Choosing the right cofounder is absolutely CRUCIAL.And there’s a smart way to do it

Choosing the right cofounder is absolutely CRUCIAL.

And there’s a smart way to do it.

Here’s everything you need to know about bringing on a cofounder (and staying safe):

Lets zoom out.

A startup is one of the BIGGEST commitments you can make.

If it works, you’ll be working on it for the next 10-20 YEARS.

When you choose your cofounder, is will be like marriage.

So here’s the thing ↓↓↓

In a marriage you can get a divorce… in a startup, there might be 100s of teammates, families, and investors relying on you.

A simple “division of assets” isn’t an option.

This is serious business.

Cofounders hold both great responsibility… and great power.

Why?

> Investors will listen to them
> The team will watch their every word & action
> And same with the press

They have the rights to the company’s finances, statements, upside, and relationships.

Get this right, but also don’t stress out.

** Note: you don’t actually need a cofounder **

Searching for one should be an exciting process!

Be open to someone that is your better half in business entering into your life.

… and follow the instructions below to stay safe.

~~ Evaluation ~~

Michael Fertik at Heroic Ventures wrote a post at hbr [dot] org/2011/02/how-to-pick-a-co-founder.

The attributes he called out are spot-on:
* A complementary temperament
* Different operational skills
* Similar work habits
* Self-sufficient

(cont)
* A history of working together
* Emotional buoyancy
* Total honesty
* Comfort in her own skin
* A personality you like
* The same overall vision
I recently coached a founder who had a productive first employee.

They felt like they should make them a cofounder.

I asked them to rate all the above attributes on a scale of 1-10.

I also asked some questions.

Is this someone who you trust to:

1: Lead a town hall presentation in front of 100s of employees?

2: Represent the company well in front of any audience?

3: Communicate with high integrity through major disagreements?

4: Commit to serious ongoing personal growth?

5: Stay committed through the toughest times?

The answer should be a vehement YES to all of the above, and an 8+ on all the attributes.

If not, they’re an Employee, not a Co-Founder.

~~ Verification ~~

So you think someone might be “the one”?

That’s exciting… but safety first!

How you stay safe: a dating period.

Work with the person for at least a full month; build and ship REAL product to REAL customers.

~~ Legal ~~

Make sure that any introductory work done with a partner is *documented*.

Why?

If you don’t compensate & document, they could claim that they’re a co-founder and entitled to a major chunk of your company.

** Pro tip **: Use a self-serve legal tool online to do 90% of the work, and then run it by an attorney for final tweaks.

ie. eforms [dot] com/employment/independent-contractor/

~~ Equity split ~~

If you are a f!ck yes and ready for marriage, congratulations!

In that case, go 50/50.

But are there alternatives? Yes, absolutely.

A) Minority Ownership Cofounder. If you’re driving outsized value, you can bring on a cofounder for 10-15% ownership instead of 50%. This leaves room to give more equity down the road if they or other really step up.
B) Founding “ROLE”. You can bring someone on as a Founding CTO, Founding Head of Eng, Founding COO, Founding Head of Ops, etc. Equity percentages range from 2%-6%.

This person isn’t quite cofounder material, but they’re a 10X employee worth giving outsized equity and title to.

Options A and B are considerable roles to grant to someone.

But with far less risk.

** Pro tip **: If you’re not 100% sure you’re ready for marriage, make sure to retain board control. This means you have more board votes than they do, or that they’re not on the board at all.

~~ Pitfalls ~~

A: An extraordinary founder empower give too much equity to others.
B: A good (but not extraordinary) founder demands too much.

Have the self awareness recognize which camp you’re in. Command fair title and ownership, but don’t let your ego drive the negotiation.

~~ Working with friends ~~

It’s true that working with a friend can be awesome.

In fact, your most likely cofounder is an existing friend.

There’s energetic alignment, values alignment, and history.

BUT don’t forgo the advice above just because someone’s a friend.

Friends can sometimes be terrible cofounders.

The risk: your friendship can lead to too much excitement without conducting enough diligence.

Be careful skipping steps.

Make sure the merit is there; the arrangement is fair; and a work dating period is had.

~~ Discovery process ~~

If you’re really committed to bringing on a cofounder:

**Build a list
Go through every contact on your phone, fb, linkedin, etc. and write down every person you love and respect.

**Start to engage
Coffees, meetings, social events (lunches, dinners, etc)

**Choose a date
Out of these interactions, pick your favorite and ask them if they’re open to working on a project together

**Repeat
Do this until you find “the one” ⭐

~~ Working successfully together ~

You’ve found the one, congrats!!

Now the hard work begins.

A while ago, I wrote this thread about diving responsibilities between cofounders.

I highly recommend it:
https://twitter.com/theryanking/status/1549182602162180097

Alright that’s it!

If you enjoyed this thread give me a follow @theryanking.

I tweet about lessons learned fundraising, building and operating businesses.

Now back to building!

Follow: @theryanking

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