I recently discussed whether a co-founder is required to raise venture capital. The short answer is no. That said, many entrepreneurs want a co-founder for reasons other than investor pressure: complementary skill set, shared passions, etc. For the founders who are interested in having a co-founder, I wanted to offer some advice on how to choose your co-founder wisely and to create a lasting, productive working relationship.
Founding pairings can occur in all sorts of ways. Maybe you went to university together, like Google’s Larry Page and Sergey Brin. Maybe you previously founded a company together, like Wells Fargo’s Henry Wells and William G. Fargo, or perhaps you met through mutual connections, the way Apple’s Steve Jobs and Steve Wozniak did. However it occurs, there is no one right way to meet a co-founder.
Co-founders must spend enough time together to build enough rapport to be completely honest with each other about their strengths and weaknesses, their likes and dislikes, their historical experience and the way they deal with conflict. Any facade will fade quickly when you’re working 100-hour weeks together. Quickly, a relationship that was supposed to be mutually beneficial becomes a dynamic that can negatively affect your ability to raise capital or to attract and retain talent.
No one wants to invest in or work for leaders with an acrimonious relationship. Here are some key steps to make sure you’re setting yourself and your co-founder(s) up for success.
While many co-founders agree on near-term goals and objectives, their medium- and longer-term visions can deviate. Remember, on average, a private company goes public eight to 10 years after its founding. Aligning on year-one goals is not enough.
Talk about how much capital you expect to raise and in what time frames. Discuss your desired exit for the company. If one co-founder comes in with a substantially different financial situation, that can create different incentives for wanting to exit to generate personal liquidity.
Step 2: Have the hard conversations now.
It’s understandable to want to kick the can on tough, even potentially emotional conversations, such as equity allocations. But, co-founders must have these conversations early to ensure they are on the same page. Tough talks are also a good litmus test to see how honest you can be with each other and how you deal with potential conflict.
Don’t stop with high-level points, such as equity allocations. Discuss vesting schedules, noncompetes, special voting rights, etc. While the conversations may be difficult, walking away before raising capital is much easier for the company than doing so afterward.
Step 3: Look to hire an executive coach.
Creating a productive forum for you to both enhance your leadership skills and address any burgeoning issues will help you and your company longer term. Don’t get stuck on selecting the perfect coach. There is no set formula. You can have the same coach or different coaches. The key is to include an independent person who is not emotionally or financially invested in your company to help you talk through various issues. Speak monthly at a minimum but preferably more frequently. If you never have issues—though that is highly unlikely—you can instead use this coach for leadership development.
Step 4: Do not use your investors to create a power imbalance.
Over time, you should keep your board apprised of any disagreements or conflicts and allow them to try to help you work through it. In all likelihood, all of your board members have lived through many founder disputes and can help refocus the conversation toward what is best for the overall company. Don’t try to hide it from them. Burying your emotions and disagreements is not a long-term solution.
That said, you should not use your investors or board to create a power imbalance. Do not leave your co-founder off critical emails or calls. If you’ve elected to bring someone on with the co-founder title, you must treat them as such in all communications.
If you and your co-founder(s) cannot align on a long-term company mission with shared visions on funding, exit, equity allocations, etc., then you don’t have the right co-founder. It’s OK to speak to multiple potential co-founders and even to pivot if you identify any red (or even yellow) flags. Put in all of the work early to see if you have the right fit.
Like all healthy relationships, once you’ve selected a co-founder, the work doesn’t stop. You must put in effort to ensure the lines of communication are open. This requires continuous, conscious effort for what will likely be many years.