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Published 17 March 2014 13:29, Updated 18 March 2014 09:58
Building a startup requires hard work and perseverance. It’s difficult to do it alone and something, I suggest, you shouldn’t do alone. You need a cofounder with whom you can share the ups and downs of starting a business.
So what do you look for in a cofounder? In my view, a successful tech business needs to have a combination of technical and business capabilities, along with some industry knowledge and experience. It’s unusual to have all these characteristics in one person. That’s why I think a startup should have at least two cofounders.
Most founders will tell you that choosing a cofounder is much like selecting a life partner. You’re looking for a long-term partnership with someone who can share the same vision and passion for the business as you do, a person you can trust and be honest with at all times. Given you’re going to be spending a lot of time with your cofounder, you want to make sure you’re compatible, have similar work ethics, and share the same goals and values. But while it’s important that you share many similarities, it’s also useful to have a cofounder that thinks different from you so you can avoid groupthink. Your cofounder should complement your skills and be able to bring something new to the table.
I met my main business partner at high school and we went to university together. During our business journey, we’ve been able to understand our respective strengths and weaknesses. In one of our early businesses, we suffered an incident where we lost a bunch of money. While we both experienced great pressure during that time, we worked through the issue and it strengthened our business partnership. If you haven’t worked with your cofounder before, you can have a trial period so you can test how you work together as a team. If things work out, then you can discuss a joint business arrangement.
Once you have found the right person, the next step is making your partnership legal. Entering into a business partnership with someone involves legal paperwork that binds the two of you together. An agreement is very important. For most businesses, it makes sense for cofounders’ equity to vest over time. For instance, a cofounder may ‘earn’ one percentage point of equity every month up to twenty months. This means the cofounder has to contribute to the business over the twenty months to earn their full amount of equity. It may also make sense for cofounders to agree to some kind of cliff arrangement. Following on the earlier example, if there was a twelve-month cliff and the cofounder left within the first twelve months, they wouldn’t be entitled to any equity. Only after they’ve served the first twelve months will their entitlement to twelve percent in equity vest.
I’ve been fortunate to have a number of business partners over my career. I met my main business partner at high school and we went to university together. We’ve started a bunch of businesses.
Choosing a cofounder is both a business decision and an emotional decision. It’s got to make business sense and there’s got to be the right chemistry around it. Don’t let yourself be rushed into making a decision. Think things through and weigh all the pros and cons. Like selecting a life partner, selecting a cofounder is not something you should take lightly.
Benjamin Chong has a track record of investing in and building Internet-related businesses over the last fifteen years. He is a partner at Right Click Capital and a general partner at Sydney Seed Fund.