Founding a company can be incredibly exciting and many new entrepreneurs hit the ground with incredibly enthusiasm and energy, only to watch their new venture devolve into petty infighting before their Read more
Founding a company can be incredibly exciting and many new entrepreneurs hit the ground with incredibly enthusiasm and energy, only to watch their new venture devolve into petty infighting before their eyes. This problem is exacerbated by the fact that many entrepreneurs don’t have a huge amount of business experience, and very few have experience managing a company and working with equity partners. This results in a number of issues which could be easily avoided if the founding process was handled more professionally.
Two is the magic number
There is a reason that many of the most successful businesses today began with two co-founders. From Jobs and Wozniak, to Hewlett and Packard, to Gates and Allen, we see the dynamic duo over and over again. Why? Because two people can have a lively debate and reach agreement without having to resort to outvoting another or bullying someone into line. Three or more co-founders introduces founder politics and makes it more difficult to align interests and reach unanimous decisions. Inevitably, this results in one or more members feeling unheard and losing faith in the direction of the company - which spells death for the new venture, one way or another.
It can’t simply be any two founders, however. The great startups of the 21st century benefited from a duality of skillsets - typically coming in the form of a technical person and a people person. In the case of Apple, Steve Wozniak was a technical genius capable of building entire prototypes by himself, and while Steve Jobs certainly had some level of technical understanding his main strength was his vision and his ability to communicate it. Together, they were able to excite investors and members of the public about an idea, and then bring that idea into reality. A similar relationships existed between the founders of their biggest competitor, Bill Gates and Paul Allen, who brought the world Microsoft.
Work with your friends, but not because they’re your friends
Starting a business with someone you don’t know is asking for trouble. At the same time, working with someone you know is unqualified simply because they are your best friend is equally self-defeating. The balance exists somewhere in the middle. The best co-founders have an existing relationship and a history together, but also believe in each other's skillsets and compliment eachother well. Ultimately, anybody who starts a business together has to be comfortable spending a huge amount of time together and undergoing a massive amount of stress which will test their relationship. For that reason, it is vital that the co-founders believe in each other and get along well, otherwise the pressure will inevitably cause them to crack.
Working with a friend is a lot more fun than working with an associate or a stranger, but it also requires some forethought and planning. Anyone looking to found a company, no matter how small, should ensure that all co-founders have signed agreements on how the company will operate, how a co-founder can leave if they so choose and how their equity share would be distributed if that were to happen. All of these things are much easier to negotiate before the company exists and has actual value, and trying to negotiate them after the venture has launched is likely to create a huge mess.