How Do I Pick a Startup Co-founder?

Starting a successful startup requires a great idea, a solid business plan, and a team of dedicated and skilled people. But the most critical decision is choosing the right co-founder. Noam Wasserman, the author of The Founder’s Dilemma, found that 65% of startups fail because of interpersonal tension within the founding team. So, picking the right co-founder really matters, and it’s likely that the co-founder relationship will have a higher impact on the success or failure of the startup than any other factor.

The co-founder relationship is the most important in any business. Selecting someone who complements your skills, shares your passion and values, and can handle the challenges and uncertainties of a startup journey can make or break your venture. In this article, we’ll explore some of the key factors to consider when selecting a co-founder and provide guidelines to help you build a strong and resilient partnership.

Passionate About Solving the Same Problem

A shared interest in solving a problem is paramount for co-founders, particularly because passion fuels innovation, persistence and a willingness to make sacrifices. The early stages of a startup are rife with challenges and uncertainties; the sheer dedication that springs from passion is often the driving force that pushes co-founders to work long hours, continuously learn and keep going even when faced with setbacks. In addition, startups typically require a 10-year commitment. Therefore, having a genuine passion for solving a problem provides the partnership with the endurance needed to persist over the years.

Additionally, the energy and enthusiasm that come with being passionate about solving a problem are contagious. It not only motivates the co-founders but can also inspire the entire team, creating a highly motivated workforce. Investors and stakeholders are also more likely to back a venture when they see that the founders are deeply committed and passionate about what they are doing. Essentially, the co-founders’ shared passion becomes the lifeblood of the startup, fostering a culture of innovation, resilience and a relentless pursuit of goals. This shared fervor is often what sets apart successful startups from those that fizzle out; it’s the indefatigable spirit that navigates the venture through stormy waters into eventual success.

Shared Values

The foundation of any strong partnership is shared values.

Shared values among startup co-founders are indispensable as they form the bedrock for the company’s culture and decision-making. Co-founders with harmonized values are more likely to agree on fundamental decisions. Additionally, these shared values reverberate throughout the organization, attracting employees, partners and investors that align with the company’s ethos. This also nurtures a sense of purpose among team members, which boosts productivity and morale. Moreover, in a consumer-conscious era, co-founders with synchronized values project a consistent and genuine brand image, which is crucial for establishing a reputable and sustainable business through strengthened stakeholder relationships.

Some startup examples are:

• Warby Parker. Co-founded by Neil Blumenthal, Dave Gilboa, Andy Hunt and Jeff Raider, Warby Parker made a name for itself not just for its eyewear but also for its social entrepreneurship. One of its core values is to make a positive impact in the world, exemplified through their “Buy a Pair, Give a Pair” program, which donates a pair of glasses for each one sold.
• Airbnb. Co-founders Brian Chesky, Nathan Blecharczyk and Joe Gebbia have embedded a culture of belonging and inclusiveness in Airbnb. The company has also focused on trust and authenticity, ensuring that hosts and guests can interact in a secure environment. Airbnb’s mission is to create a world where people can “Belong Anywhere.”
• Asana: Asana, co-founded by Dustin Moskovitz and Justin Rosenstein, emphasizes fostering an environment of transparency and mindfulness in the workplace. Their product itself is designed to enable better organizational communication and reduce work about work.

It’s important to remember that the values of a company might evolve over time, and actions should be continuously evaluated against stated values to assess their ongoing commitment.

Builder and Seller

When starting a company, it’s important to have a team that covers a range of skills needed to build and grow the business. By choosing a co-founder whose skills and knowledge complement your own, you ensure that key competencies are covered. For example, if you’re adept at software development, partnering with someone who excels in business development can make a formidable team. Generally speaking, a good founding team needs a builder and seller. Both types are vital for a balanced and successful startup. Here’s the distinction between the two:

Builder Startup Founder.

• Focus on Product. Builders are typically focused on creating and developing the product or service. They are often engineers, designers or product managers.
• Problem Solving. They excel at problem-solving and are generally very detail-oriented. They can spend hours perfecting features and thinking through user experiences.
• Technical Skills. Builders usually have strong technical skills. They know how to create, develop, and refine the product or service that the startup is based on.
• Long-term Vision. They often think about the long-term prospects and sustainability of the product, continually seeking ways to innovate and improve.
• Introverted. Builders may tend to be more introverted, preferring to spend time working on the product rather than promoting it.

Seller Startup Founder.

• Focus on Sales and Marketing. Sellers are focused on selling the product or service. This can include marketing, sales, partnerships, investors and customer relationships.
• People Skills. They typically have strong people skills and are good at networking, negotiations and building relationships.
• Big Picture Thinking. Sellers often think in terms of the big picture and are always looking for opportunities to grow the business, even if the product isn’t perfect.
• Risk-taking. They are usually more willing to take risks, especially if it means gaining a large customer or entering a new market.
• Extroverted. Sellers tend to be more extroverted, thriving in social situations and public speaking.

In an ideal scenario, a startup should have a combination of builders and sellers. The builders ensure that the product or service is of high quality and meets the needs of the customers, while the sellers ensure that the product or service is effectively marketed and sold to those customers. Their combined skills and focuses can complement each other and drive the success of the startup.

Stress

Y Combinator Partner Harj Taggar notes that the most important thing to know about someone before starting a business with them is how they handle stress. And the second most important thing is how they will help you handle stress.

Understanding how a potential co-founder handles stress is crucial because the journey of a startup is often rife with high-pressure situations and unforeseen challenges. A co-founder who crumbles under stress or becomes erratic and impulsive can create a volatile environment, which can be detrimental to decision-making and team morale.

Conversely, a co-founder who remains composed and can think clearly under pressure can be a stabilizing force within the company. Additionally, it’s important that your co-founder is not only able to handle their own stress but is also supportive in helping you manage yours. The mutual support during stressful times can foster a resilient partnership, which is vital for navigating the ups and downs of the startup journey. Through effective stress management, co-founders can make better decisions, maintain a positive work environment and ensure that the company stays on track even in the face of adversity.

Money

It’s essential for potential co-founders to be open about finances. They need to have the “money talk,” a crucial conversation between startup co-founders where they openly discuss personal and company financial expectations. This conversation is vital for setting clear financial expectations, fostering transparency, and ensuring that both parties are on the same page regarding the financial commitments and goals of the startup.

During the “money talk,” co-founders should address a series of important questions:

1. What is your current personal financial situation? Discuss your personal financial obligations, savings and risk tolerance. Could you live off savings for five years? Or, do you need a salary next month?
2. What are the financial goals of the startup? Align on short-term and long-term financial targets, including revenue, profitability and growth milestones.
3. What are our salary and compensation expectations? Discuss if and how co-founders will be compensated through salary, benefits or other means, especially in the early stages.
4. How will equity be distributed? Deliberate on how ownership of the company will be divided among co-founders and what, if any, vesting schedule will be applied.
5. How will we approach fundraising? Talk about whether you will seek external funding, and if so, what kind of funding (e.g., venture capital, loans, grants) and how much.
6. How will financial decisions be made? Define the decision-making process for financial matters and how disagreements will be resolved.
7. What are the exit strategies? Discuss potential exit strategies such as an acquisition, initial public offerings (IPOs) or other scenarios, and what conditions would trigger an exit.

It is important to approach the “money talk” with openness, honesty and a collaborative mindset, as the outcomes of this discussion will have a long-lasting impact on both the relationship between co-founders and the success of the startup.

Know Someone Well

At this point, you may have figured out that it’s pretty difficult to ascertain whether a person has a passion for a similar problem, similar values, is complementary to your skill set, handles stress and is aligned on finances if you don’t already know them really well.

Selecting a co-founder you know well, such as a longtime friend or co-worker, can be advantageous for your startup because familiarity breeds trust and a deeper understanding of each other’s strengths, weaknesses and values. When the foundation of a working relationship is built on a history of trust, communication tends to be more open and efficient. Moreover, having prior knowledge of each other’s work ethics and problem-solving approaches can result in better synergy and a more harmonious decision-making process, which are invaluable assets in the unpredictable and demanding environment of a startup.

As you’re trying to understand your potential co-founder better, here are some questions to consider:

• 10 Key Questions to Discuss Before Deciding to Work Together– Y Combinator
• The Best Questions to Ask a Potential Co-Founder Have Nothing to Do With Work – Esther Perel

Start by Building a Project Together

I think every company should start as a project and should remain a project for as long as possible before evolving into a company. A successful company is likely a 10-plus year commitment, but a project is a much lower commitment. It could just be a weekend or maybe an ongoing commitment of a few hours a week. Projects are fun experiments where people can work together to learn about a specific idea and each other. Starting with a project is like dating before you get married.

Working on a project together before officially starting a company can serve as a litmus test for the partnership and offers several advantages:

• Assessing Compatibility. Engaging in a project allows both parties to evaluate their working chemistry. It’s an opportunity to see if communication styles, decision-making approaches and overall values align. It’s one thing to discuss business over coffee; it’s another to collaborate on actual tasks.
• Testing Skills and Competencies. A preliminary project gives you a practical way to assess each other’s skills and competencies. You can evaluate if the skillsets claimed are genuine and if they complement yours as needed.
• Understanding Work Ethic. Through a project, you can observe each other’s commitment, reliability and work ethic. You’ll see how much effort and time the other person is willing to invest and whether they can meet deadlines.
• Handling Conflicts and Stress. Conflicts and stress are inevitable in any business. Working on a project can reveal how your potential co-founder handles conflicts and stress, and whether you can constructively resolve issues together.
• Validating Passion and Motivation. A project can be a measure of your potential co-founder’s true passion and motivation. Sometimes initial excitement can wane once the real work begins. It’s crucial to know if they remain motivated through the grind.
• Evaluating Problem-solving Skills. Startups need to solve problems efficiently. During a project, you’ll see how potential partners approach problems and if they can contribute effectively to finding solutions.
• Financial and Time Commitment. A project can be a smaller-scale test for financial and time commitment, which is vital in a startup. It allows both parties to see if they are ready to commit resources without yet diving into a full-fledged company.
• Minimizing Risks. If the partnership doesn’t work well during the project, it’s easier to part ways than after legally binding yourselves in a company. It acts as a safety buffer, preventing you from entering into a potentially detrimental partnership.
• Building Trust and Rapport. Successfully completing a project together can build trust and rapport, which are fundamental in a co-founder relationship. It sets a positive precedent for future collaboration.

In essence, treating a pre-company project as a trial run can provide invaluable insights and lessons. It can either solidify the foundation for a great partnership or help avert a potentially disastrous one. This practice ultimately reduces the risks involved in starting a company and increases the chances of a harmonious and effective co-founder relationship.

Conclusion

In conclusion, choosing the right co-founder is a critical decision that can make or break a startup. It requires careful consideration of various factors, such as shared passion, values, skills, stress management, financial expectations and compatibility. Selecting a co-founder who complements your skills and values, and who shares your vision and commitment, can increase your chances of success and help create a strong and resilient partnership. By following these guidelines, you can build a team that is well-equipped to navigate the ups and downs of the startup journey and bring your vision to life.