Building a startup alone is not an easy task. That’s why many startups are launched by teams. The time, effort, and skills required to launch a startup are often too much for one entrepreneur alone.
So, should you find a co-founder to make this easier?
There are advantages and disadvantages to having a co-founder. Starting a startup as a solo founder often means retaining a larger share of equity in the business and more decision-making authority; however, having more than one founder has many advantages of its own.
Here are the pros and cons of having a startup with co-founders.
Pros of Having a Startup Co-Founder
Let’s start with the positives:
When thinking of the pros of having a startup co-founder, “divide and conquer” is one of the key concepts that comes to mind. Startup companies require a lot from founders, and these tasks can become overwhelming for just one individual.
Co-founders help better manage all aspects of the startup by sharing responsibilities, dividing up tasks based on personal skill sets in order to conquer the company’s goals.
In addition to sharing the responsibilities, co-founders are accountable partners as well. Co-founders have skin in the game: they are accountable to ensure that tasks are completed and that the goals of the organization are mutually accomplished.
Co-founders always have your back. Even the most talented founders encounter problems and failures in their ventures. Having a co-founder ensures that you don’t have to face it alone. Co-founders are there to provide support as you encounter and overcome the challenges you face and to help share the burden.
Like you, your co-founders will invest their time, effort, and money into your startup. This makes them both reliable and relatable. Sometimes they may even be the only person who truly understands your concerns.
It is pertinent for co-founders to support and hold each other accountable for reaching the company’s goals.
Broader Skill Sets
No one person can be an expert at everything. It’s ideal to choose a co-founder that knows the business you are going into while also having a complementary set of skills and strengths to those that you carry. Co-founders each come with their core areas of expertise — giving the startup a broader range of the skills needed to become successful.
Ideally, each founder should be involved in the startup due to their specific skill set. Having complementary skill sets helps in carrying out the broad range of tasks that startup founders often need to complete.
As a founder, you have a vision for everything your startup is about — from the services you provide, your clientele, the solutions you’re offering, even all the way down to how the company is run on the day-to-day.
Adding co-founders also adds more perspectives and unique ideas to the mix. With open communication, founders are not only able to express their point of view, but they also have the opportunity to bounce those ideas off of each other.
When you are able to brainstorm with your co-founders, each of your individual ideas have the potential to grow and develop into something greater, creating more opportunity for new ideas that better the company, as well as benefit all parties involved.
Better Decision Making
As the saying goes, two heads are better than one. Co-founders are critical to your startup’s decision making since they provide additional viewpoints and opinions.
Co-founders are a great source of input and advice when working through decisions. You’ll need someone who won’t take your idea for granted but who will think critically and contribute new and beneficial ideas.
Another benefit of having a co-founder is the additional resources each party offers. There will be challenges that your business faces as it grows. Co-founders offer different ideas, strengths, and an extra set of hands in addition to access to their networks and resources.
Co-founder(s) who come to the venture with resources of their own are very helpful for cash-strapped startups. Co-founders often have access to resources that may be different from yours, including capital as well as a network of experienced professionals. Networks can be just as valuable as your co-founders contributing capital to the venture, and tapping into other networks is great for receiving advice and assistance with growing and expanding your business.
Easier to Find Investors
Co-founders make it easier to find investment. In addition to the additional resources and access to your co-founders’ networks, companies with multiple founders have an easier time securing investments.
Investors tend to prefer to invest in startups that are led by a team over those that are led by a single individual. This is partly because they have more trust in companies with multiple founders and thus are more likely to finance them.
Cons of Having a Startup Co-Founder
One of the major cons of having a co-founder is sharing equity. When you take on co-founders, you are going to give up some of your stake in the company. Although there are countless ways of splitting equity, it is something that requires significant considerations.
To avoid issues and disputes about equity, it is best to have open conversations about each co-founders’ overall expectations and outcomes from the start. Co-founders mutually have to be comfortable with the amount of equity each will receive and the vesting schedules. By setting expectations early on, co-founders can comprise and craft mutually agreeable terms and conditions.
When taking on co-founders, equity decisions should be detailed in a Founders’ Agreement. Not only are founders’ agreements great for resolving disputes, but they can also be used as a tool for reminding co-founders exactly what it was that they signed up for.
Taking on a co-founder is also a huge commitment. First, you must find a co-founder that shares both your vision and your dedication and commitment. Finding a co-founder who shares your vision and motivation is a major part of the screening process when selecting a co-founder.
Having a co-founder who isn’t committed can result in disagreements, participation issues, and can even cause your co-founder to back out of the startup.
It is important to find a co-founder who believes in your vision so much that they are committed to doing everything it takes to see it through. Having a committed co-founder is pertinent to the success of the startup. If you are willing to devote all of your time, effort, and finances to your startup, it is important that your co-founders share your enthusiasm, dedication, and commitment.
Another con of taking on a co-founder is concerns over levels of time and participation each co-founder devotes to the business. Disputes among co-founders often start over who should be doing what and comparisons of each founder’s workload.
Sometimes it can be difficult to persuade your partner to commit to the same degree of participation as you. Perhaps your partner may not be as passionate or devoted to the company’s principal goal as you are. In other cases, your partner may feel that you aren’t matching or exceeding their efforts in participation.
Issues with participation can lead to further disagreements and a lack of commitment, and these should be avoided. One way to do this is to spell out each co-founder’s obligations right from the start in a co-founder’s agreement.
Not everyone has the same viewpoints, and disagreement is a common issue that leads to a co-founding team's demise. A disagreement between co-founders might mean the difference between life and death for a company.
Disagreements destabilize the startup’s foundation leading to a number of issues for the future of the company. When co-founders have disagreements, disputes can lead to a hostile work environment — stunting the growth of the company with personal perspectives and ideas that co-founders can’t mutually agree upon.
How to Choose the Right Co-Founder
Finding the right co-founder highly depends on your nature and the nature of your startup. Co-founders have to be able to come together, communicate, and make all of the crucial decisions that need to be made for a startup.
Think about what it takes in a person, in a relationship, to be able to agree on and make optimal decisions for your startup. Here are some things you should consider:
- Complementary Skills
Most importantly, you need to be able to get along with and communicate with your co-founder(s). No matter how much a potential co-founder brings to the table in resources, commitment, or skills and expertise, if you cannot communicate with and get along with your co-founders, your startup is likely to flounder or fail.
Second, you need to find co-founders that share your vision and commitment to your startup. When your co-founders share the central vision of your startup, they are much more likely to be passionate about the startup and be dedicated and committed to the idea you are pursuing.
Third, you should look for co-founders who have complementary skills and expertise to create the synergistic energy that magnifies the impact of launching a startup with co-founders. When your co-founders have complementary skills, it allows each co-founder to work in sync using their strengths and expertise.
How to Create a Founders’ Agreement
When you do choose a co-founder for your startup, you will need to draft the appropriate agreements between the startup’s founders. This should be initiated in the earliest stages of forming your startup by drafting a founders’ agreement. Additionally, this should be defined in-depth in the formation documents for your LLC or corporation.
The founders’ agreement lays out the roles, responsibilities, liabilities, ownership, and vesting schedules among the co-founders of a venture.
Founders’ agreements should address any possible issues that may arise concerning the ownership, contribution, and decision-making power of the founders. The ideal founders’ agreement should lay out:
- IP Ownership
- Founders’ Roles
- Decision Making
- Issuance of Shares
- Founders’ Exits
Consider hiring a startup lawyer to help draft or review your founders’ agreement. Read our guide on how to find a startup lawyer for information on finding the right attorney for your startup.