Equal partnerships are hard to make work. I’ve seen them fail even when the most easy-going, non-demanding people are involved. But the benefits of having co-founders are huge: moral support, complementary skill sets, high levels of commitment, etc. So how do you bring cofounders in without getting stuck in a bad situation?
Before we can fix them, we have to at least have a theory on why equal partnerships fail so often. There are lots of opinions about it; here’s mine: I think equal partnerships (50/50, thirds, quarters, etc.) often end in unresolvable conflict because the buck doesn’t stop at anyone’s desk. It’s not so much a rights thing as it is a responsibility thing: who’s ultimately responsible for resolving disputes, providing focus, and making the business successful? Of course everyone has a part in each of those things, but when there’s a disagreement, who takes responsibility not just for resolving it but also for the results?
If the problem is having someone ultimately responsible, then the solution is pretty simple: structure your partnership so that one person clearly has “conflict resolution” powers. It’s actually easier to do in 3+ cofounder situations, for instance in Spreedly our structure is such that I have two votes and my three cofounders each have one vote. This means that I cast the deciding vote unless all of my cofounders decide I’m being dumb and band together to out vote me. A similar setup is also possible with three cofounders.
The interesting thing about this sort of “overridable responsible party” setup is that by it’s very nature it almost never has to be invoked. Since everyone knows there’s someone who will settle disputes, said disputes never arise. I’ve never once had to exercise my “powers” and intervene, and I don’t think that’s just because all of the Spreedly founders are so awesome. I think it’s also because having a known resolution mechanism in place encourages everyone to resolve disputes informally.
Of course, this doesn’t mean you can pick just anyone for a cofounder. Rather, I think it enables the right kind of people to work together smoothly. Beware any system that purports to replace the need for good people – nothing can compensate for incompetence or intentional bad behavior. But once you find the right people, you still have to formally organize your relationship, and I think a setup like this can really help.
What about two founders startups? I haven’t done one myself, but I think the answer might be that one founder needs to trust the other enough to cede the final call to them. Either that, or you need to bring in a third founder to balance things out and prevent deadlocks. I know some people make 50/50 partnerships work, but I think it’s a fluke and have no interest in trying my luck.
Of course, you always have the option of going it alone. It’s a hard road to travel, though: you have no one to bounce ideas off of, no one to share the burden, no one to encourage you when you’re down. I’ve found that my Spreedly cofounders are often up when I’m down, and we’re constantly talking each other back “off the edge”. Life is just better with friends, and that’s exactly what good cofounders end up being. A solid structure can help you stay friends over the long haul.
There’s a proverb that says, “And if one can overpower him who is alone, two can resist him. A cord of three strands is not quickly torn apart.” Hopefully you have some food for thought on cofounders and ownership structures now – I’d love to hear any feedback you have!