According to Professor Wassermam, 65% of high-potential startups fail as a result of conflict among co-founders. Needless to say, there are many benefits of having a cofounder when you start your own start up, however, I wanted to argue why even the “best cofounder” would be the biggest risk of your start up’s failure.
- Someone you trust and shares similar views.
The journey of starting a company is difficult and entrepreneurs tend to seek cofounders whom they have worked with or known for a long time. Thus the usual suspect are friends and colleagues, some even shoot for spouses or families. This is particularly true for college entrepreneurs who start their businesses out of their dorm rooms.
While it is exciting to launch something together with your closed ones, many underestimate the need to set expectations right right and fail to put together formal legal documentations. The close relationship also makes it difficult to bring up topics like “equity splits” and “I should get a bigger share”.
Even when you have all the documentation and expectation in place. When business is not going well and views diverge, you will just spend most of your time dealing with infighting coupled with personal conflicts.
When business is going well, everyone tends to overvalue their contribution to the success and asks for a bigger share. We have seen so many cases such as SnapChat and Yik Yak where fraternity start up teams suing over their classmates on shares.
- Someone who is not a friend/family but has complimentary skill sets/resources.
The most dramatized example is the Facebook Story. According to Saverin, Zuckerberg approached him when he started Facebook as Saverin was the “business guy” with the resources to invest while Zuckerberg could focus on the site. Saverin served as CFO and was tasked to raise funding and develop business. The fall out began when Saverin decided to stay in New York for an internship while Zuckerberg and the team moved to Palo Alto. Saverin was forced out completely until he settled in a lawsuit many years later.
So what went wrong? Again, it is also expectation management. Moreover, everyone has their own priorities in life and might make life decisions that are not the best for the business, especially when your business partner is not personally acquainted with you.
So no cofounder at all?
Paul Graham’s parting advice from YC for start up is “Get a co-founder”.
I am not entirely nullifying the concept of co-founder, but I think rather than spending that much time searching for the perfect partner, we should see co-founder simply as the first employee with a larger equity stake.
At the end of the day there should only be one commander in chief and figurehead, just like everyone relates Facebook to Zuckerberg, not Dustin Moskovitz. There are also many successful companies with a single founder such as Amazon and DropBox.
Even when you have a cofounder, make sure there is substantial difference in shares and the skill sets of him/her replicable. At the end of the day, you never know what will happen.