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10 common startup mistakes: #3 my friends = great cofounders

August 4, 2017 by Lee Erickson
The third installment of a 10 post series on common startup mistakes. Mistake 1, 2, 3, 4.

Friend or co-founder, or both?

Are there examples where best friends have started and run a successful business? Sure. But, it’s not always a piece of cake (just ask Mark Zuckerberg).

While your friends may seem like a sure bet (after all you’ve grown up together), a smart entrepreneur makes sure that they protect both their business and their relationship.

Does your friend have what it takes?

Focus on skills not friendship.

While trust and getting along are critical, you also need to critically evaluate the skills that your friend has – you should now what they good at and what aren’t they so good at. You want a co-founder who compliments your skills and will brings key skills that your startup needs to survive.

Getting along is important, but if your friend doesn’t actually bring¬† critical skills to your specific business, then it might not be such a great fit. Be discerning early on.

Be clear about responsibilities.

If you do have a friend who brings a critical skill set to your business, then it’s important to be crystal clear about who is doing what. If you’re doing the 50/50 split thing (which isn’t ideal), you need to have agreed on who does what and how you break a tie. It’s important to agree upfront which types of decisions each person gets the final say on (e.g., sales, marketing, features set).

And, if you have misgivings about deferring to your friend on critical decisions, then you need to re-evaluation whether you actually want them as a co-founder. Listen to your gut on this. It’s best to deal with this now then when you’re in the middle of trying to run a business and hit an impasse.

Make it official with a “prenup”.

OK, not really a prenup, but basically the same idea. While you trust your friend (and trust is key), smart entrepreneurs document the relationship, the terms, and make it legal.

Key things to include in your co-founder agreement:

  • The percent equity each person can earn and when they earn it (vesting over time is key).
  • What happens if someone wants to leave (termination clauses).
  • Roles and responsibilities.
  • Intellectual property ownership.
  • Salary and compensation.

  You are the average of the 5 people you hang around with.
~ John Rohn


Resources to check out:

There are a number of resources that you can use to help you manage the friend/co-founder relationship:

  • Penn State Entrepreneurial Assistance Clinic.
    Take advantage of free legal services here at the LaunchBox.
  • Your gut.
    Don’t underestimate your gut feelings about this. If you have doubts you need to stop and really think about moving forward. The last thing you want is to loose a friend and a great business idea at the same time.
  • Talk to people who’ve already done it.
    Learn from those who have been there and done that. You’ll likely hear both horror stories and major wins, but you’ll learn a ton listening to what they would have done differently.

COMING UP: MISTAKE #4…new solution = no competitors

What are you waiting for? Today's a great day to start a business.