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As you plan your company, decide whether you want to be the sole founder or have cofounders or partners and who else you want on your founding team.
Cofounders and Partners
Pros and Cons of Cofounders and Partners
The right partner(s) and team can free you from having to know or do everything. The wrong partner may not supply what you need or may even limit your progress. Most experts on entrepreneurship recommend having cofounder(s) or partners but they warn should that you choose wisely.
What to Learn About Potential Cofounders/Partners Before Committing.
- Make sure you share goals and values
- Look for a compatible work style, business philosophies, visions, and ethics.
- Decide who will be considered a Founder and how much equity you should each get.
- What connections and potential sources of money do they bring?
- What other commitments do they have?
- Agree upon responsibilities and time commitment.
- How much salary do they need, and can they defer it if needed? Are they financially stable?
- What would lead them to leave the partnership?
- How do they deal with problems and handle stress? Make a plan for conflicts that are not easily resolved.
- How long did they stay at their jobs, and what accomplishments do they have?
Dividing Equity Among the Founding Team
Be sure to talk with each member of the founding and executive team about equity distribution. The proportion of equity is typically determined by the value an individual brings to the business and includes consideration of
- Who had the business idea
- Who did the work
- The extent of each person’s involvement after the inception of the business
- Value added to the business by a scientist’s or executive’s reputation for past work.
Work out these details early with a lawyer. Plan carefully, so that founders are left with some equity, despite dilutions from investors.
- Keep in mind that investors will look for a management team that can implement the business plan.
- Make sure you can see yourself working intensely with a potential partner for several years.
- Make sure that your partners and management team have the same vision and goals for the business.
Instructions: Please review this transcript of an interview with a potential business partner (fictional) and rate how much you would like them as a partner. Submit your response to compare your answer to that of others.
What goals and values are most important for you if we partner in this business?
I put the success of the company above all else, except for my health and my life partner.
Please tell me about your work style and business philosophies.
I will work 12 to 18 hours a day for a few years and expect the same from my partner.
How many founders are you willing to have and how much equity do you think we should each get?
If we do this, I don’t want any other founders and want equal equity with you.
What connections and potential sources of money do you bring?
I don’t have financial resources to contribute, nor any connections with money. But you can count on me being knowledgeable about how to get SBIR funding.
What other commitments do you have?
I have a life partner who is on board with me committing to this partnership, but I will consider their wishes before making further commitments. Other than that, this company will be my top priority.
What responsibilities and how much time can you commit to at this point in time?
I think we can work all that out later as we go.
Are you financially stable and secure enough that you can defer a salary if needed?
I can defer a salary for up to a year, and expect you to do the same if we need it for the company to survive.
What would lead you to leave the partnership?
Anything unethical or if you do not fulfill your part of our agreement.
How do you deal with problems and handle stress? What do you propose for conflicts that are not easily resolved?
I give the most effort to the most important problems. To avoid conflict, I think it is important to have good communication. I would really listen to my partner and try to see their point of view. If we cannot work it out, we could engage the help of a neutral 3rd party.
How long did you stay at your jobs and what accomplishments do you have?
I have jumped around every year or so in different biotech companies and different types of positions, to gain a broad understanding of the industry.