It's easy to be caught up in the excitement of a new business venture, but when it comes to choosing the person with whom you will spend more hours, than your spouse, it is important not to enter into a relationship you may live to regret - there is a lot at stake if goes wrong, but plenty to gain if you get it right.
Being friends is just not enough. Generally, you make friends with people just like you! In a friendship, sharing the same likes, dislikes, general interests and values matters. In a business relationship, making sure that you and your co-founder(s) bring different but complementary skills to the business is critical. Also critical is a healthy respect for each other's opinions and being able to discuss issues in an open and constructive way.
Are you more suited to running an operation independently or would you benefit from sharing the responsibility and input? Most investors I speak to say that they would not invest in a business that is run by a solo founder. They know that it's impossible to grow a really big business on your own and it's a high risk investment for them to back a solo founder. It's better to share the responsibilities, the ups and the downs and the major challenges with a co-founder.
How much time are you both prepared to commit to the enterprise, does one of you value work / life balance more than the other. Is your potential partner as committed as you to succeed? Most co-founder problems start here: when one of the co-founders feels that the other is not pulling his or her own weight in the business. Be clear at the very start of your venture about each other's roles and responsibilities and feel free to challenge progress in a constructive way. Also, make sure that you have strong founders' contracts and legal agreements in place in the event of a breakdown of the relationship.
Are you both making a financial commitment? Personal investment and taking risk makes a partner less likely to leave. If only one of you is making a financial commitment, the split in equity should reflect that higher risk that you are taking.
Are your skills and personal attributes complementary? Are they the skills the business needs? A good business needs to have founders with a mix of complementary skills and attributes. So, for example, one founder will generally take the lead as the technology expert whilst the other may be better suited to sales or operations roles. If you're starting a tech business and none of the founders have a tech background, think about bringing a techie on board as a co-founder. Remember you will also need someone who has credibility with potential funders, investors and customers so don't forget that critical sales and marketing ability.
Who is going to actually run the company? You need to elect one of your co-founders as CEO to run the company whilst the others take on other senior roles. It is disastrous for two or more co-founders to take on the role of 'co-CEO' as this confuses everybody and gives the impression that there is no one in charge of the company.
How is the business structured? Putting this in place is vital at the start together with any legal agreements. As mentioned before, water-tight founders agreements are critical at the start of the business. Seek advice from a lawyer and be prepared to spend some money to get this right. It will probably be money well spent if the partnership breaks down in the future. Better to take time to get to know your potential partner and launch the company later.
Do background checks if you're bringing in a third party co-founder. Ask your network about them and also ask for personal references which you must follow up. If you hear anything that sets alarm bells ringing, for example, if you hear that the person has walked away from several start-ups, do not bring that person on as a co-founder. If you desperately need the skills, offer them a job with the option of co-founder status after a year or 18 months, all things being well.
Many early stage business partnerships flounder as soon as the business hits its first hurdles. Good partnerships where all parties have respect for each other, are clear about their roles and responsibilities and are willing to work towards a common goal generally survive these problems.