, every discussion should be well documented or on paper. Simply run away from a founder who hesitates to document the discussions and/or paperwork.