What Nobody Tells You About Choosing a Cofounder

Your cofounder can make or break your business. This article explores red flags, division of roles, equity splits, and how to test working relationships before legally partnering.

Founding a startup is like entering a long-term relationship—one that can either lead to success or end in a messy breakup. While the allure of shared dreams and complementary skills is strong, the reality is that cofounder conflicts are a leading cause of startup failure.

In fact, a 2014 article in Fortune estimated that 90% of startups ultimately fail, with personnel or staffing problems accounting for 23% of failures.

The Red Flags You Might Be Ignoring

Dr. Matthew Jones, an executive psychologist specializing in startups, highlights five critical red flags to consider before choosing a business partner:

Resistance to Change in Personal Relationships:

Partners unwilling to accept changes in personal relationships—especially when co-founding with friends or family—may struggle with the emotional transitions involved in professional collaboration.

Ego-Driven Behavior:

Individuals who lack relational give-and-take can create imbalanced dynamics, particularly if one party tends to be overly accommodating.

Inability to Accept Feedback:

Early signs of defensiveness may signal growth limitations under business pressures.

Lack of Specificity About Roles:

Ambiguity in individual contributions and expectations can lead to unresolved conflicts.

Skipping a Trial Run:

Forgoing a trial run that tests how potential co-founders handle stress and negotiate responsibilities can mask incompatibilities.

Dr. Jones emphasizes that understanding your own values and observing early interactions closely are keys to choosing a partner who can withstand the entrepreneurial journey.

Equity Splits Are More Than Just Numbers

Deciding how to allocate equity among cofounders is a complex decision with long-lasting implications.

According to a Harvard Business Review article, the percentage of founders who express unhappiness with their equity split increases 2.5x as their startups mature.

Here are three common approaches to dividing equity:

• Equal Division: Advocated by some for its simplicity and perceived fairness, but it may not reflect individual contributions.

  
  

• Transactional Approach: Based on quantifiable inputs like capital investment and time commitment.

  
  

• Relational Approach: Considers factors like trust, shared vision, and long-term commitment.

Tools like the Carta Co-founder Equity Split Calculator can help model a recommended founder equity breakdown by inputting details about the company and each founder.

For broader perspectives, Stripe Atlas and Y Combinator’s Startup Library offer guidance grounded in founder experiences.

Testing the Waters Before Making It Official

Before legally binding yourselves together, it's crucial to test the working relationship. Jeff Rosenthal, cofounder of the venture capital firm CIV, emphasizes the importance of rigorous testing before forming a partnership.

He and his cofounders exchanged written letters discussing everything from work schedules to long-term life visions, ensuring clarity and shared expectations.

Similarly, Alex Iskold, Managing Partner at 2048 Ventures, advises that the most likely ideal cofounder is your old co-worker. He stresses the importance of founder vesting and being thoughtful in your selection process.

Choosing a cofounder is one of the most critical decisions in your startup journey. It's not just about shared ideas but about aligning values, communication styles, and long-term visions. Taking the time to thoroughly vet and test this relationship can save you from future conflicts and set the foundation for a successful partnership.