Why choosing the right co-founder is one of the most important decisions an entrepreneur can make
I first met Brew Johnson in college. Many years and tons of life experience later, I left a dream job at Google and moved my family across the state to start a business with him. His work ethic, and background as both a real estate attorney and an entrepreneur made him the ideal match for building PeerStreet. Picking a co-founder isn’t always easy. But it is one of the most important business decisions you can make.
Going into business with someone is not unlike marriage—it’s (ideally) long-term, you have to see this person a lot, and if the relationship falls apart, it’s likely to be for financial reasons. Some of the most successful businesses of our time are founded on dynamic, fruitful relationships between two people—Bill Gates and Paul Allen, Bill Gates and Melinda Gates (he’s good at this!), Sergey Brin and Larry Page. But bad business marriages can lead to all kinds of problems, including fragmented cultures, disjointed vision and poor performance.
Having started a couple of businesses myself, here are a few insights on what to look for when choosing a co-founder:
1. Find someone who complements you but is different from you
They say opposites attract—as true in business as it is in personal matters, though often for different reasons. Every player on your team needs to fill a very big role. So having a breadth of experience and clearly defined roles is useful. Additionally, founders are unique. They need to work onthe business, not just in the business. That’s my summary of Michael Gerber’s classic book on entrepreneurism, The E-Myth. Gerber’s advice has stuck with me since my co-founder at Urchin handed me a copy of the book many years ago. It’s a lesson many founders miss, and until they do, they risk never truly scaling their business.
Finding a co-founder who can add value in a certain role, or multiple roles, and can also look at the bigger picture to identify and build systems, is essential. My co-founder, Brew Johnson, and I discuss this a lot at PeerStreet. We intentionally aim to hire people who are better than we are at each role. While we both wear many hats, we try never to let any one job take up too much of our focus. When that begins to happen, we hire for that role, so we can keep building and improving the systems that allow our business to run.
Think about a successful restaurant. Having two high-profile chefs may get you only so far. But a restaurant that earns a two-star Michelin rating and has an experienced manager can be both a great place to eat and a profitable business.
2. Be sure that you genuinely enjoy spending time with this person
You spend a lot of time with co-founders. And by a lot, I mean everything from being squished together in middle seats on an airplane to late nights in the office figuring out how to untie complex business knots. You don’t have to be best friends, but you do have to enjoy spending time together.
Warren Buffett and Charlie Munger have built a successful enterprise worth billions of dollars. In a CNBC interview, they revealed one of the secrets to their long-term relationship at Berkshire Hathaway: “Obviously, we like each other a lot,” Buffett said. “We have minds that work the same way to a great degree. We find the same things quite humorous and the things we deplore we agree on.” The two worked together in the Buffett family grocery store, both having been born and raised in Omaha.
Brew and I went to college together. You’d think we might be sick of each other by now, but good co-founders learn that every minute spent together means more problems solved and more creative ideas. At this point, we’ve spent so much time together that we can (and often do) finish each other’s sentences. It’s this closeness that allows us to divide and conquer.
3. Build the capacity for productive disagreement and necessary compromise into the relationship
Never, ever choose a co-founder who only agrees with you. You’re not going to be right 100% of the time. In an environment where only 25–30% of venture-capital-backed businesses make it, you need to find a business partner who’ll challenge your thinking. Debate is not only healthy but necessary because it allows the best ideas to emerge.
When I’d debate something with my co-founders at Urchin, we’d lock ourselves in a room until we could make a decision. It doesn’t have to be so dramatic every time, but forcing decisions is crucial.
Equally important to remember, you don’t always have to get your way. At Google, the former Chief Business Officer, Nikesh Aurora, reminded his teams of this frequently. I’m paraphrasing here, but essentially he said that we were all at Google because we were smart. Which means most of us were probably used to winning debates. But if you’re in a meeting with ten other smart people and everyone has an opinion, you’re beating the odds if you get your way three out of 10 times. That might feel like losing, but it isn’t. Make a decision and get behind it.
Some of the biggest business breakups occur when founders cannot get on the same page simply because one or both can’t stand to lose an argument. Eduardo Saverin and Mark Zuckerberg’s high-profile breakup was famously chronicled in The Social Network. Although it’s hard to determine how exactly Saverin and Zuckerberg’s relationship fell apart, what’s clear is that they were never able to resolve their numerous conflicts.
Conflict is healthy, but conflict resolution and compromise are absolutely necessary. Co-founders are notoriously bull-headed. That quality and an unwavering belief and passion are two sides of the same coin. Co-founders need to be willing to challenge each other but believe so strongly in the long-term success of the company that they are willing to find a compromise.
I was speaking to a group of students in USC’s entrepreneur program when one asked me how to pick a co-founder. I told her to find someone she could build a business with. Someone who appreciates her vision and shares her passion but also challenges her ideas and improves upon them. And most certainly someone who brings his or her own skills to the table, whether these skills amount to a talent for engineering, business affairs, or social interaction.
Like marriages, businesses are prone to failure. Perhaps as many as 80% of all business partnerships fail. So when choosing a co-founder, think long and hard about whether this person is the right fit not only for you but for the business you plan to build together.
Some of the best businesses in the world were built by famous duos: Hewlett and Packard, Jobs and Wozniak. If you end up in a failed partnership, figure out why. The experience is as much about success as it is about figuring out what needs to change for your next go-round.