Updated: Jul 18, 2020 at 11:30pm
Created: Jul 18, 2020 at 10:56pm

Co-founder setup can be different by industry, so this content's general scope is related to tech startups. If your industry is outside of tech-as-a-primary, then think of adding an industry expert (e.g. retail, bio, etc.) It's not a must, but some industries have a lot of tacit knowledge that can be picked up while working in it, so will give you some leverage when getting to product/market fit.

First of all, startup can be pretty hard. Starting is the easy part. You just need to get over the initial mental hurdle and some initial capital to pay for the costs in the first couple of months. But the actual execution and pushing through to sustainable survival is the difficult part.

In the world of startups, there are exceptions to every rule. But that does not mean you should bet your company and life on being an exception for every aspect. Doing a startup itself is already an exception and getting it to a decent level of success too is a very rare exception. So don't try to innovate everything. Learn from the best practices.

Some rare exceptions, where companies find product/market fit really early on, or is a repeat-founder/has a big seed check to start with, execution can be a bit easier, but in majority of the cases, you will most likely to grind your way towards product/market fit and it will be a challenging journey.

Solo-Founder vs Co-Founders

Being a solo-founder is you have nothing to balance you, when you get off the rails mentally. When you lose momentum, there's no real thought-partner to pace with you, so the chance is that you give up early. That's why early stage investors and accelerators generally prefer having a small co-founding team. Usually 2-3 co-founders are ideal, but there are cases where 4 or more are co-founders. My recommendation rule-of-thumb is, if you can all sit in a small dinner table at a restaurant, it's okay. If you need to start separating out tables, that's a bit too much. So, up to 4. Preferably 2-3.

Aligned values, augmented skills

The key to finding the right co-founder is making sure you are aligned in the values, but skills are augmented. If you are a business person, you will need a technical co-founder. If you are technical, but need someone with business acumen, go do that. If two of you are technical, then the third person can be that business savvy person.

This will help you broaden your perspective, and cover the different areas of building the company. Unless you've built a billion dollar business before, you probably lack most of the knowledge to build and run the company (and that's okay) as long as you go with an assumption that you need other people to augment you. And if you have built a billion dollar business before, you already know this.

Aligned values

It's very important to have alignment in values. If one person believes in 100-hour weeks & work-life harmony and the other believes in 40-hour weeks & work-life balance. You got a problem. Discuss your values and beliefs on what great work, great company looks like. Imagine what it'll feel like when you reach 100 employees or even a 1000. (of course, many of these will change as your company matures, but test the boundaries of the values). You may learn that your co-founder does not want to build a big company, while you want to build a company with 10,000 employees. Make sure the co-founders know what they are all agreeing into. If possible, define your company core values early and evolve them over time.

Augmented skills

Make sure the co-founders roles & responsibilities (R&R) are clear. This does not mean that co-founders only do what's defined as their R&R. But directionally, who owns/decides what, and what's the decision making principle/process among the co-founders will be very important. Your skills need to augment each other as much as possible, to draw a complete picture of building an early-stage company. If your areas overlap too much, but other critical skills are missing, find the person to fill those gaps.

A core benefit of having a co-founder is that your company will have multiple pillars to sustain your structure. From R&R perspective, but also emotional support. It's very rare for an individual to take on the full burden of building the company by oneself, so sharing it with a few folks will help you go much much further.

Going horizontal & burnouts

It's very likely that your co-founders will feel some level of burn out in the first 1.5-2 years. I call this "entrepreneur puberty" where people become really stressed out, emotional, resentful, get into huge fights, and just really tired. It's likely that co-founders may blame each other for mistakes & failures, even insult each other, if the company has not reached product/market fit yet. Just know that when this day comes, it just means that people are burnt out. Don't rationalize the hate or blame. You are just burnt out. (Read more about [[Burnouts]])

The first goal of the co-founders is to get to product/market fit. If people can support each other along the way and problem solve to this point, you guys have done your job. After this, if the product/market fit is strong and the company starts to grow significantly, if the co-founders continue to add material value to the growth, that's the super star and exception. In many cases, co-founders will become more of comrades and the elders of the company to reinforce your culture and values. Some people scale much more than others, but it's rare that people will continue to scale forever.

At one point, you may need to recruit your executive team above them, and as painful as this may sound, for the company to grow (and at this point, company will likely to have a life of its own, like a superorganism), this transition will be crucial. Again, there are many many exceptions, and the key is to know when someone is scaling or not, and provide feedback and opportunity to continue to grow, but not to a point where the team suffers.

Ownership distribution

While some people advocate equal split, more often than not, it's rarely 50/50 or 33/33/33 split. Read [[Decision Making]]. Consensus/vote/unanimous decision making should be avoided in most cases (unless for trivial and fun things). There's really no such thing as equal distribution of responsibility. Having a clarity on who makes the final decision (and therefore bare the responsibility) removes the burden and increase the velocity of the execution.

The only thing that startup has advantage over bigger companies / incumbents is the speed of execution and learning. This is only possible by fast decision as decision often become the bottleneck of execution.

Again, there are exceptions, but having a non-equal ownership is time & battle-tested approach, so pick your poison carefully.

🖇 2 Linked Nodes