The Co-Founder Mythology

http://www.bothsidesofthetable.com/2011/05/09/the-co-founder-mythology/

by razin • 15 years ago

130 28 15 years ago

Jd• 15 years ago

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.

alain94040• 15 years ago

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.

qq66• 15 years ago

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• 15 years ago

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.

thaumaturgy3• 15 years ago

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.

wnoise3• 15 years ago

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

thaumaturgy3• 15 years ago

The illegal kind.

trustfundbaby• 15 years ago

I agree ... without giving us some idea what kind of trouble he got into, there's no way of assessing this anecdote. Getting popped for having some weed in your car is way different from being accused of killing someone, or stealing money from your employer, for example.

tptacek3• 15 years ago

No, it doesn't. Also: he pretty clearly doesn't want to get into details, so how rude is it that this thread is trying to push him to?

freshfunk• 15 years ago

Not a great example because I think at least 50% of people would do what your friends did. Like others mentioned, it depends which law he broke but chances are it brought up to question this person's sense of responsibility, integrity and whether this is someone that could be trusted. These are foundations for any business relationship (let alone the distractions that come with someone who has problems with the law).

Perhaps the only saving grace for this person is if they were responsible for a notorious but awesome hack job that only few people (read: no script kiddies) could do.

michaelbuckbee• 15 years ago

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.

zbowling• 15 years ago

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.

tribeofone• 15 years ago

Relevant: http://news.ycombinator.com/item?id=2415467

Jabbles• 15 years ago

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://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• 15 years ago

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.

msuster2• 15 years ago

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.

tchock23• 15 years ago

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.

repoleved• 15 years ago

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.

msuster2• 15 years ago

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.

rmason• 15 years ago

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.

tptacek3• 15 years ago

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.

The Co-Founder Mythology

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