If your startup has two founders instead of one, you can expect 30% more investment, triple the customer growth rate, and a higher likelihood of success.
Clearly, going solo has its drawbacks. But when it’s time to bring on a co-founder, where should you start?
What to look for in a co-founder?
Before you start the hunt, put together a checklist. What you need from a founder will depend on your industry, your goals, and your own special skills. But anyone in search of a co-founder should be on the lookout for the following.
When your skills overlap too greatly, you and your co-founder may end up struggling for control over the same parts of your business. Instead, look for ice to your fire, peanut butter to your chocolate: Your perfect opposite.
Are you a born networker, obsessed with your industry, and great at fundraising? Look for a software engineering genius and behind-the-scenes management expert. More comfortable with github than glad handing? Find a social butterfly. The more unlike each other your skill sets are, the better you and your co-founder will be able to support each other.
Communication is essential for healthy romantic relationships. The same goes for business. Even if your co-founder operates in a different hemisphere, they should be able to work with you to make sure you’re both on the same page and fully updated about the progress of the business. When miscommunications crop up, it’s a sign of worse to come—so make sure your channels stay open early on, and your co-founder is serious about staying synced.
Shared values and goals
Looking to quickly launch a viable operation, prove profitability, and sell? You’ll have trouble with a co-founder who wants to build an empire from the ground up.
Make sure you’re in agreement on the following:
- Vision. Where do you see the future of your niche? What do you both agree your competitors are doing wrong or right?
- Commitment. Is your potential partner a 24/7 workaholic, or are their weekends sacrosanct? Is this their only obligation, or are they co-founding half a dozen other companies?
- Communication style. Hopefully you communicate with each other well. But how? Is your co-founder a gentle soul, careful never to offend—or do they speak their minds 100% of the time, zero filter? Differ too much in this regard, and the two of you could end up at each other’s throats before you even ship a beta product.
Too much of the same thing is boring. It can also be unproductive. You want a dynamic relationship with your partner—and that means contrast.
A few ways it’s good to differ from your co-founder:
Differing perspectives keep the ideation process fresh. And the more angles you can see a problem from, the better able you are to solve it. For instance, if you’re young, find an older co-founder. Stay open to seeking out co-founders from different countries, who speak different languages, who have different educational backgrounds. They’ll bring something new to the table.
Do you see the big picture first of all, and then zoom in on the details? Try finding someone detail-oriented, who perhaps needs a hand backing up and seeing the forest despite the trees. When blockers pop up—as they’re bound to, at some point—you’ll each come at them from different angles, on different levels. That makes for a faster, more effective response.
Clearly, you want to find someone who knows the industry you’re going into. But stay open to co-founders who come from a different part of the niche. For instance, if you’re launching a fintech SaaS, and your background is in platform integration between different payment processors, be open to hiring someone whose speciality is online banking, blockchain tech, or automated payroll. They may be able to offer ideas you’d never dream of.
So long as you and your co-founder are passionate about your mission, you’re bound at some point to disagree. And how well you’re able to resolve your disagreements could make or break your enterprise.
It’s essential your co-founder is confident enough that they’re willing to defend their point of view—while acknowledging and incorporating others’, too. In fact, arguing over a decision, big or small—whether it’s your company’s IPO or your Christmas party’s IPA—can lead you both to a better choice than either of you may have made independently.
To find a partner you can constructively disagree with, make it part of your interview process during recruitment. Ask potential co-founders about past disagreements they’ve had at the management level, and how they resolved them. And get their take on arguments as a whole; do they see disagreements at work as a blocker, or as a chance for greater dialogue?
Finally, as you check their references, you may want to ask former co-workers and business partners about their experiences. Does your prospective partner have a hot temper? Was there ever a time their stubbornness bottlenecked other peoples’ work? If so, you should have a talk with your prospect about your expectations for civil disagreements before you make a final decision.
The drawbacks of hiring a co-founder
One more step before you hit the job boards and networking events in search of your perfect match: Make sure you know the risks of bringing on a co-founder.
They could abandon you
Some people just don’t have the grit it takes to tough it out at a new, still rough-around-the-edges startup. If your co-founder bails, you could find yourself halfway through the process of raising seed capital (for instance), with half your leadership team missing.
There are a few ways to prevent this. The most straightforward is to disburse equity according to a vesting schedule. You’ll be able to guarantee a minimum time commitment from your co-founder this way.
You have to share some of the pile
Your co-founder is going to get a chunk of your equity. That’s certain. The question is, can you share nicely?
A little perspective, here. You may fantasize about owning 100% of your venture, but if you want the benefits a co-founder brings to the table, you’re going to have to let some of it go. As in life generally, there are no free lunches in the startup world. Give a little, get a little.
Plus, remember: It’s only fair. Your co-founder is taking a risk signing on with you. After all, the whole thing could go south before they have a chance to make a profit or even take a draw. That’s a waste of time on their end.
If your partner is willing to invest time and energy into your business, you should be willing to share a little control of the company. Plus, when you both have a vested interest in success, you’re more willing to give it your all.
What to talk about at your first meeting
Whether you’re sitting down for coffee with a prospect, or popping a bottle of champagne after you both sign the dotted line, make sure you’re in total agreement about the following.
To guarantee you hit on every point below, set a meeting with your co-founder, lock the door (or Zoom chat), and come to an answer for all of the following:
- Who fills which role? Which one of you is CEO, CTO, COO? Make sure you’re clear on this. There can only be one of each.
- What happens if you succeed? What are your plans—sell the company? Double down and grow further? If you’re in disagreement about this now, you’ll run into serious issues later on.
- What happens if you fail? What are your personal contingency plans? How much do you have on the line? And at what point do you know it’s time to throw in the towel?
- How would you like to exit? Make sure you’re both clear about who is willing to receive a buyout, who would be open to leaving their role but staying on the board, and so forth. It may seem early to discuss this now, but it’s better to be certain going forward than to struggle with unforeseen blockers later on.
- What’s your prime motivation? Fame? Fortune? Or just the pleasure of seeing something you helped create succeed? Understanding each others’ motivations goes a long way to making sure you’re always on the same page, and you know what to expect from your co-founder.
- What are your five year plans? No, this isn’t a job interview. The question may seem rote, but it’s worth exploring. Talking through the next five years with your co-founder can help you learn more about what they value in life, and the kind of person they want to be. That builds a stronger connection between you, so you’re more in sync with what the future holds.
Fighting with your co-founder
Okay, so “fighting” may be too strong a term—this is a startup, not mixed martial arts. But, as we mentioned earlier, disagreements can be a good thing, surfacing issues that might otherwise have been overlooked.
But how do you make sure an argument between founders is constructive, rather than a hindrance? And how do you ultimately resolve it?
In a piece for Forbes, an expert panel of entrepreneurs put their heads together and came up with nine tips for making sure you and your co-founder disagree less, agree more—and, if you do end up butting heads, come to a quick conclusion that benefits you both.
Make sure you have 100% transparency
This means mutual respect and openness. If one of you is holding back, it’s up to the other to call them out. Disagreements that don’t come to the surface can fester until they’re resentments.
Schedule regular one-on-ones
Meeting one-on-one regularly—say, once a quarter—lets you and your co-founder air your grievances without worrying about an audience. So overlooked issues get to see the light of day before they snowball.
Keep responsibilities crystal clear
You each have a different role to play in your business. When you start struggling for control over the same responsibilities, a major blow-up is just around the corner. Make sure you spell out clearly the expectations for each partner.
Bring in a mentor
Keeping a mentor or business coach on call gives you a third party you can turn to if an impasse ever does arise. Think of it as an escape hatch in case things get really heated.
Remember, you’re in a professional relationship with your co-founder. That doesn’t mean you have to invite them to your kid’s birthday party or talk them through a breakup. In fact, making sure to treat each other as colleagues, rather than best friends, gives you both more room to breathe—and ensures the relationship stays healthy.
Keep your goals front and center
Make sure you both agree on what success looks like—then stay focused on that. Keeping your goals center stage can stop your personal foibles from stealing the spotlight.
Use a “veto jar”
Here’s an interesting idea from Jacob Tanur of Click Play Films: Each founder gets a jar with a set amount of jellybeans. Each time they veto an idea, they eat a jelly bean. Setting a finite limit on how often you can seriously disagree makes it easier to pick your battles.
Acknowledge your own weaknesses
Coming into a partnership with a co-founder, it’s important you’re both open about the barriers you face—so you can accommodate each other, and anticipate each other's needs. Have trouble focusing for more than fifteen minutes? Keep meetings short. Partner can’t function without a strict schedule? Adapt to it. Acknowledging weaknesses now stops them from undermining your relationship later.
Be okay with disagreeing
One of the most constructive steps you can take is making sure you both agree on disagreements: That they’re bound to happen, and they aren’t a bad thing. When you’re open about the fact that disagreements are going to occur, you dampen their emotional charge, so each one seems less like the end of the world.
Inviting your new co-founder to Capbase
Once you’ve found the perfect candidate and your co-founder is ready to jump onboard, set up your Capbase account and invite them.
Capbase removes a lot of the headaches co-founders face together early on. First things first, you need to register your company, so the way you each relate to it is written in stone—and so your intellectual property belongs to the company. We will do this for you quickly and easily.
Then, incorporate, designate founders’ shares, and set up your board. Normally, these tasks would take a lot of running around and paperwork. Capbase gets you moving in no time.
Finally, set up a vesting schedule. So neither you nor your co-founder has to worry about the other jumping ship early—and you can devote yourself to your new project 100%.
Excited to start issuing shares? Who wouldn’t be? Capbase makes it easy, but if you’re still thinking of doing the old fashioned way, learn the essentials: How to File Reg D with the SEC on your own.