Getting co-founder dynamics right

Questions to ask your co-founders in advance to avoid fatal mistakes

Photo by yang miao on Unsplash

Even though “product market fit” is the holy grail all startups are hunting after, it’s the quality and alignment of the co-founders that is often the cause for failure. According to a questionnaire answered by VCs weak senior management (usually the co-founders) was contributing to the startup’s failure 95% of the time and it was considered to be the most important contributing factor 65% of the time.

So this brings up the big question: Who should you co-found with?

As a general rule of thumb: People you already worked with. That usually implies that you know how to work together and already created some trust or even friendship. In other words: You know what to expect. On the contrary founding with friends you haven’t worked with is as likely to be successful as founding with total strangers.

However, in all cases, I strongly recommend everyone to be as explicit as possible about expectations regarding everything of the startup.

Inspired by a list I originally received from Johann Romefort, I created my own list over time to structure a conversation that surfaces the most important expectations. This is not a small talk type of conversation. This is not a conversation that you should postpone because “things will fall into place”. Look for disagreement in these questions. False agreement can massively hurt you. Keep that as your frame of mind when answering these questions. It’s also totally fine if you feel ambiguous about some questions. Be radically honest and open with each other. I added things to pay attention to or listen for to every question to help you lead those difficult conversations.

1. Personal Values and Motivations

• Why are you starting this company?

  • What is your intrinsic drive?

  • What motivates you most (e.g., impact, wealth, innovation)?

  Pay attention to / listen for:

  • Conflicting motives such as profit vs. sustainability

  • Different levels of commitment

• What are your core personal values?

  • Examples: Integrity, creativity, resilience.

  Pay attention to / listen for:

  • Conflicting values such as structure vs. freedom and creativity

• What are you ready to sacrifice for this venture?

  • Time, lifestyle, control, financial security?

  Pay attention to / listen for:

  • Unrealistic expectations of the sacrifices that need to be made

• What is your definition of success?

  • Personal, professional, and company-oriented.

  Pay attention to / listen for:

  • Different levels of ambition

  • Conflicting definitions of success (I want to build a huge company vs. a small business that runs as independent as possible)

• What is your biggest fear about the venture?

  • Personal, professional and company-oriented

  Pay attention to / listen for:

  • Fears that conflict with other definitions of success or expected sacrifice (e.g. fear of loosing control over the company vs. getting massive amounts of VC funding)

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2. Strengths, Weaknesses, and Work Style

• Strengths:

  • What are your superpowers and key skills?

  • How do you plan to contribute to the venture?

  Pay attention to / listen for:

  • Do the strengths match with the role?

  • Missing contributions you would expect

  • Are our strengths complementary

• Weaknesses:

  • What are your key areas for improvement?

  • How do you compensate for these weaknesses?

  Pay attention to / listen for:

  • Weaknesses that strongly conflict with the role

  • Weaknesses that you have a hard time dealing with

  • Lack of self-reflection

  • Poor compensation techniques

• Work Style:

  • How many hours per week are you willing to work?

  • How much vacation do you need?

  • What work environment and culture suit you best?

  • How do you prefer to communicate?

  • How flexible are work times?

  • What are absolute red-flags for you in a working relationship?

  Pay attention to / listen for:

  • Remote vs. Office policy

  • Is “full-time” 40h or 80h a week?

  • Is everyone flexible enough to make a flexible work schedule work?

  • Can we make the way of working work with our preferred communication style? (e.g. calls and meetings don’t work with asynchronous remote teams)

• Conflict and Stress:

  • How do you handle conflict?

  • How do you cope with stress and burnout?

  Pay attention to / listen for:

  • Personal preferences. Awareness goes a long way on this one.

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3. Roles and Responsibilities

• Preferred Roles:

  • What role do you see yourself playing now and in 2+ years?

  • How would you handle changes to your role (e.g., hiring above you)?

  Pay attention to / listen for:

  • What-if-scenarios that need to be addressed e.g. if hiring above is a dealbreaker, what will you do when it happens?

  • Misaligned expectations

• Key Skills and Passion Areas:

  • Rank your skills in key areas and indicate your passion level. (Scale 1-5)

    • Sales

    • Marketing

    • Product Strategy

    • Design

    • Engineering

    • Operations

    • Fundraising

    • Leadership

    • Company Building

    • Recruiting

    • Legal

    • any specific skill central to your venture

  • Who is responsible for what?

  • Where do you see skill and / or passion gaps?

  Pay attention to / listen for:

  • Lack of passion for topics you expect a person to own.

  • Lack of skill across the entire team.

  • Mismatch of role and skill & passion

• Decision-Making:

  • How should day-to-day and major decisions be made? How do you handle non-unanimous decisions?

  • What role do you expect in executive hiring, firing, or equity splits. ?

  Pay attention to / listen for:

  • Conflicts of control vs. autonomy: “I want to sign-off on any decision that is being made”, “Everybody is fully responsible for their assigned domains. No interference.”

  • Be specific on how you handle disagreement: e.g. majority vote, tie breaker and veto rights.

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4. Financial Expectations and Constraints

• Fair Market Salary:

  • What would you consider fair compensation?

  • What is the minimum salary you need and for how long?

  Pay attention to / listen for:

  • Is this close to the market value? Is the compensation “fair” in comparison?

  • Is it realistic that you will be able to pay that compensation?

• Personal Financial Commitment:

  • Would you invest your own money into the company?

  • What is your financial runway?

  Pay attention to / listen for:

  • Unrealistic expectations

  • Clearly communicate constraints and related timelines

• Funding Philosophy:

  • Bootstrapped vs. venture-funded?

  • What level of funding do you think is ideal?

  Pay attention to / listen for:

  • Conflicting philosophies

• Equity and Exit:

  • What is your philosophy on founder equity splits?

  • For how long are you committed to this company (Founders Vesting)?

  • Under what conditions would you sell the company?

  • How do we handle if a co-founder can’t keep his original commitment?

  Pay attention to / listen for:

  • Conflicting equity expectations

  • Founders vesting

  • Good Leaver / Bad Leaver agreements

  • Exit expectations

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5. Team Dynamics and Culture

• Ideal Team Culture:

  • What would make you proud of the company’s culture?

  Pay attention to / listen for:

  • Common set of values / Conflicting values

• Team Management:

  • What is your approach to recruiting, retaining, and managing talent?

  Pay attention to / listen for:

  • Common set of values / Conflicting values

• Work-Life Balance:

  • How will you balance personal and professional priorities?

  Pay attention to / listen for:

  • Unexamined prioritization

  • Different prioritization within a founders’ team can lead to friction

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6. Co-Founder Relationship

• Support Expectations:

  • What do you need from your co-founder(s)?

  • How do you plan to support your co-founder(s)?

  Pay attention to / listen for:

  • Expectations that go beyond the mere role fulfillment

  • Clarity of expectations

  • Balance: Can we offer the support that is needed?

• Conflict Resolution:

  • How would you resolve personal conflicts?

  • What is your approach to a potential “startup divorce” scenario?

  Pay attention to / listen for:

  • Be meticulous on the divorce scenario even if you think it is not likely.

• Third Co-Founders or Partners:

  • How would you handle bringing in additional co-founders or investors?

  Pay attention to / listen for:

  • Veto and majority clauses

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7. Execution and Alignment

• Short-Term and Long-Term Goals:

  • What are your goals for the next 6 months, 2 years, and beyond?

  Pay attention to / listen for:

  • Different levels of ambition and commitment

  • Different target pictures

• Barriers and Risks:

  • What challenges are you most concerned about?

  • What is your plan to mitigate these risks?

  Pay attention to / listen for:

  • Naive assumptions as clear signs that you haven’t thought things through.

• Alignment and accountability:

  • How do you expect to align with each other?

  • How do you hold each other accountable?

  Pay attention to / listen for:

  • Clear expectations e.g. how decisions are documented

  • There is no such thing as “too much accountability”

  • Preferred ways of follow-up and communication

These discussions won’t be easy, but they save you a lot of trouble, time and effort down the road. A lot of topics will also save you time with your legal counsel regarding co-founder agreements and other shareholder contracts. I know for sure that these questions would have saved me tons of money.

Want to make sure someone saves tons of money, too? Share it!

Sources:

Gorman, M., & Sahlman, W. A. (1989). What do venture capitalists do?. Journal of business venturing, 4(4), 231-248. Chicago