Launching a startup is one thing, but keeping it alive is even harder, with half of new SMEs withering and dying within five years.
Over the years, I’ve worked in and founded my own startups, and as a former lawyer have helped entrepreneurs liquidate their businesses. And after watching the good, the bad and the ugly, I’ve realised the main reason start-ups fail isn’t a lack of access to funds – it’s co-founder conflict.
The view is echoed by Y Combinator, arguably the world’s most famous accelerator. Former Y Combinator partner Harjeet Taggar described fights between founders as “certainly the most common reason for failure we see”.
Serial investor Jeremie Berrebi also said that after 13 years investing in over 200 companies, he’d “finally discovered one of the main reasons that start-ups fail – conflict between founders”.
The types of conflict we see vary, from equity splits to clashing egos. There’s an inexhaustible list of ways a working relationship can turn sour.
But over years we’ve identified the top seven rules co-founders should follow.
Lesson 1: A working (not social) history works best
Co-founders come together most commonly through social circles. While working with people you know and trust has an appeal, it’s likely to cloud your judgement about the skills and competence required.
Professional acquaintances, such as former work colleagues, work best. You know what they’re good at and over the years you’ve seen how they operate in good times and bad.
Lesson 2: Find common goals; define your success
Too many co-founders dive into business together without defining and sharing what success would look like on a personal level. Talk openly about through your priorities, ambitions, insecurities and family commitments – and agree on an exit strategy.
Lesson 3: “I do this; you do that”
Go beyond job titles or merely splitting up roles. Dive into all the jobs that need doing from and look for gaps that either no one wants to fill, or where the required skills are lacking. Decide who’ll take on (or learn) what, then set a future date to assess how it’s working out.
Read more tips on the next page…
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