Building a Team or Planting a Time Bomb? The Reality of Multi Co-founder Startups
Starting a successful business is a dream of many, but the journey is not always smooth. One of the decisions that can make or break a startup is the choice of co-founders. While having someone to share responsibilities and workload is comforting, multiple co-founders also come with inherent risks that can derail a startup. In this blog post, we will look at the risks associated with startups with multiple co-founders, and how founders can mitigate these risks.
Misalignment Risks: When multiple people with different ideas and visions come together to start a business, it's not uncommon for there to be disagreements and misalignments. These can lead to significant problems for a startup from a cap table perspective. A poorly drawn cap table can cause irrevocable harm to a startup later down the road. Therefore, it's crucial to understand each other's vision and expectations before starting the venture.
Vesting Risks: Startups take a long time to mature, and four years of vesting with a co-founder that doesn't work out can create serious drag on the company. It's important to make sure all founders are committed to the vision of the company for the long haul. Founders must have an open conversation about how long they plan to stick with the company, what their exit strategy is, and what happens if one of them wants to leave.
Founder Biases Risks: Founder bias is when a co-founder's strong opinions lead them to make decisions that are not supported by data or evidence. This can become very harmful and lead to the company taking unnecessary risks, mismanaging time, resources, and money. Founder biases can have far-reaching implications for the startup, and as such, their removal can be vital to the growth of the company. There is nothing worse than founders continuing to support each others biases and not listen to the rest of the team.
Firing Risks: Even if everything seems right in the beginning, circumstances change, and what worked before may not work anymore. Firing a co-founder because the company outgrows their utility can be a huge drag and weight on any CEO. It's necessary to have a clear-cut agreement in place beforehand, that specifies how disagreements will be handled and what would be the exit strategy in case any of them fails to meet the standard.
Starting a business is a complex and often risky endeavor. Choosing the right co-founders is just as important as choosing the right business idea. While multiple co-founders may seem like a great idea on paper, they come with inherent risks that must be carefully considered. It's important to have clear communication, alignment, a well-drawn cap table, and a shared vision for the company. Founders must be aware of the risks and take proactive measures to address them in a timely manner. Building a successful business takes time, effort, and teamwork but navigating these challenges successfully can make all the difference in the world.