Solo founder or cofounder - what's better?

I’ve been a co-founder and/or co-owner of 9 businesses (hard to believe even for me, but it’s true). I sold out of the first and third, failed on the fourth, was kicked out of the seventh, and I’m now happily working on the 9th. Here’s what I’ve learned, and what I recommend to founders today.

Lessons learned from being a solo founder and having 9 different co-founders over 20 years.

I've run my own consulting business twice, joined two companies as a minority shareholder and launched four startups with between one and three cofounders. There have been ups and downs along the way, and I've learned some of the following the (very) hard way!

1. Too many founders bring on a co-founder too quickly. It’s weird. You might fight investors tooth-and-nail over your startup’s valuation, fiercely resisting every percentage point of dilution, and yet perhaps, just a few weeks earlier, you handed over half your equity to a co-founder you barely know. This should not be the default.
2. According to researcher and author, Noam Wasserman, “sixty-five percent of startups fail due to founder conflict.” (Harvard Business Review, Dec 2022). If you really want a cofounder, don’t rush it. Try to work together informally first, and be honest about your respective commitment levels. Only formalise the arrangement once you get to know each other properly.
3. One way or another, you will definitely have to overcome conflict. Disagreements are inevitable, so (as the HBR article states) “you need to learn how to (productively) disagree”.
4. Always have a founders agreement in place. Contracts are there for when things go bad. One of my former cofounders should have been a lawyer - he was excellent at contracts and ensured we had a solid, fair founder’s agreement. We used it more than once and are still friends today. (See below.)
5. Strive for a culture like that of Netflix: promote transparent, honest feedback but always with “positive intent”.
6. Agree in advance that, should there be a disagreement, one of the founders will have the final say. Don’t split the equity 50:50. Always make it 51:49 or better (at DQ we’re 34/33/33).
7. If it’s your idea/business, leave it as long as you can before bringing in a co-founder. If you can wait until your first revenue or funding round, your business will be worth a lot more and you’ll be able to bring in the same person on a much smaller percentage, or perhaps just pay them cash (leaving you with a bigger share, obvs). Don’t underestimate the impact of this. If you want a $10m exit, you just reduced your target acquisition price from $20m (if you own 50%) to $11m (if you retain 90%).
8. Work out what exactly you need help with. If you’re the techie and need someone for fundraising and sales/marketing, how else can you achieve this? Can you pay an agency, perhaps? What if you’re a non-technical founder? There are a lot of tech businesses out there who’ll help you build an MVP for a combination of cash and (a smaller amount of) equity. Of course, for either of the above, you could always apply to DQventures! :)

Founder Agreement Template

I'm no lawyer and this is in no way to be taken as legal advice, but a few people have asked me to share the document a former business partner and I put together to govern our founder relationship. I've included it below, in case it's of use. Obviously you should get your own qualified lawyer to look this over and make any necessary changes before using it.

Good luck with your business!

Image credit

– Featured image by Mohamed Hassan from Pixabay.
– Angry cofounder by Midjourney.