Prosperous startups have many factors, the most crucial being the right team. Specifically, the right co-founder.
The process of finding co-founders for your startup journey is critical. According to Noam Wasserman's book, The Founder's Dilemma, 65% of startups fail due to conflict among co-founders.
It sounds daunting to find a co founder for your startup and you may be wondering; Why do you need a co founder in the first place? Where to find him/her? And how to pick the right one?
We're here to answer all these questions and to clear your doubts to make the process of finding the right co-founder a lot easier.
What is a Startup Co-Founder
A founder is an individual who starts a business with the help of other people. The founder of a business is the person who has a defined idea, while a co-founder accompanies the founder in establishing and converting the startup into a rewarding business.
For instance, Mark Zuckerberg came up with the idea of Facebook. However, he wanted to expand his business model and brought on four of his friends to help him- Andrew McCollum, Eduardo Saverin, Chris Hughes, and Dustin Moskovitz. They took on their major responsibilities and became recognized as the co-founders of Facebook.
The Benefits of Having a Startup Co-Founder
Starting and running a business requires a lot of responsibility- if you're at least a two-person team, tackling these responsibilities will be made a whole lot easier. Here are some of the top reasons why you should find a co-founder:
Diverse Skill Sets
Each individual has their own respective skill set. When looking for a co-founder, look for a person with different skills than yours. What's a weakness to you might be a strength to your ideal co-founder and vice versa.
While you're an expert in your specific skills, your potential co-founder will take on what's challenging to you but is a skill to them. A diverse skill set with technical expertise is an important thing for a well-rounded business.
For instance, you might be good at marketing but battle with numbers- finding a co-founder that's good with finances would be beneficial to the business.
Easier to Secure Funding
When you're looking to secure funding or join a business accelerator program, having a founder is a preference for potential investors. The same is true for when you require financing from banks.
Two founders instead of a solo founder reassure investors that your startup will succeed and progress quicker. Investors know that more than one founder brings in combined skills, joint decisions, commitment, and better long-term performance.
Expand Your Horizon
When working on your own it's easy to get tunnel vision. A co-founder will help expand your horizon by providing a different perspective. They might see things that you have otherwise missed. This is especially important when it comes to making key decisions for your business.
Share the Load
A lot of work is required when starting up, so there will be long days and sleepless nights. One individual can't handle everything by themselves. Founding members help share the load, making life easier.
Each entrepreneur comes with their co-founder network, so double the odds and make use of their network. Your business can be taken to the next level with the right type of connections, which is extremely helpful in the early stages of a startup.
What Traits You Need to Look for In Your Founding Team
The majority of co-founders share several key characteristics. Even if you find a great co-founder with all of these traits, it doesn't guarantee success, however, the chances of failing will be reduced.
When looking for a co-founder, you need to find an individual that shares the same goals and aspirations as you to align your vision together.
Shared Core Values & Principles
Personality is ingrained in people through life experiences. You and your business partner must share the same principles. If your views conflict on major principles, it will impact your ability to collaborate and grow the startup together.
A startup requires lots of time, money, and effort- it's a huge investment. Having a startup co-founder who can carry your responsibilities and tasks with integrity is vital for your business to be a success.
When times get tough, passion is the only thing that will keep you going. It's important to find a co-founder that feels just as passionate about the business as you do. If a founding member is only in the business for money it will be impossible to overcome the obstacles when times get rocky.
A strong value for a co-founder to have is the concept of constant improvement. There's nothing better than an individual who accepts their mistakes and embraces suggestions humbly. The right person is willing to learn and improve their knowledge.
The Importance of a Startup Founders Agreement
A Founders Agreement is a binding legal agreement that outlines the obligations, rights, and interests of the founders involved in the startup. The responsibilities and respective duties of each founding team member are outlined in the agreement. It's crucial for startups to have a Founders Agreement in place, to avoid future disputes and conflicts.
Co-founder compensation is the ownership stake each founding member has in a business.
The main reason to allocate co-founder compensation is so that each member of the founding team is appropriately rewarded for their contribution. Whether it be for their time, expertise, money, relationships, or energy, allocation of compensation is the key to avoiding disputes later down the line.
Co-founder compensation acts as both a safety net and an incentive. Without compensation, founders won't have the financial motivation to stay when times get tough. The greater the compensation a founder has, the greater their interest will be in a successful venture.
Equal Compensation or Not
Not every partner brings the same benefits to the table. This is why startup founders are wary of splitting equity at first. Especially if they came up with the business idea or are bringing in revenue to pay the bills. These are all valid reasons, but there's a problem with this type of approach- it isn't beneficial long-term.
There needs to be some sort of balance at the beginning to avoid problems later down the road. For instance, if the founder takes 90% of the equity and the co-founder is only given 10%, the entrepreneur will likely feel used.
There are numerous ways to split equity, but firstly, there are several important aspects to take into consideration:
It Takes Years to Build Successful Startups
Startups aren't built in a day- it takes 7 to 10 years for a business to be truly successful. If you've been working for a few months before your co-founder joins, it doesn't make much of a difference. Small variations in the first year of your startup don't justify different founder equity. To have committed co-founders, split the equity fairly.
Startup Founders & Co-Founders Bring Different Skills to the Table
Each individual has their own set of skills that they bring to the table. During the development of your startup, each set of skills is essential at a certain stage.
Co-Founders Are Business Partners
Co-founders aren't employees, and they shouldn't be treated as such. Co-founders are business partners. Equity isn't based on how many hours a founding member works, but on the value, they bring to the business. For instance, a prospective co-founder may be good at marketing and bringing in early capital which you need to get the startup off the ground.
Startups Require Execution
Your startup wouldn't exist if it wasn't for your idea- but, startups require implementation. Who executed your idea? You and the technical co-founder of course. Giving undue preference to the founder that came up with the startup idea is unfair, as the co-founders assisted with getting the product or service to market and generating its initial traction.
Value Your Co-Founders and Others Will Too
Investors consider an equity split as a cue on how the startup founder appreciates his or her team of co-founders in the startup world. If you give your co-founder a small equity share such as 1% or 10%, investors will wonder why and come to their own conclusions. Investors might think your founding members aren't impactful or good for the startup. One of the top reasons an investor decides to fund a startup is a quality team, so why give the idea that you don't highly value them?
To prevent your startup from failing and increase its chances of success, a motivated team of like minded individuals is needed. The more stake a co-founder gets, the more motivated they will be.
Where to Find a Co-Founder
You can find co-founders in a personal relationship. This could be a person you've worked with before, a friend, or a family member.
If you don't know anyone who fits the bill in your existing network, there are plenty of places where you can find a co-founder. Here are some online platforms that offer an entrepreneur network to find people to co-found with 23 Places to Find the Right Co-Founder for You.
It's hard to solve challenges on your own, and founders face many. To have a successful startup, finding the right co-founder for your startup is crucial.
A good co-founder can be the difference between the success and failure of your company in its industry. The best partner is the one that shares the same passion and vision as you and has complementary skills. They are also trustworthy and dedicated.
Bringing on a partner is one of the most important decisions you will have to make. If executed correctly, the result will be a long-term partnership and faster growth for your businesses.