Navigating the Co-founder Relationship

The percentages in favor of successful startups with multiple co-founders are telling. 80% of successful startups have multiple founders. Out of this, a whopping 25% of startups have more than 3 founders. The expression “the more the merrier” could not have found a more apt application than in the startup world.

That said, the galore of extremely successful solo founder companies is certainly not lacking. Paytm, Byjus, Amazon, Alibaba, and Tesla exemplify some very successful Indian and international startups. Nevertheless, the benefits of having a co-founder are far reaching to be overlooked.

In the fast-paced startup world, time is of the absolute essence with a limited window of opportunity and little room for error. Building a company from the ground up is an imposing task filled with risks. Having a co-founding team with complementary skill sets and experiences helps to raise the likelihood of success.

With a larger network, co-founders can tap into their individual set of connections for a broader outreach and faster execution of ideas. They can distribute and share the burden of responsibilities, condensing the time to market. A good example of this would be a team of co-founders with individual skills in product development, sales, and finance, respectively. With their particular core competencies, co-founders can complement each other by bridging the existing gaps in knowledge and getting the product and funding off the ground.

“High-bandwidth conversations and shared passion allow bringing in alternative perspectives to a situation. By playing the devil’s advocate to pre-set notions, co-founders reduce the possibility of falling into blind spots.”

However, often co-founders fail to stay the course or to navigate the inevitable change in relationship dynamics, undermining the value of the company they have created. A classic example of this is the fallout between Facebook co-founders Mark Zuckerberg and Eduardo Saverin, and the ensuing messy lawsuit.

Though certain discussions amongst co-founders can be uncomfortable, it is feasible to have them upfront to avoid future unpleasantness and discord:

1. Leadership: It is imperative to unanimously choose and acknowledge a leader. With the buck stopping at one place, decision making in times of conflict or otherwise becomes much easier and faster.

2. Hierarchy: As the company scales it is important to have hierarchy amongst co-founders. It often happens that there is an inequitable distribution of workload, making it harder to have co-founders continue as equals. For the company’s best interest discuss how you will resolve potential future clashes over titles, roles and responsibilities.

3. Equity Distribution: It is important to discuss equity distribution amongst co-founders. Having an equal share in the equity with dissimilar backgrounds, experience, contribution and performance standards can lead to a sub-optimal performance by the company with motivation issues.

4. Defining roles: As the startup transitions to a mature firm, how will leadership aspirations or expanded responsibilities be handled. For example, where a ideas driven founder may have been pivotal in the beginning, what if another operationally excellent co-founder is better for the now larger company.

5. Exit Plan: While it may seem odd to begin a business thinking about its end, it is feasible to discuss the exit plan to avoid future issues which can create rifts or even become deal breakers.

6. Vesting schedule: Having an equitable and fair vesting schedule is critical so that the working co-founders, who are creating value, are able to focus on the success of the company, and not harbour resentment for co-founders who exit midway and continue to reap benefits.

With pre-defined boundaries and careful navigation through rough patches, you can avoid the general pitfalls and make something wonderful in case of startups.

Disclaimer: The article is the independent opinion of the author and does not represent those of Kstart or Kalaari.

Source: Go-Globe