Key takeaways
Your cofounder should be someone as committed to the business as you are. They should be working on the business full-time. There should be a “business” cofounder (CEO) and a technical cofounder (CTO).
You and your cofounder need to communicate well together, and have clear and distinct areas of ownership. The first tests of this will be assigning titles/responsibilities and dividing equity. These will be hard, unpleasant conversations, but don’t put them off.
Who should be a cofounder?
The answer seems obvious: a founder is someone who starts a new business. But it’s not actually as simple as “the founders are the first three people to work on the business.”
The essential attributes of “being a founder” are:
- You’re working on the business full-time
- You’re accountable to your employees, customers, and investors for the success of the business
- You’re fully dedicated to the success and survival of the business
- You’re prepared to see it through to the end—knowing that in some cases this may be a decade-long journey or more
Who should not be a cofounder?
Anyone not prepared to do all of the above should not be a founder of your company.
If you’re working on the business full-time but your friend is chipping in on the side as a kinda-early-employee but isn’t ready to go all-in, they aren’t a cofounder. They’re absolutely helping, but they’re not making the level of commitment needed to merit the title “cofounder.”
There’s one exception to this rule: when startups are spun out of research universities, the professor responsible for the research is frequently a “cofounder,” even though they may not be very operationally involved in the business.
What’s the right number of cofounders?
There’s no magic number here, and anyone who tells you that you have to have a certain number is wrong. But there are some best practices: “two” is a very common number of founders. There are also many businesses with three co-founders (Pilot.com is one of them).
There are also lots of businesses started by solo founders. We think that’s a tough choice that you should avoid if you can.
Why shouldn’t I be a solo founder?
Again, there’s no right number of startup founders, so if you’re dead-set on being a solo founder, more power to you. But there are some good reasons not to:
- Investor optics: Investors prefer founding teams for a variety of reasons. One less-obvious reason is: so much of doing a startup involves convincing people. Convincing investors to back you. Convincing customers to buy from you. Convincing employees to work for you. If you don’t have a cofounder, is it because you couldn’t convince anyone to work with you? Or because you’re difficult to work with? Both of these would make it significantly harder for your startup to succeed, which is why they can be yellow flags with some investors.
- Morale: Startups are really hard, even on their good days. It’s nice to have someone in the boat with you that you can complain to (because you can’t complain to your employees.) Your cofounder can also end up being a moderating influence on your emotions: on days you feel super-down about the business’s prospects, they’ll often be a bit more upbeat and can help your morale, and vice versa.
- Skillset: There’s a lot to do at a startup, and it’s helpful to divide areas of ownership right out of the gate, so that you don’t have to be thinking about literally everything. More on this later in this chapter.
Again, there are lots of successful solo founders in the world, so take this as advice, not a mandate. But our perspective is: a startup is already super-hard, so why make it harder?
Can I have too many cofounders?
There’s no formal limit to the amount of cofounders a company can have. But you have to make sure you really understand who is actually in charge, and who owns what. If the reason you have eight cofounders is because you couldn’t decide who the real decisionmaker is, that’s a problem. And if it’s unclear to you, it’ll be unclear to your cofounders, and it’ll definitely be unclear to your employees.
When is “too late” to add a cofounder?
What you’re probably realizing in reading this section is: the title “cofounder,” is, in some ways, a bit made up and arbitrary. There are guidelines and best practices, but there are no firm rules. Nothing prevents you from adding a “cofounder” whenever you want. (A company I know added a cofounder a full three years after they started!)
Of course, as the company grows and you make your initial hires, it becomes optically much more challenging to add cofounders, because your existing employees will reasonably ask: why don’t I also get the cofounder title?
How do I legally add a cofounder?
There's nothing legally associated with naming someone "cofounder", so there's nothing special you need to do here. This doesn't require you to add them to the board or any existing paperwork. All you need to do is to give them the title, issue them some equity, and, if you're paying yourselves, add them to your payroll system.
Where should I find a cofounder?
The best cofounder is someone you already know and have worked with. Founder conflict is one of the leading causes of death of a startup. If you’re able to derisk that with an already known-good working relationship, it’s one fewer thing to worry about.
As a result, long-time coworkers, friends, or even siblings can all be good choices.
If that isn’t an option, you’ll have to cast a broader net. If you’ve never worked with someone before, I strongly recommend doing a small project together first, to confirm that there’s a mutual fit.
What do my cofounder and I need to agree on before we decide to work together?
There are a few key things you and your co-founder really need to be aligned on in order for your company to work. These things include:
- What are you actually building? Are you open to pivoting if the idea doesn’t work, or are you dead-set on this particular hypothesis?
- Why do you want to do a startup? What are the ideal, acceptable, and unacceptable outcomes? Are you prepared to do this together for a decade?
- Where will the company be based? Will you work remotely or in-person? Where will you hire employees?
- What are your expectations about working hours, and work-life balance?
- Will you both be working on the startup full-time?
- How are you going to cover your initial costs?
- Who will have what role within the company? (more on this later)
- How will you allocate titles and equity? (more on this later)
If you disagree on any of these points and can’t reach a resolution, you should go your separate ways.
How do I decide whether someone is a cofounder or a first employee?
The founding team should be an early set of people who are going to go all-in on the company. This means they work full-time, and are committed to seeing it through.
But isn’t this also true of your early employees? Your first employee is frequently joining not long after the business gets going—what makes them not a cofounder?
The two questions to ask are:
- Is the scope of their role that of a cofounder? Is this a person who you are excited to potentially play a significant, ongoing role at the executive level of the company for the next decade+?
- Is their feeling of responsibility/ownership at cofounder level? Is this just a job for this person, or is the level of commitment and ownership deeper? (Are they going to go down with the ship?)
As an example, if the company fails, your first employee no longer has a job and feels sad/disappointed, but doesn’t necessarily feel accountable for that outcome. By contrast, the founders should (and will) be very viscerally, personally, and deeply affected—it was their responsibility to make it work, and they failed at that responsibility.
What titles should I give myself and my cofounders?
Short answer: the two most common startup founder titles are CEO and CTO.
The longer answer is that it’s important for you and your cofounders to reach clarity about who is responsible for what, so that you can all move quickly without stepping on each other’s toes. Broadly, you should probably have the “technical founder” and the “business founder,” or the builder and the seller.
The builder is typically the CTO. As you might expect, the builder is responsible for building, shipping, and maintaining the product—likely by writing the initial lines of code, and then by building a strong engineering and product culture. They’re the ones responsible for making sure you actually build a compelling product.
The seller is typically the CEO and is responsible for making sure the company doesn’t run out of money. This person is responsible for fundraising, which is very much a full-time job when actively being pursued. They’re also responsible for sales and marketing, and for “selling” the company to early employees who you’re convincing to take a chance on you.
It’s important to note that the CEO—whoever it ends up being—is the final decision maker at the company, and the other founders report report to the CEO.
Should both founders be involved in fundraising?
Generally, no—when you’re really in the thick of it, fundraising is more than a full-time job, and if all of your founders are 100% engaged on it, it means that progress at your company will grind to a screeching halt.
The CEO should be the person taking point on fundraising. This person will handle all of the initial meetings and legwork. When it’s finally time for an investor partner meeting, all the founders should attend and be prepared to field questions. (Your early investors are largely investing in the team, after all.)
What about co-CEOs?
I’m not enthusiastic about the concept of co-CEOs because what it typically means is that the founders were afraid to have the hard conversation about which person will ultimately have the final say. Or, even worse, they did have the conversation but couldn't reach agreement. Startups thrive on speed and decisionmaking in the face of incomplete information, and the diffusion of responsibility of having two CEOs makes that harder to achieve.
Regardless of the reason, this is a red flag and we’d recommend that you avoid it. After all, if it’s unclear to you how decisions are getting made, it will be even more unclear to your employees.
What about COO?
When you have more than two cofounders, the next-most-common title that you’ll see for the business founder is COO. If the CEO is the CTO is the builder, what exactly does the COO do?
This is a fairly new title for startup founders, and as a consequence, it’s not universally well-defined. A good rule of thumb is that the CEO is more externally-focused, and the COO is more internally-focused. So the CEO might concern themselves more with product, or sales, or marketing, whereas the COO might concern themselves more with finance, legal, IT, or HR/People.
Again, for this to be successful, you’ll want to make sure that everyone has clearly-enumerated, clearly-understood areas of responsibility.
Should my cofounder have the CMO or CFO title?
Probably not. Your cofounder might be amazing at marketing, but you probably shouldn’t name them CMO. You’re going to want to hire a real CMO at some point in the future, and you’ll want to avoid the awkwardness of having to take that title away from someone.
Or said another way: think about a startup’s hierarchy of needs. It doesn’t make sense for a 3 person startup to have a marketing executive, or even a marketing team. The founders (and specifically, the “business founder”) are the marketing team.
The same is true for these other “Chief” functions. You owe it to yourself to keep those titles free so that you can hire a seasoned executive into those roles when the time is right for your company.
How should my cofounders and I split equity?
This is a tough and incredibly contentious subject, and one of the first hard conversations (along with titles) that you’ll have with your cofounders.
There are a few schools of thought on how to split equity. My recommendation is that you and your cofounders divide equity evenly—but there are good and bad reasons for doing this. A bad reason to divide equity evenly is because you’re afraid of having a hard conversation with your cofounder.
A good reason to divide equity evenly is is because a venture-backed startup is a decade-long journey (or more), and if you and your cofounders are truly in it together, the vast majority of investment of blood, sweat, and tears has yet to occur.
Suppose one person started two months earlier than the other cofounder. At the time of the IPO, they will have worked on the company for ten years and two months, and their cofounder for ten years. That doesn’t feel like it merits a sharply asymmetric equity split.
Another reason to be cautious about dramatically different founder stakes for people doing similar roles is the risk of founder resentment. There’s a very real chance that a cofounder with significantly less equity becomes resentful and unmotivated and eventually quits.
Having said all that, there are a few circumstances where a significant asymmetry in equity makes sense—for example:
- One founder is contributing significant, key IP to the company
- One founder is a late-career 4x-exited previously-Sequoia-backed founder, and the other founder is a new grad
- One founder has already raised significant amounts of capital prior to the other cofounder joining
- One founder isn’t working on the business full-time and doesn’t intend to do so in the near future (per above, I strongly discourage this)
Again, there are no firm rules here—all of this is convention and best practice. The key is having the hard conversation with your cofounder to make sure you get to well-reasoned conclusions that you all feel good about.
What are the keys to a good relationship with my cofounder?
The vast majority of startups (90+%) fail, and cofounder drama is one of the leading causes of death, especially in the early days.
Good founder relationships require a few things:
Mutual trust and respect
You don’t have to be best friends, but you do have to respect each other. You’re going to be spending a lot of time together, and if you don't trust and respect each other, you’re going to have problems.
Clear, distinct areas of ownership
We covered this above, but your individual roles need to be clear, and should avoid overlap wherever possible. Deciding early on who is going to own what (and who is going to be accountable for what) leads to faster progress, higher performance, and better cofounder harmony.
A clear understanding of which topics require discussion
Some things you do will inherently be cross-functional—they’ll involve areas owned by you and areas owned by your cofounder. You will need to discuss these topics with each other, and you need to reach alignment.
As you work more closely with your cofounders, you’ll get a sense for what things they care about. If you think something’s going to be controversial, bring them in early and over-communicate about it. No one likes surprises.
The ability to give (and receive) candid feedback
The transition from pals, siblings, or spouses to business partners in a startup can be awkward. You may not be used to giving this person feedback on their work or challenging their ideas. But it’s critical that you feel comfortable giving each other feedback—truthfully and frequently—both about the work you’re producing, as well as about the state of the relationship.
Remembering that they’re also human
Don’t take the cofounder relationship for granted. Yes, you’re hopefully both in it for the long haul and committed to the mission, but your cofounder also benefits from support, encouragement, and praise. Don't neglect their feelings.
At the end of the day, a good cofounder relationship is like any other relationship: it comes down to good communication, clear expectations, and mutual respect.
Conclusion
The choice of cofounder is an important and consequential one. Armed with these tips, you’re one step closer to building something durable and enduring.
In the next chapter, we’ll cover our tips on setting up your “financial stack”—some of the important things you need to do to make sure you have good financial hygiene.