Tech Startups: The Intricacies of the Co-Founder Relationship

The following is adapted from Viva the Entrepreneur.

As an entrepreneur, one of the first and most important decisions you make is choosing who is going to go on this crazy startup adventure with you. Picking the right person is not unlike picking a spouse. You’ll need someone that matches your energy, understands your mentality and excels where you may fail. True partners. 

However, as your business evolves so does the relationship and navigating the waters of defining roles can be nuanced and determining responsibilities or even pay can be downright touchy. Here is a roadmap that can help you avoid the ego pitfalls, divide the workload and build a strong co-founder relationship with ease.   

First Things First

Oftentimes entrepreneurs make the mistake of thinking they can go it alone and that they don’t need a co-founder at all. This is a mistake! You have to have a co-founder. Pure and simple. Don’t even think about trying to get by without one; it’s simply too hard to go it alone. You absolutely need that one person who will always have your back, pick you up when you are down and chip in without hesitation no matter what you need.

The goal should be to have a balance of skills and abilities to offset and support each other in a complementary way. A ying to your yang. This is especially important for tech companies.

The best co-founder relationships are those where one founder is more technical- or product-oriented, and the other is more business- or sales-oriented. If you consider this dynamic from the start, you are far more likely to choose the right co-founder from the onset and roles can take an organic evolution from there. 

Just Starting Out

But let’s set titles aside for now. When you are first launching your endeavor, titles are mainly rubbish. The CEO and the co-founder  will be doing anything and everything just to get the company up and running. You will likely not have any employees (or very few) and it will be both of you to for coffee and sign the big deals. Titles won’t mean didley. 

In these early stages, the most important aspect is to just be in the trenches with someone you can count on. As you build your team, you will naturally want to define what roles each person  has. There will be  plenty of improvisation, but you don’t want both you and your co-founder to get sucked into a hard task, like fundraising. Titles can help to carve out the different roles and responsibilities internally. This will be the beginning stages of defining specifically who owns which responsibilities.

And if you followed the earlier advice and picked your co-founder well, the CEO question will be taken care of by complementary skills. When I started out with my co-founder Thomas, it wasn’t entirely clear-cut. But once we launched, the natural sorting was that I took care of sales, marketing, B2B marketing, business development and he assumed product engineering, design, and search engine marketing. This is a typical pairing in the tech world but it will not always be so clear cut so early on. 

Assigning Roles

When you’re starting or running a business, you have to leave your ego at the door. You do what’s best for the company. Whoever is the most comfortable being an external person—interfacing with clients, talking to journalists, getting on stage and presenting, and pitching your idea—should be the CEO.

So you’ll both need to be honest with yourselves about who this person is in your relationship. It may not always work out that you should be the CEO and they should be the co-founder. Check your ego and do what is best for your business. Remember that every role you play just increases your knowledge and awareness for your next possible venture. 

As you are taking this hard look in the mirror, just know, if you’re the CEO, you are the person responsible for sales and have the weighted job of always thinking about the money. Your #1 job is to make sure the company doesn’t run out of money. That is a heavy burden to carry and assigning the right person to that role is imperative. 

One small note here: assigning roles organically does not mean that CEOs shouldn't challenge themselves to develop new muscles. It’s always a smart move to double-down on strengths and find other people to supplement wherever you have weaknesses. This is especially true in a startup where rate of development is the number-one advantage. Keep this in mind and continually push yourself to gain new skills. 

One and One Only

You have to be fast in this startup game, and that’s why I don’t ever recommend  having two CEOs. This is tempting! Both of you have worked to nurture this business and have accomplished some really important milestones together. Some people are drawn to this idea of co-CEOs, and I know people who have made it work, the legendary entrepreneurs and investors: Meyer Malka and Wences Casares, for instance. But I’ve also seen this strategy explode. 

Not only does sharing the CEO role make things harder when you have investors, it sends a weird message to your team. There needs to be one voice that can speak to the vision of your company. This can come up in the everyday, when a team member needs feedback from leadership, the response can be muddled.

If there’s any difference of opinion among the two CEOs, it creates a delay—and again, anything that slows down decision-making in a startup is the kiss of death. Avoid this kiss and avoid co-CEOs.

Money Matters

Here comes the really sticky part: money. The very first thing you need to do when you start your company with your co-founder is to vest your shares. What do I mean by that? Say you and your co-founder each own 45 percent of the company, with the remaining 10 percent in an option pool for recruiting executives. Great and fair start.

When you vest your shares, it means you and your co-founder don’t actually own that 45 percent from the beginning. Rather, you earn it over time. The logic behind this arrangement is that he or she might not work out—more often than not, there are problems with co-founders—and you have to protect yourself as CEO.

What are all the things that can go wrong? Lots! Maybe you realize soon after starting the company that the responsibilities are just too much for the person. Maybe some unexpected event in their lives makes it impossible for them to continue. Or maybe they’ve got conflicting ideas, and these different visions turn out to be irreconcilable.

The last thing you want is to find yourself two years in, and 30-40 percent of the company’s equity is tied-up with a co-founder who isn’t adding any value. Vesting can help avoid this entirely.Co-founder disputes are the number one early startup killer and misalignment of equity is certainly something that can cause a rift between co-founders. You see this constantly in startups: one person puts in a lot more money than the other, and it creates an uneasy dynamic. It is important to set the equity in accordance with the title. Knowing that there is one person ultimately responsible for making the calls eases the burden for everyone, including investors. 

Responsibility as CEO

The CEO at the helm should be an incredible listener and have an effective process and style for taking everyone’s input into consideration. Someone who makes decisions based on the entirety of the business and not just their particular interests. If you are the person to take on the role of CEO, you cannot just steamroll over your co-founder whenever you have a difference of opinion. It is essential that collaboration is sustained through strong communication. Respecting each other’s different styles will help you avoid resentments and foster a positive bond.

Ultimately, trusting the individual you select is the most important ingredient when choosing a co-founder. But that trust goes both ways. You have picked a strong co-founder but you also have to be a consistently strong CEO. It will take both of you to make your dreams a reality. If you select the right person from the start, you are on the right path. But know that it takes work, solid communication, mutual respect, smart decisions and honest conversation to really go the distance. Not at all unlike most successful marriages.

For more advice on becoming an entrepreneur in Latin America you can find Viva the Entrepreneur on Amazon. 

Brian Requarth is the co-founder and former CEO of Viva Real, a leading proptech business in Brazil. He merged the company with ZAP Imóveis (owned by Grupo Globo) and became the Chairman of Grupo ZAP. Brian raised $74 million in venture capital funding for Viva Real, which sold for $550 million dollars. He now invests in the most promising tech companies in Brazil and Latin America as an angel investor. He is dedicated to empowering the next era of entrepreneurs in the region. His new company, Latitud aims to democratize access to everything an entrepreneur needs to succeed. Our fellowship brings together the top entrepreneurial minds and most experienced tech operators across Latin America to learn from each other, and obtain hands on mentorship from top experts in the region and Silicon Valley.