Peter Sorgenfrei lays out three essentials: understand each co-founder's real motivations, verify they have startup skills (corporate experience doesn't always transfer), and study how they handle conflict. Then align equity with commitment levels and lock it all in a written agreement covering decision-making, performance, and what happens if someone leaves.
Many of my clients are in a co-founder situation, so it's themselves and one or two or maybe three other people who have co-founded a company. And oftentimes we talk about how you manage those relationships and how you kind of grow together or make changes if you need to along the way. So I thought I'd talk about that a little bit today because I think. A lot of the people that are watching this may have been or will be in situations that require them to think a little more carefully about who they co-found businesses with. So if we work under the premise, or if we assume that the co-founding relationship is new, so you basically can set it up right, what are the things that you need to do? In order to do that. The first thing is, of course, to get to know the person or persons that you plan on co-founding a business with as best as you possibly can. That does not mean that people you know well are the best co-founders. It just means that you should really understand who they are, what drives them, having observed them hopefully in different situations. to figure out what is, what is their motivation? Why are they doing this? The second thing that is important to understand is what skill set do they actually have, right? Typically what happens is people get together and they're like, oh, we need somebody who's good at sales. We need somebody who's good at the technical stuff. We need somebody who's good at operations, for example. And we're like, oh yeah, I do that in my day job. So I'll be the, I'll be the sales guy co-founder and you're good at operations. So you'll be the operations co-founder. The problem is being good at sales in a company, large company, for example, is not the same as being good at sales in a startup. It's 2 completely different animals. There's not the same support systems. There's not the same brand. There's a bunch of things that are not there. So you actually have to strip it back a little bit and try and figure out, okay, what does it mean to be good at something? And does this person actually have that skillset or do they just think they have it? Or do they desire to have it? If they don't have it, can they get it? So that's another thing. That's item number 2 you need to think about. So first, how well do I know the person? Second, do they have the skill set? And then third is, all right, so this thing that we're doing together, it's probably not going to go as we intend or plan. How are we going to deal with that conflict on a personal level? Is this somebody I can actually talk to when things are difficult? Have we had difficult moments together? Have I— do I have evidence of them having been in difficult situations in other areas of their life? And how did they deal with that? So those 3 things are kind of the soft stuff. And then you get down to having agreements. One thing that co-founders often debate and discuss is who needs to have what share of the company. And while that's important and valid, it actually doesn't matter so much in the long run because over time people are going to get diluted and changed up and changed out. And How you assess the value. There's a bunch of elements to that. So I think in the beginning, a good guideline is to say, all right, how committed can we be to this venture, right? So am I going to be working on this full-time while my partners are going to be working on it part-time? That should be reflected in ownership. Is anybody drawing a salary from the business? That should be reflected in the ownership. And when that is said, the best thing is to do to be as equal partners as you can in the beginning, but also have mechanism for how to decide who is drawn down or who's changed up as you do that. Then you need to have agreements. There are plenty of good sort of co-founding agreements available in many different places, but writing down what the rules are for how you're going to operate together. What happens if somebody is not performing? How are you going to consider another co-founder if you want to bring somebody on? How do you make decisions? You know, is it simple majority? Is it unanimous decision-making in certain cases around, for example, investment or divestiture? So kind of outlining all the decision points and how you're going to make decisions is going to be important. And I now see, you know, this video can be incredibly long. I'll stop here, but hoping that this will help you get started to think about your current founding, co-founding relationship. If there's something there that's not working, try to actually address it and deal with it and get in touch if you want me to help you do that. Or if you're considering getting into a new business with potential partners, I strongly encourage you to spend good time upfront figuring out what kind of relationship you're gonna have, how are you gonna govern it, and not just like most people, and I've done this too, just kind of jump into the boat with some folks that I think might work out and then later on have issues because we didn't more carefully consider the setup and our relationship. I hope this was helpful to you. As always, let me know if you need anything else on this topic or any other topics. I'd be happy to record more videos like this. I think this is fun, and hopefully it's, it's valuable to you as well.
