August 17th, 2022 | By: The Startups Team | Tags: Strategy
You'll hear the terms “founder” and “co-founder or cofounder” thrown around a lot in Startup Land. But what, exactly, do they mean? What's the difference between the two? And how do you find a good one? It's not very easy to find cofounders that properly fill the business needs and help in the early stages of a startup. So, where do founders even start?
We'll answer the above questions and six more in this breakdown of everything you need to know about founders and co-founders in order to ensure your company's success.
A founder is a person who comes up with an idea (hopefully a profitable idea) and then transforms it into a new business or startup. Founders can set up a business on their own, or they can do it with others (what we call cofounders). For example, Larry Page is a founder of Google.
If a founder sets up a company with other people, they are both a founder and a co-founder. Let's use Google to illustrate. So, Larry Page is not only Google's founder, but also a co-founder with Sergey Brin. Cofounder is a term that exists to give equal credit to multiple people who start a business together generally from the beginning.
A cofounder may be part of the vision of a startup from the get-go, or they may be brought on very early by the original founder because they have skills the founder is lacking. For example, the founder may have design skills, but no engineering skills. In that case, it greatly benefits them to bring on a technical cofounder early in the process of launching their startup. But it's not always easy to find cofounders that are right for the business model or that will truly aid in the company's success.
Also, let's settle a debate; cofounder vs co-founder vs co founder. They're all perfectly fine to use. Our data tells us that British usage generally favors co-founder and cofounder is more often used in the US - but don't get too caught up in it — this will be the least important of the decisions regarding cofounders (or co-founders, or dare I say co founders). Do we really want to get caught up on whether it's a proper noun, or a single word? Proper nouns are the least of our worries at this point.
“Founder” and “CEO” are two other titles that people can carry simultaneously.
“The term ‘founder' describes your relationship to the history of the business,” William Pietri, Startup CTO, and Lean Startup expert, says. “Page and Brin will always be Google's founders. The term ‘CEO' is about your position in the current organization's hierarchy. Some will be CEOs, at least for a while.”
Pietri points to another delta between “CEO” and “founder” — one is a permanent title, while the other is a job title.
“You will always be a Founder or Cofounder and your title will change,” serial entrepreneur Tanis Jorge says. “Be sure to be careful however how you dole out the Founder/Cofounder titles. That should be a lifetime title (dare we say a life sentence?) so be sure it goes to the right people who played a major role in the starting of the company and who will continue to play a role in the years to come. Another option is to give yourself the title President if you have plans to find someone to run your business (say, if you are a technical founder).”
Cofounders and founders create the business, they "co-founded" it. They have the most at stake, often contributing their own funds to launch the company going and working crazy hours as they push to get the startup vision off the ground to (hopefully) turn it into a successful company. Especially in the early days of a new business, the buck stops with them, they bear all the responsibility.
A founding member can often feel similar to a founder or cofounder because they come on so early in the process. They're also putting in crazy hours, and maybe even taking a pay cut in order to be a part of something important. They may be helping develop concepts into a profitable ideas and from that into a full-on successful business. But a founding team member is an early employee, not a founder. One important difference? The types of stock the two groups receive. Founder's equity is different from Employee Stock Grants.
Now that you know the differences between all these terms, it's time to get down to the nitty-gritty of the business needs. Most important: How do you choose the right co-founder? How founders decide what they should search for in a cofounder is an important part of the process. (Fair warning, it's about as easy to find co-founders as it is to find venture capitalists to invest — and maybe even harder) The first thing you should do is figure out what skills you're lacking. If you're an engineer, maybe find a designer. If you're a "vision person" definitely find an engineer and a designer. If you already have engineering and design knowledge under your belt, look for someone who's really skilled at marketing and managing people and can explain your technical talk to the rest of the team.
“If you're doing a tech startup, the co-founder should have a technical background if you don't have it,” entrepreneur Rui Delgado says. “That will save you a lot of money when you're bootstrapping, as well as making sure you deploy a great product as soon as possible.”
The cliche is that a cofounder relationship is like a marriage. And, just like with romantic dating, your best bet is to get them to like you. We mean, really like you.
“People don't join up because you want them to,” Pietri says. “They join up because they want to join.”
So how do you make them want you? Start by working out what you have to offer. What is it about you that people will want to follow? And then focus on the startup itself. An idea is generally not going to be brilliant enough to attract a co-founder on its own. Instead, work on figuring out how your company is going to be a success, even if it's still more planned than reality.
Show it in the business model of your company. Prove that you have the ability to raise funds. Doing that extra bit of work demonstrates to your potential co-founders that you're serious about going beyond startup fantasyland and lays to rest some fears that they'll inevitably have.
Serial entrepreneur Tom Williams suggests sticking to your networks when you're looking for a co-founder.
“I'm totally unconvinced that two people can find a person they haven't known previously, and become an effective co-founder,” Williams says. “I think you're better off finding the money to hire someone than actually find a co-founder. The main reason? You probably won't find someone as passionate as you are about the organization you're building. And keep in mind, I have no clue who you are or what you're building so that's no judgment on you or the idea, just the reality I've observed over 20 years of startups.”
Finally, Pietri says to be careful about jumping immediately to “co-founder” when there may be other options.
“Co-founders are partners, almost family,” he says. “Too many people say they want a co-founder, when really what they want is an employee who will work for free. If you want an employee, just pay 'em. Partnerships that aren't true partnerships end up a mess for everybody.”
The ideal number of founders is either two or three, with an exception occasionally made for four, depending on the startup and the team. Being a lone founder can be really tricky — not only is hard to have all the responsibilities on your shoulders, but it's also unlikely that you possess all the skills and knowledge that your startup actually needs to succeed — and more than three or four will leave you with a “too many cooks in the kitchen” situation.
From angel investors to Accelerators to VCs, many have a preference for startups with multiple co-founders. This preference is largely driven by a desire to diversify the skill set, bring more resources to the table, and have some redundancy in the leadership team. It's not always a hard NO for a single individual, but it can definitely make the case for investment in those companies harder.
When you're figuring out what to call yourself — Who's the CEO? Who's the CTO? Who's the Head of Sales? — the most important thing is to focus on what each person brings to the table. If you've done a good job at your cofounder search, it's already pretty clear what people's skills are. The technical guy is the CTO. The money guy is the CEO. The people guy is Head of Marketing.
Also, this should go without saying, but we're going to say it anyway: Give yourselves normal titles. There was a trend for a while of startups giving their team members “quirky” titles. All that does is make things confusing for everyone else — including your potential investors — so, please, just stick to the common ones.
If someone has come along a little later in the game, but still early — as in, pre-first employee — then you treat the same as any other co-founder! If you're choosing to add a “co-founder” after you already have employees, though, things can get a little tricky. Your employees may feel put out by the fact that this newcomer is getting a higher title and potentially a higher level of respect than they are when they were asked to take on more risk by coming on earlier.
So if you have someone you absolutely need for your company to go forward that you want to bring on in a significant way but it's too late to give them the co-founder title (which is largely symbolic anyway — it doesn't have legal implications), give them a title that matches what they're bringing to the table. Make them your CTO or Head of Content or President of Sales. Whatever their skill is, make that the focus; not the fact that they're not a “co-founder.”
Some conflict is inevitable, of course. Startup founders are only humans and will usually have at least slightly different goals, tactics, and skills than their cofounders. But Meghdad Abbaszadegan, who walked away from his own startup, Feel Free, after it fell apart due to co-founder conflict, has worked out three things all founders can do to protect their startup.
1. Get an operating founders agreement in place.
Verbal agreements aren't enough. My co-founder and I formed several verbal agreements at the beginning of our partnership. When Feel Free faced more difficult decisions, those verbal agreements fell short.
Facebook, one of the most infamous organizations of our age, struggled through an ugly legal battle after the Winklevoss twins claimed CEO Mark Zuckerberg made a verbal agreement to give them equity in the company.
Zuckerberg eventually prevailed, but there's no doubt the Winkelvoss brothers wish they had more than a verbal agreement.
2. Start with a simple approach when it comes to a co-founder agreement.
If you're not ready to put an operating founders agreement in place, you'd still be wise to get some sort of agreement in writing.
A simple one-page co-founder agreement that clearly indicates responsibilities while outlining company structure and operations can do a lot to ease tensions down the road.
Skip the legalese and “parties of the first part” in favor of straightforward language that lets everyone know exactly what's expected.
3. Make sure you own all outsourced work.
We had a designer on our team who created all of our branding. We had promised him equity in the company, but we never had a formal founders agreement in place that his work would belong to Feel Free.
When our co-founder conflict sparked, he decided to not sign his work to the company to protect himself. Create a solid agreement with any contractors to help them feel protected and ensure your company's future.
In retrospect, I wish my co-founder and I had put our verbal agreements — with each other and our employees — into writing so we could have avoided any conflict in the first place.