
The Co-Founder Mythology - razin
http://www.bothsidesofthetable.com/2011/05/09/the-co-founder-mythology/
======
thaumaturgy
I wouldn't say partnerships _can't_ work out -- they obviously do, often
enough -- but I would say that they can fail no matter how much you believe
yours won't, so it's a really good idea to have a backup plan just in case, no
matter how long you've known your friend for or what you've been through
together.

I got my eyes opened on this last year. I was part of a pretty tight-knit
group of friends. Some of us decided to get together and apply to YC. It's a
good thing that didn't go very far, because a few months later, one of our
group got in pretty serious trouble with the law. I took the view that he was
a good person that didn't deserve to have a bad decision follow him around the
rest of his life; my girlfriend and I attended his court dates and argued for
his parole, and when he was released, we moved him to our area and helped him
get back on his feet.

Our previously close-knit group of friends, it turns out, were really unhappy
about that. They quit talking to us altogether, even though, as climbing
partners, we've been responsible for each-others' lives on several occasions,
and have generally been there for each-other through good times and bad.

Never saw that coming. Suddenly partnerships looked a lot less wise afterward.

~~~
wnoise
To my mind, that response really depends on details such as "what sort of
'trouble with the law'?".

~~~
thaumaturgy
The illegal kind.

~~~
warrenwilkinson
Bad parking or Murder?

~~~
thaumaturgy
If I were willing to discuss any of the details of my friend's case, I
wouldn't be purposely obtuse.

The takeaway from that was only supposed to be that while I won't tell anybody
that their friendship may not (edit: I meant, "won't") work as a business
partnership -- even if they've done it before -- in my experience, even strong
friendships aren't invincible, and they can collapse quickly over issues
you've never imagined. So, when it comes to business, treat it like business.

~~~
powertower
No one is asking for his name, or the details, or anything that can be traced
back to him (or you). Just the general charge.

~~~
tptacek
Since he's too polite to, I'm just going to step in before this thread
embarrasses us any further and say it's none of our business.

------
Jd
I hate to say this here, but msuster is the one VC out there who really knows
how things work and talks straight -- and the one I'd really want to go to bat
for me. There is no sugar coating or extra idealism, but he's not limited to
just software stuff either. In fact, I'd argue that makes him a better
investor since he understands other industries -- and many of the dynamics in
software are no different than other places.

To the specifics: I think when you are hacking on something large you need
external motivation. Since the YCombinator model is to start with little
upfront investment until you are "ramen profitable" you basically end up with
a couple of people in a room hacking on something until it is presumably worth
something (of course, valuations are notoriously difficult in software -- esp.
social software). Since people don't get a lot done on their own, the purpose
of a co-founder is for the motivational factor. If you were an uber-hacker
(e.g. Drew Houston comes to mind) probably you don't need anyone else. You can
build a functional prototype, get investment, hire, etc.

There is also the problem of the "idea." Although there are lots of loosy
goosy "idea" people, there are also a fair number of talented hackers without
any practical ideas -- and you really need to have a practical idea to have a
startup. While personally I think you are usually better focusing on a problem
domain where you have experience and there is a clear need, there are
certainly cases where a hacker needs a co-founder simply to provide that
interface layer between code and real life. As an example, anyone who has been
in the industry for awhile will note just how terrible at design many
otherwise very talented programmers are.

Anyways, I found this extraordinarily inspiring as a single founder YC reject
who has been doing reasonably well w/o any YC support.

------
qq66
The cofounder myth is a correlation vs. causation trap.

The reason so many successful companies have multiple founders is that in the
early days, when it was just ideas bouncing around, the cofounder dynamic made
two people sit down together, feed off each other's energy, refine each
other's ideas, and get the company going in the earliest stages.

If you've already gotten that far as a single founder, you don't need to find
a cofounder. If you haven't gotten that far as a single founder, maybe a
partner will help you get that far.

~~~
swampthing
Not entirely sure if this was what you were getting at, but I've always found
advice against 50/50 equity to likely be the product of a cognitive error.
People see companies with 50/50 equity splits failing due to founder disputes
and extrapolate that to mean that 50/50 equity split is sub-optimal. This does
not necessarily follow - it could very well be the case that it is the cause
of disputes but that it is still often the best option. Sort of like how
there's a lot of problems with democracy but the prevailing wisdom is that
it's still the best form of government out there (same with capitalism).

Not saying that it necessarily is the best way to do things (though I'm
partial to it), just that I have not seen convincing arguments against it -
that it doesn't work sometimes does not cut it, it has to work less well than
an alternative.

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alain94040
Post is completely right. Especially saying that 50/50 split is a bad idea. I
don't have to repeat all the arguments here (as organizer of the co-founders
meetup, I get to discuss these at length). If I put my investor hat for a
second, saying you split 50/50 is a signal that the leader of the company
doesn't have the guts to make painful decisions. So failure is very likely.

------
tptacek
Suster has talked to far more second-time founders that wouldn't do 50/50
again than you can imagine. But in the universe of startup founder pairs, the
majority won't work out, no matter what the equity. It's like setting up a
saltwater aquarium. You have to get the chemistry, competence levels, roles,
life circumstances, and business traction all within tolerances.

And when you don't, "50/50" is an easy scapegoat, isn't it?

There's good advice here; everyone should vest, and you need to have a
mechanism to enforce consensus. My current company has a President (not me).
That worked for us. Nobody had to jiggle the knobs on equity to make sure the
business runs when there are disagreements.

But I think that for as many stories as there are on 50/50 blowups, there are
other stories about businesses blowing up because the wrong person got 60. I
worry more about the 60/40 failure modes. You _better_ pick the right person
to get the bigger share.

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tchock23
I started with a 50/50 partnership five years ago and would seriously rethink
it next time around. I did it at the time because it was my first go around at
starting a business and both of us had no idea what we were doing (basically
the "fear" element that Mark mentions in this article). Everybody we knew told
us not to go 50/50, but we pressed on anyway for lack of any other option.

Where it really hurts is in decision making. Things that would take a single
founder a few hours or days to mull over can take weeks, months (or even
years) to decide. It kills the speed advantage of being a startup. We ended up
bringing in a minority partner a couple of years in, but that didn't help
since the other two partners were still equal and there was no clear decision
maker.

There has to be a clear leader, despite equal stakes. In my case, we had an
awkward conversation about who should be CEO that went nowhere, and it has
hurt us ever since.

Mark's post also mentions risk profiles. Right now I am married and have an
inexpensive house, but my co-founder has two kids and a new house. Despite
best intentions on his part, we have very different risk profiles which impact
our decision making.

On the flip side, it is great to have the support of someone else there when
you're going through the ups and downs of startups. My first go around I doubt
I would have been able to get as far as I did without that, so I don't
necessarily regret it. However, next time around will be a different story.
I'm bookmarking Mark's post so I don't forget this lesson again.

------
Jabbles
This contrasts greatly with Joel's post on the advantages of splitting equity
fairly:

[http://answers.onstartups.com/questions/6949/forming-a-
new-s...](http://answers.onstartups.com/questions/6949/forming-a-new-software-
startup-how-do-i-allocate-ownership-fairly/23326#23326)

<http://news.ycombinator.com/item?id=2445447>

I'm afraid I don't have the expertise to tell which of the contradicting
points are valid, perhaps someone who agrees with Suster could refute some of
Joel's for me, or vice versa.

~~~
onetimething
Anon account here.

I'm currently a co-founder in two-man startup. The idea, though not
revolutionary, was my co-founders, and because he's older, more experienced,
has more connections, etc: he has the vast majority stake in the company. He
is also the "CEO" while I'm a "CTO".

A lot of posts, including the article, come from the prospective of the person
with the greater equity; and I get that from their POV, it's a better deal.

But being the guy with less than his half of the stake, I gotta say, unequal
equity is making me about ready to quit.

We both earn $0/hr. We both spend all our free time busting ass for the
company. We're both "in it to win it", at least thus far.

But who gets to make all the important decisions, even when I'm pretty sure
they're bad? Him. Who gets the biggest payoff? Him. Who's the guy in the
spotlight? Him.

So even though we're "co-founders" and we work an equal amount, he gets all
the glory, cash, and can steer the ship (for good or bad).

Obviously I didn't know it'd turn out this way when I started, but if you're
out there thinking about bringing on a "co-founder" to boss around at 25% and
$0/hr, think long and hard about what makes you worth doing that for. Which
isn't to say those things don't exist: If you can raise money, sure, you're
probably worth more than half. But be realistic: If you can't come up with
reasons you're worth 75% of the company, then it's only a matter of time
before people you've convinced otherwise realize that as well.

FWIW, I "fell" for the same "well we should have someone who can make rapid
decisions steering the ship" line as well. Baloney. You do that when you can
PAY people to do what you want. Until then you're just a couple dudes making
negative money. I'll risk a 50/50 gridlock in decision making over having
someone tell me what to do everyday at "my" company any day.

~~~
msuster
re: "I'll risk a 50/50 gridlock in decision making over having someone tell me
what to do everyday at "my" company any day."

why not just make sure that you're the majority owner of your next company.

I can see the resentment this situation is causing you. But it might possibly
be because the CEO isn't pulling his or her weight. If they were pulling CEO
weight you might - perhaps - feel differently.

------
michaelbuckbee
Others here seem to be taking a different lesson from this than I got out of
listening to the video: it isn't so much having a cofounder is good or bad as
it is that founder vesting is incredibly important if life and or other
craziness happens.

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zbowling
Was in a 50/50 partnership in the past. Things got tough because we didn't
have a single CEO that had a final say. I wanted to compromise and work
through it but my partner wanted to avoid that and wanted me to just claim him
CEO because he felt I was diluting "his vision" but I refused (not until then
did I realize I couldn't trust him as the CEO because I felt it was my baby
too and wasn't going to hear me out if he was CEO). Not saying that can't work
but it's tough and leaves it to chance you got the right personalities (like a
marriage) and may put the business at risk.

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rmason
This really resonates with me. I've found in Michigan at least the best people
just aren't willing to take the risk of a startup.

If you can get traction first I believe it will be possible to bring in
someone who can really add value because you've just reduced their risk.

------
tribeofone
Relevant: <http://news.ycombinator.com/item?id=2415467>

------
repoleved
Your co-founder will be your lifeblood. A startup has many valleys and only a
few peaks...if you want to make it through need someone you trust with your
life. I can't count the times I was willing to give up and throw in the towel
and my co-founder has talked me off the cliff. don't believe the hype from
these premodonas who haven't spent any real time in the trenches.

~~~
msuster
I spent 8 years in the trenches. If you want to argue with my position I'm
open to a discussion. But merely saying people who don't agree with you are
"primadonnas" is a bit superficial.

