I guess time and your gut will tell, but don't waste valuable time to find out. Don't postpone any tough talks to later. Spend a lot of time together in business maybe even private. Traveling with someone to a foreign country for me is always a good indicator. You'll see how someone behaves in a different cultural setting, how they deal with unknowns and eventually you feel if you can work hard together for the next 5+ years ;)
I've been researching this a lot lately. So this could be from other posts on HN, other forums, or blog posts... most of this is probably not my original thoughts.
First the right co-founder would be a lot like you. Compatible communication styles and temperament. If one of you likes to "call it like it is" and the other is more gentle, things won't go well. You don't have to be identical, but close enough to not waste time fixing your relationship every day.
Second, the right co-founder will be the opposite of you. In terms of skills, opposites are good. You're good at development? You need them to be great at something entirely different.
If you met your best friend because you worked side-by-side doing the same job and do everything together, probably not a good cofounder. But if you have a former colleague that you worked with, you got along great, but you were in sales and he was a developer -- that might be a match made in heaven.
I like to think of it like a marriage. My wife doesn't mind doing the things I hate (cook, clean, etc) and I love doing the things she hates doing (going to work, doing finances, etc). We communicate well, get along great, and the responsibilities are easy to split.
You don't. Founding a company will be one of the hardest things either of you ever does. It's almost impossible to know beforehand how people will react to extreme stress, sleep deprivation, large amounts of money, etc...
You can certainly do your best to learn about each other and extrapolate what that means for a day to day working relationship, and for the good and bad times. I'd highly recommend working on a side-project together, or one of you hiring the other as a contractor for 1-3 months to work on the main product (pre-incorporation) with the understanding that everything will even out at incorporation. Equal (or reasonable) equity split, and the person paying the other for contracting work will get a reimbursement as part of the incorporation expenses.
To further reduce your risk, you absolutely need vesting and triggers. Based on my experience, the standard 4 year vesting / 1 year cliff is not enough for founders. I'd explore more long term options, such as 6 year vesting / 2 year cliff, or the 4/1 that only starts after reaching a significant revenue / fundraising milestone. The latter of 1 mil ARR or raising over 1 mil in funding. Obviously you should both have the same terms here.
You may also want to consider having only one of you on the board (so that in the worst case you can fire a cofounder). This should probably be the CEO. Also, CTOs are usually the first/only devs so you may want to consider setting a 6 month done-or-out milestone for product dev. This could be applied to other roles (CEO- fundraising, Sales- hitting early adopter/traction milestone), but I haven't seen that done in practice yet.
The worst case for you is that it doesn't work out in the early stages. This doesn't have to be a bad split, nor kill the startup. Sometimes people go in with good intentions, find out that it's not for them, and leave on good terms. But if they do leave, on good or bad terms, before the company is stable then you don't want them to take a large portion of the equity.
I strongly believe that founder equity is to compensate performance, not opportunity cost. That's why they need to have such a large portion- the risk of not performing is so great since the bar for a founder is so high, so if they do perform they need a large reward. If founders are concerned about opportunity costs of giving up a large salary, and need equity to make up for it, they probably aren't really ready to make the jump to a startup.
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[ 0.23 ms ] story [ 22.8 ms ] threadI started my business with 2 partners. One of them I trust completely, even with my life. I had a negative gut feeling about the other since day 1.
The latter is the one we had to let go, and it got really really nasty.
Good times don't tend to expose the relationship well.
First the right co-founder would be a lot like you. Compatible communication styles and temperament. If one of you likes to "call it like it is" and the other is more gentle, things won't go well. You don't have to be identical, but close enough to not waste time fixing your relationship every day.
Second, the right co-founder will be the opposite of you. In terms of skills, opposites are good. You're good at development? You need them to be great at something entirely different.
If you met your best friend because you worked side-by-side doing the same job and do everything together, probably not a good cofounder. But if you have a former colleague that you worked with, you got along great, but you were in sales and he was a developer -- that might be a match made in heaven.
I like to think of it like a marriage. My wife doesn't mind doing the things I hate (cook, clean, etc) and I love doing the things she hates doing (going to work, doing finances, etc). We communicate well, get along great, and the responsibilities are easy to split.
You can certainly do your best to learn about each other and extrapolate what that means for a day to day working relationship, and for the good and bad times. I'd highly recommend working on a side-project together, or one of you hiring the other as a contractor for 1-3 months to work on the main product (pre-incorporation) with the understanding that everything will even out at incorporation. Equal (or reasonable) equity split, and the person paying the other for contracting work will get a reimbursement as part of the incorporation expenses.
To further reduce your risk, you absolutely need vesting and triggers. Based on my experience, the standard 4 year vesting / 1 year cliff is not enough for founders. I'd explore more long term options, such as 6 year vesting / 2 year cliff, or the 4/1 that only starts after reaching a significant revenue / fundraising milestone. The latter of 1 mil ARR or raising over 1 mil in funding. Obviously you should both have the same terms here.
You may also want to consider having only one of you on the board (so that in the worst case you can fire a cofounder). This should probably be the CEO. Also, CTOs are usually the first/only devs so you may want to consider setting a 6 month done-or-out milestone for product dev. This could be applied to other roles (CEO- fundraising, Sales- hitting early adopter/traction milestone), but I haven't seen that done in practice yet.
The worst case for you is that it doesn't work out in the early stages. This doesn't have to be a bad split, nor kill the startup. Sometimes people go in with good intentions, find out that it's not for them, and leave on good terms. But if they do leave, on good or bad terms, before the company is stable then you don't want them to take a large portion of the equity.
I strongly believe that founder equity is to compensate performance, not opportunity cost. That's why they need to have such a large portion- the risk of not performing is so great since the bar for a founder is so high, so if they do perform they need a large reward. If founders are concerned about opportunity costs of giving up a large salary, and need equity to make up for it, they probably aren't really ready to make the jump to a startup.