In forming your company, you will need to decide whether to take on a partner and who would make a good partner. Most experts in entrepreneurship recommend having one or more cofounders. The right partner(s) and team can free you up so that you don’t have to know and do everything.
Advantages and Disadvantages of Having a Cofounder/Partner
Advantages
- Having someone to share the experience with, both good and bad, including. . .
- working long hours.
- making tough decisions.
- handling emergencies.
- raising money.
- celebrating successes.
- The business has a larger pool of knowledge, skills, connections, and money.
Disadvantages
- Being slowed down by needing to consult your partner to make decisions or being unable to progress because of a disagreement. Disagreements are fairly common.
- Potentially having to make a compromise you do not want to make to resolve a disagreement.
- Unforeseen partner shortcomings, inappropriate behaviors, or differing ethics can harm the business.
What to Learn Before Committing to Potential Cofounders/Partners
Have a frank and broad-ranging conversation with potential partners before committing. Learn if you can have a workable relationship.
- Make sure you share goals and values you consider most important. Ask how important the product or service is to them.
- Make sure your workstyle (including where and when they will work), philosophies about businesses, business ethics, and vision for how to run the business are compatible.
- Decide who will be considered a founder and how much equity you should each get.
- Find out what connections and potential sources of money they bring to the business. Do they compensate for your weak areas?
- Learn what other commitments they have.
- Agree upon responsibilities and time commitments, and ask if they are aware of anything that could interfere with that.
- Determine if they require a salary. Are they willing to defer financial gain? Can they afford to do that if needed?
- Find out what circumstances would lead them to leave the partnership. Do they have a plan for what they will do if the business runs short of money? Are they financially stable?
- Discuss how they work through problems and handle stress. Pay attention to potential conflicts. Develop a plan for dealing with conflicts that are not easily resolved.
- What has their pattern been in their work life? (How long did they stay at jobs, for example, and what completed accomplishments do they have?)
- Can you see yourself working with them intensely for at least several years?
(Gascoigne, 2018)
Hiring a Team
If you are affiliated with a university and want to hire graduate students, junior faculty, postdocs, or graduating students to staff your lab, you will need to check the university’s conflict of interest policy first.
How Is Equity Divided Among Founders?
The value an individual brings to the business typically determines the proportion of equity they are given. This value includes consideration of who had the business idea, who did the work, the extent of their involvement after inception, and value added to the business by their reputation for past work.
(Krawczyk, 2023)
References
Gascoigne Adriana. Tech Boss Lady: How to Start-up, Disrupt, and Thrive as a Female Founder. Seale Press. October 9, 2018.
Krawczyk R. How to split equity amongst founders? (Updated in 2022) | RST Software. RST. 2023.
Tip: Finding a Cofounder
- Use your network and ask if anyone knows of an appropriate cofounder.
- Co-founders lab – A searchable database of over 400,000 potential cofounders, team members, and advisors.
Tip: Regarding Partnerships. . .
- Create a well-written partnership or operating agreement to prevent problems and allow you to leave the partnership if needed.
- Be sure to define at the outset how you will divide equity.
Tip: Consider Having a Founding Team
If you are concerned about giving up control, consider having a founding team instead. The team may achieve many of the same advantages as a partner while you maintain control.
