Published in · 6 min read · Mar 12, 2024
The advice that single startup founders need co-founders to be successful is simply wrong. Before you rush into partnering with a co-founder, consider what the data says, potential downsides, and alternatives.
In this article, I explore why there is ample evidence to suggest that co-founders are often not worth it and what to do instead of hitching up with a random co-founder.
First of all, co-founder relationships are a very large and pervasive failure point for startups.
According to Harvard Business School professor, Noam Wasserman, “65% of high-potential startups fail due to conflict among co-founders.” Similarly, venture capital and private equity data aggregator CB Insights, found that two top reasons why startups fail are “disharmony among team” (7%) and “not the right team” (14%) often referring to founder friction and dysfunction.
Co-founder relationships can implode for various reasons such as disagreements about strategic direction or hiring, resentment about the amount of work other co-founders are putting in or the quality of their work, jealousy around recognition, arguments over equity and compensation, etc. Before you rush into a co-founder relationship, take time to understand the risks as well as the benefits.
Not only can co-founder lead to critical problems, single founders are actually more successful than multiple co-founder teams.
According to two MIT researchers, single founders are up to twice as successful as multiple-founder teams. Similarly, research conducted by Crunchbase showed that startups led by a single founder were most likely to raise over $10mm and achieve an exit over multi-founder teams. Another study by NYU and Wharton researchers also showed that startups with one key decision maker (i.e. one founder) are most successful.
Data tells us that while co-founder relationships often lead to failure, single founders often outperform.
There are times, however, when entering into a co-founder relationship can be a great move. Co-founders can bring key skill sets, be extremely committed to building your startup, and help you through the many lows that you will undoubtedly encounter on your journey. Here are some things to look for when deciding which co-founder, if any, is right for you.
Do the potential co-founders have an established positive working relationship with you?
Co-founders often rush into a partnership despite never having worked together. That’s a huge leap of faith that is unlikely to work out. People have a wide range of working styles, preferences, and hang-ups. Think about your past. How many team members did you love working or interacting with? Probably the majority of your former teammates were fine, but could you imagine yourself spending the next ten years of your life with them?
When you enter into a co-founder relationship, it’s a long-term commitment, and it’s much safer to partner up with someone you know you work well with and you want to be around for years to come.
Do the potential co-founders have a complementary skill set and experience?
Not only do you want to make sure that you will have a great working relationship with your co-founders, but you obviously want folks who have complementary skill sets. If you are an engineer, you don’t want two more technical co-founders unless you are building a leading-edge technology. Instead, you want to build a team with experience in product design, engineering, sales, marketing, operations, etc.
Are the potential co-founders authentically and equally passionate about your business?
Another common driver of co-founder discord stems from the founders not being equally passionate and dedicated to the company.
It’s nearly impossible to find a co-founder with the same passion as you, but when the difference is significant, it can cause friction in the partnership. Less passionate co-founders might seem disengaged from the company, more pessimistic, not as hardworking, etc. Therefore, it’s important to gauge a prospective co-founder’s affinity for the problem and the mission.
Unfortunately, it’s very common that co-founders start out with a lot of initial passion, which quickly fades. The only way to suss that out is by working with them for a while before giving them a co-founder role and compensation package.
Above all, do not get a co-founder because an investor told you that you should!
Ask yourself why a co-founder might be valuable to you.
Co-founders bring skill sets that are necessary to build and grow your company. They can also provide moral and emotional support. Co-founders are much more than a checkbox for investors and accelerators. If that’s the case, ask yourself what skills and experiences you need on your early team to be successful.
Startups at the earliest stages really only have 5 domain areas that need to be filled: product development, marketing, fundraising, operations, and sometimes sales. Maybe within each domain area you can go one level deeper. For example, maybe within product development, you need product design, front-end engineering, back-end engineering, and QA.
Now ask yourself, to compile all the necessary skills and experiences that your early-stage team needs, do you need to have full-time contributors? Do they need to be compensated with a great deal of equity? Do they need a co-founder title to join your team? If the answer to any one of these questions is no, you likely do not need a co-founder. Instead, you can get creative and find what works best for you.
Recruit high-caliber operators for equity
If you need a high-caliber engineer, do you need to give him or her 30–50% of the company? Could you get one for 20%? The same goes for marketers, salespeople, operations experts, etc. Chances are that you’ll be surprised what great talent you can get without giving away half or nearly half of your company.
Recruit a team of part-time experts for equity
Another erroneous bit of startup advice is that you need full-time team members. Yes, it’s true that if your company is the only thing a team member is working on without a fallback plan, they will work harder to make sure you succeed. However, beyond that, the benefits to having a full-time team member are marginal. What you need is full-time work, not necessarily full-time team members.
For example, let’s say that you need 60 hours per week of top-notch engineering. If you got four incredible engineers, each working 15 hours per week in their spare time on your project, which they find much more interesting than their regular job, would you not get 60 hours of outstanding engineering work?
Further, if you could give them 5% equity each (with vesting and a cliff), you would get the engineering done while giving away less equity than for a co-founder. Is a co-founder worth it so much that you’d rather add risk and dilution to the equation?
Recruit advisors for equity or pay
If you need really world-class expertise in certain domain areas, you can also recruit equity-compensated or paid (preferably) advisors. For example, do you need expertise on neural networks in medical diagnostics, a renowned researcher might be a better bet than a co-founder.
Startup folks love giving advice which is wrong more than half of the time. The notion that you absolutely must get a co-founder or a gaggle of them, is one such misguided and ill-informed piece of advice.
The most important thing to understand is that there are no universal rules or best practices in startups because every founder, team, and company is unique, and you can always find a successful counter-example to anything people tell you. The only thing that matters is that you do whatever works for you and your business. Be creative and trust your gut, as always.
