Searching for co-founders is like looking for the person you will spend your life with. Some people choose to go through life on their own, and some would like a partner but they can’t find the right person.
You will need to date your co-founders before you decide to “marry” them. And you don’t truly know them until the going gets tough – that’s where you will see their true colours (good or bad). Just like a life partner, good co-founders will share your vision and values, joys and sorrows. Sometimes they will annoy you to no end, and you’ll go through rough patches, but when things are good, they provide companionship and invaluable wisdom.
In fact, once you are in business, you might find that you are spending more time with your co-founder than your life partner. You will make tough decisions together, and you will end up with babies of your own (also known as employees).
Like any marriage, you don’t set out expecting to fail, but it might not work out. It can also turn out to be wonderful! Either way, it will be one of the biggest learning curves you’ve had – and I’d like to promise you, it will be worth it. Yes, even if you fail.
Who should you pick as co-founders?
At the beginning of my entrepreneurship journey, I was told that the worst people you can pick to be your co-founders is your friends & family – because someone can be a great friend but a terrible business partner. Unless you know them professionally, you might be risking your friendship. Whether it’s a friend or not, pick your co-founder for skillset and compatibility, not for friendship.
One way to make sure that your arrangement doesn’t end in a divorce is to pick a former colleague – Someone you’ve worked with closely, whose work ethics you know and respect.
Should you do it alone?
What if you can’t find the right people? Consider starting on your own, and you might just come across great people along the way. It’s better to start a company on your own than to start it with the wrong co-founder.
Knowing yourself and how you like to work is also an important factor. Do you thrive off other people’s energy and having a sounding board? In this case, you might want to put in more time to find a co-founder. Do you like working alone and making your own decisions? Maybe you’re suited to be a single founder.
Most investors prefer investing in startups with more than one founder. If you are a solo co-founder, it’s wise to make sure that you have a good team with relevant experience in place before starting your talks with investors.
Why co-founders are important
Even if you want investment down the line, investor preferences alone are not necessarily a good reason to find a co-founder. Instead, let’s dig into the reasons why investors prefer startups with a team.
Ask any single founder when they last had a holiday where they didn’t work and you’ll see it’s not an easy life. Single founders need to have all the answers when asked by their employees, they need to make difficult decisions and be the strong leader – even when they feel like they have no clue at all. As much as you can build a support network of mentors and sounding boards, you may not be able to take time off to recharge your batteries until your business is well functioning and you have found and trained staff that you can trust (this can often take 2 years or more). Hence, solo founders have a bigger risk of burnout.
2. Complementary skills
The two main reasons to get a co-founder is that multiple founders offer complementary skills, while solo founders may bring specialized expertise while struggling with other areas of the business. One of the common startup issues we see is the product-focused founder that is building an amazing product, but lacks the business skills to market it, sell it and generally run a functional business.
3. The matatu factor
Also known as the bus factor, what if you get hit by a matatu? Being hit by a bus is a metaphor for one disappearing from a project due to sickness, death or other reasons. If you become incapacitated as a sole founder, your startup will also disappear.
How many co-founders should I have?
A team of two to three is a good number. Having three co-founders allows you to have a tie-breaker in decision making, but any more than that and you’ve got a crowd. Too many co-founders can weaken the overall leadership and slow down important decision making.
You have found the people you want to start your business with. Now, how will you split the future gains of your hard work, otherwise known as shares?
Founder’s Pie is one way to decide shareholding by considering what each founder bring to the mix. It takes into account:
Commitment and Risk
If someone says they want to be your co-founder, but they have no skin in the game and they only want to hop on board once you get a paid assignment (so that they can get paid), they are not co-founder material.
Shareholding can also determine decision making power. If you split the shares 50/50, you need consensus to make decisions. When you don’t split shares are equally, the biggest shareholder usually has the most decision making power which can make decision making easier.
Shareholding can change depending on circumstances, so what you start out with is not set in stone. Feel free to review it when it seems necessary.
Shares should be vested over a period of time. When you don’t vest shares, your co-founder can be assigned 50% shares today, walk away tomorrow, and still retain their ownership. Where shares are vested over four years with one year “cliffs”, it might mean that for each year that you stay with the company, you receive 12.5% shares. If you leave before the one year cliff, you get nothing. If you decide to leave after two years (or you get booted out), you will own 25%.
Listen to your gut
The best advice we received at the beginning of our journey when we were “dating” co-founders was this: If you are in doubt on whether to proceed with a co-founder, listen to your gut. The issues you have in the beginning of the relationship will only grow bigger once there is money, assets and shares at stake.
Like all marriages, co-founder relationships require work. You will have a honeymoon period but down the line, you’ll find that things get tougher. You need to check in with each other regularly about your values, whether you’re still aligned with your vision, and whether you are happy with the working relationship. It sounds simple, but many people struggle to have those honest conversations – it’s not always as easy as it sounds. The best advice we have is to speak up about your issues in a constructive way, as they come up – and remember during your tough times that we’ve all been there!