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“Just find a co-founder” is some of the worst advice we can give new entrepreneurs.
A great co-founder can dramatically improve your odds of success. They can bring skills you don’t have, challenge your thinking, carry part of the load and help turn an idea into a real company. But the wrong co-founder can be far more dangerous than having no co-founder at all. The problem often starts in college. A few friends sit around talking about an idea. Everyone gets excited. Suddenly they’re business partners.
I saw this firsthand when I invested in a small company started by four friends. They generated millions of dollars in sales, but within two years they filed for bankruptcy. These were smart, entrepreneurial young guys who later succeeded in other businesses. But they hadn’t organized themselves around their individual strengths. Everyone gravitated toward the job they wanted instead of asking: Who should actually be doing what?
That experience reinforced something I’ve learned repeatedly over 30-plus years of starting companies: Never pick a co-founder simply because you like them. Pick them because the two of you are stronger together than either of you is apart.
Here’s the three-step process I recommend.
Step 1: Profile yourself before you profile them
The first person you need to understand when choosing a business partner isn’t the potential co-founder. It’s you. What are you exceptionally good at? What are you mediocre at? What do you hate doing? What kind of work gives you energy?
I’m an idea guy. I love strategy, sales, relationships and figuring out where the next wave is coming from. My brother Bill is different. He understands the plumbing and wiring behind technology far better than I ever could. Early in my career, that difference became an enormous advantage. We weren’t two people with identical skills fighting over the same territory.
Steve Jobs and Steve Wozniak are the classic example. Woz had extraordinary technical ability. Jobs brought a different set of strengths. They weren’t clones. They were complements. That’s why I’m a big believer in personality profiling. You don’t need to be good at everything. You need to understand what you’re good at and surround yourself with people who are good at what you aren’t.
Write down your five biggest strengths and five biggest weaknesses. Then make a second list titled “What this business needs that I don’t bring.” That second list is the beginning of your co-founder job description.
If you’re a visionary, you may need an operator. If you’re analytical and process-driven, you may need someone who thrives on people and sales.
Step 2: Compare values before you compare equity
Different skills are an advantage. Different values can be a disaster. I learned this the hard way. I once had a business partner whose values around money and the company were fundamentally different from mine. Spending became a constant source of tension. Eventually, the differences became too great, and I had to end the partnership.
No personality profile could have fixed that, because the problem wasn’t personality. It was values. Before you agree to become co-founders, answer some uncomfortable questions:
- How much money is each of you willing to risk?
- When should founders start taking meaningful salaries?
- If the company makes money, do you distribute it or reinvest it?
- What happens if one founder works 80 hours a week and the other works 40?
- If someone offers $10 million for the company, do you sell?
- What lines won’t you cross to win?
Above all: What does success actually look like to you?
One founder may want to build a $10 million company, sell it and start another. The other may dream of spending 20 years building a billion-dollar company. Neither ambition is wrong, but put those two people together without discussing it and you’ve planted a bomb with a very long fuse.
Write down your answers separately, then compare them, à la “The Newlywed Game.” This is a relationship you could be in until retirement if it goes well. Take it seriously. You don’t have to agree on everything. But if you find fundamental differences around ethics, money, ambition, risk or how people should be treated, pay attention.
Skills should complement. Values should align.
Step 3: Stress-test the relationship before you sign
A co-founder relationship is a lot like a marriage with a cap table. Treat it that way. Entrepreneurs sometimes meet someone, get excited about an idea and within weeks are talking about a 50/50 split. Slow that process down. Instead, create a test.
Pick a meaningful milestone and work toward it together before making the relationship permanent. Build the prototype. Land the first 10 paying customers. Launch the first product. Try to raise the first $100,000. Make it difficult enough that something is likely to go wrong.
I want to know what someone is like when the website crashes, the biggest prospect says no, the product is late or you’re almost out of cash with payroll coming. Pressure reveals things conversation doesn’t. Watch what happens. Do they blame everyone else? Do they disappear? Can they make decisions without perfect information? Will they do boring, unglamorous work? Can you challenge each other without turning every disagreement into a personal fight?
Give the test enough time to include some bad days. Then answer one question: After seeing this person under pressure, do I want to own a company with them for the next 10 years? If you hesitate, don’t ignore it.
My three green lights
Before committing to a co-founder, I want three green lights:
- Profile: Does this person bring strengths I don’t have?
- Values: Are we fundamentally aligned on money, people, risk, ethics, ambition and what success means?
- Pressure: Have we worked together long enough to know how each of us behaves when things go wrong?
If any of those lights is red, don’t rationalize it because the person is your roommate, college buddy, cousin or the smartest programmer you’ve ever met. Walk away from the partnership.
An uncomfortable conversation today is cheap. Having it five years from now, when you have millions in revenue, employees, investors, lawyers and both your names on the bank account, can be extraordinarily expensive.
And remember, you don’t necessarily need a co-founder. You can hire expertise, outsource functions, recruit advisers and bring in executives as the company grows. Going it alone creates problems you can solve. Choosing the wrong partner can create one that threatens the entire company.
Before you give someone half your company, profile yourself, compare your values and put the relationship under pressure. You’re not looking for somebody you’d enjoy having a beer with. You’re looking for somebody you’d still want beside you when the building is on fire.
“Just find a co-founder” is some of the worst advice we can give new entrepreneurs.
A great co-founder can dramatically improve your odds of success. They can bring skills you don’t have, challenge your thinking, carry part of the load and help turn an idea into a real company. But the wrong co-founder can be far more dangerous than having no co-founder at all. The problem often starts in college. A few friends sit around talking about an idea. Everyone gets excited. Suddenly they’re business partners.
I saw this firsthand when I invested in a small company started by four friends. They generated millions of dollars in sales, but within two years they filed for bankruptcy. These were smart, entrepreneurial young guys who later succeeded in other businesses. But they hadn’t organized themselves around their individual strengths. Everyone gravitated toward the job they wanted instead of asking: Who should actually be doing what?