Business Founders are faced with critical decisions on an almost daily basis. Perhaps the most critical of all is choosing a co-founder (or co-founders) to accompany you on your journey.
If you end up with the wrong co-pilot in the cockpit, you’ll have trouble getting to the right destination. Or worse still, you may never get your business off the ground.
On the flipside, having the right co-founder opens the door to a myriad of business benefits. If your founding team has complimentary working styles and strengths, equal passion, shared vision, and the right skillset… the sky is quite literally the limit.
The cost of partnering with the wrong co-founder
Choosing the wrong co-founder could cost you… well, everything.
A CB Insights business report interviewed the founders of 111 UK startups that failed between 2018 and 2021. 14 percent of founders stated they failed due to “having the wrong founding team”, and 7 percent failed due to “disharmony” between founding partners.
In addition, many founders who cited other causes as the primary reason for failure stated that “discord with a co-founder” was also a contributing factor.
If you’re one of the lucky ones, choosing the wrong co-founder may simply mean that you end up buying them out of the business. This is actually an alarmingly common occurrence…
One 2019 survey conducted by Fuel Ventures – a London-based venture capital company – interviewed more than 3,000 UK business owners. They found that 43 percent of company founders were forced to buy out their co-founders. Of this 43 percent:
- 71 percent blamed the break up on “a difference in opinion” where the company’s direction was concerned, and…
- 18 percent said their former co-founder “didn’t reciprocate their beliefs and/or values.”
If you’ve been entertaining the idea of co-founding a business with someone, chances are that these stats are starting to make you a little uneasy – but don’t panic.
Getting a co-founder is still a great idea; launching a startup demands a broader range of skills and experience – and way more energy – than most human beings can muster on their own.
You just need to take the time to do your due diligence and find the right fit.
Co-founding with friends or family
It’s quite common for two or more friends who are business-minded to embark on a business venture together. I’ve worked with quite a few founders who established co-founder relationships this way.
The danger in this is that the existing social connection can blind you to other vitally important factors. Such as… do they even have the right skills and experience for this role?
It’s especially easy to fall victim to this “friendship blindspot” if your potential co-founder seems to represent a convenient solution to your immediate needs.
Here’s an example: Imagine you have a super-innovative idea for a new SaaS platform but you’re worried about pitching it to investors… Your internal dialogue might go something like this:
“Hmm, my mate Bob works in SaaS Sales.
Man, what a GREAT guy Bob is…. so outgoing and charismatic. He’ll get my idea…. and investors will LOVE him.
I’ll ask him to co-found the company with me!”
The truth is that Bob the SaaS salesman is currently a Junior Account Manager whose sole responsibility is to sell entry-level subscriptions for a dated but popular iCookery platform.
Bob is a fantastic, skilled and talented guy in MANY ways – but he is not the right co-founder for your startup.
What’s key to remember in this scenario is that bringing him onboard would be as detrimental to his interests, as it would be to yours.
“The right fit” works both ways.
When founding with friends doesn’t work out
On last week’s episode I spoke with Sean Anderson, founder of Hoxo Media, who experienced something similar to this hypothetical scenario a few years ago.
Sean brought a third co-founder onboard fairly late in the planning process, because they were:
- A close childhood friend, and
- Working in a sector that would add credibility to the business
Within a few short months it became clear that the founding team dynamic wasn’t right, and that the new co-founder’s skillset did not align with the company’s needs.
Yet, Sean’s “friendship blindspot” rendered him unable to address the problem head on. He became stuck in an endless role-revaluation cycle… on a futile crusade to justify his friend’s equal equity in the company.
Fast forward two years and Sean ended up negotiating a deal to buy his friend out of the company. They did part ways amicably – so this is a happy ending compared to many!
How to avoid co-founder mistakes
How can mistakes like this be avoided? Sean will tell you himself that it all comes down to due diligence. Founders must outline what their “ideal fit” co-founder looks like, and develop a plan to assess those criteria.
Here’s a broad idea of what the bare bones of an “ideal fit” looks like:
To develop an ongoing, mutually beneficial and fruitful relationship, startup co-founders should (at the very least):
- Be aligned in their vision and values – Your company culture and growth trajectory will suffer if you’re pulling in different directions.
- Have the ability to accept and apply feedback – Nobody gets it right all the time. One of the most joyous things about a harmonious co-founder relationship is that you can help each other learn from mistakes.
- Have a clear and fair ownership agreement – If responsibility isn’t equally divided, your equity distribution should reflect this.
- Complimentary leadership styles – Different approaches to leadership create a balanced experience for your team. However, polarly opposite leadership styles can divide rather than unify a team, and lead to an unhealthy work environment.
- Have the skills and experience necessary to perform their roles.
- Be able to communicate comfortably and effectively.
- Have the stamina and tenacity for the journey.
Besides these basics, it’s a good idea to write up a job description for your ideal co-founder. This should almost always begin with self-evaluation; when you understand your own skills, strengths, and weaknesses, you can pinpoint precisely what your perfect co-founder would bring to the table.
To steal wisdom from an old saying… “marry in haste, repent at leisure”!