Hey, this is Michael Seibel and Dalton Caldwell. Welcome to Rookie Mistakes. We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid these common errors.
Let's start with our first anonymous story from YC founders — mistakes to avoid.
At the beginning, when everything's going well, you don't know how you're going to handle disagreements or bad actions by the other person. It's extremely hard to deal with a bad situation after the fact if you don't have anything written down.
It's awkward to talk about things like who gets what percentage of the company, or whether you have founder vesting. Human beings don't always remember things quite the way they went down. So write it down.
I think the biggest error I see is founders looking for someone with a skill match versus someone they've actually had a fight with before — a friend. A lot of founders assume that whatever skills their co-founder has at the moment they join the company are the only skills they'll ever have. In my experience, almost everything you learn, you learn on the job. So you'd rather work with someone you really like and learn together than work with someone you don't know at all, get into fights, and then break up.
To put some facts on that: how many founder breakups have we seen where the founder says, "My co-founder is excellent, A-plus — they just don't have the skills that we need"? Versus, "My co-founder is a living nightmare and I can't take it anymore." How many people say, "What a great person that I like a lot — I just shouldn't have made them my co-founder because they didn't have the right skills"? Michael, do you ever hear that?
Never hear it. And by the way, it's not that it's not true. It's that that doesn't cause a co-founder breakup. That doesn't kill a company. It's an error, but not a fatal one.
All right, let's move on to the next one. A YC founder wrote in:
Take arguments with your co-founders seriously. It's more likely to kill you than anything else.
What I see with a lot of co-founder disputes is that the relationship has never been pressure-tested. They've just been friends. "Oh yeah, we chat all the time." And then the first time there's a disagreement, it's a blowup. The relationship is broken, and you'll never be able to put the pieces back together again. Versus someone you've known a while — maybe it doesn't seem as shiny, but you've already had some disagreements. You've already had the relationship ebb and flow over years.
My best takeaway is that, first, you don't always have to come to a resolution. If you don't have two people engaging productively, you can pause. You don't have to keep the fight going. Second is understanding how your co-founder deals with stress. Some people deal with stress by attacking; some by retreating. If you understand how your co-founder deals with stress, you can better interpret what they're doing.
All right, here's the last comment that a YC founder wrote in.
I chose a co-founder with whom I could not share my honest disagreement. We didn't know how to fight well or come out of those fights better and wiser. Some part of that was conflict avoidance on my part, and some part of that was him fighting dirty.
It's crazy when you speak to founders who spend eight hours a day with someone, 12 hours a day with someone, and they'll say, "I haven't spoken to them in a week." And I'm thinking: what are you guys doing all day? You haven't talked to them in a week? Or in a month? Or haven't had a real conversation with them in a year?
When things get that bad, I would argue there's a point where breaking up becomes inevitable, and the CEO's job is now not how to repair the relationship. It's how to separate in the most effective and least destructive way.
When you talk to folks about this, they know in their hearts that that's what needs to happen, but they just can't bring themselves to actually do it because it feels bad. When you talk to these folks, they know that the right thing for the company is to go their separate ways. But for whatever reason they're willing to go through years of pain — or actually reduce the chance the startup is going to work — rather than face that head-on. It's really rough.
The longer this relationship persists in this way before there's a breakup, the worse the breakup is going to be. The more likely there's litigation. The more likely one person has vested stock, so now your cap table is affected. All these things get worse by leaving it alone.
How should the CEO set up a company so that if there is a co-founder fight, it's not fatal to the company?
The closest to equal you can get, the better — because it avoids the "this person has 10% more, so it's their company" drama. You see all this drama that happens over equity split. So equal is good. However, here's a pro tip: a straight 50-50 deadlock is rough, and we see that kill companies a lot. It might be reasonable for the CEO to have one extra share. So you effectively have the same ownership; you're equal co-founders. But that one extra share is you agreeing and writing early that in the event of a 50-50 deadlock, there's a tiebreaker vote.
Dalton, before we close, what are some tactical tips you give folks who are looking for co-founders now — who are extremely early in their journey or thinking about starting a company?
I hear from a lot of folks starting companies who want to come up with the idea first, maybe raise money first, and then add a co-founder. I actually think that's going about it in a less-than-ideal way and might cause more problems. I would recommend figuring out who the co-founder is first. Then, if you come up with the idea together and perhaps fundraise together, you'll have collective ownership: it's your idea and it's your company. A lot of times when you add co-founders later, in their mind it's your company — it's not their company. Even though you worked on the company an extra month than the other person did (which is so silly), you'll always have this "well, this wasn't my idea, this wasn't my company" — which isn't great from a retention perspective. If you can both really feel like you shepherded the idea through the earliest stages, you're going to see a lot more ownership and people stepping up when you go through hard times.
To reiterate what we talked about at the beginning: I don't want to say co-founders are essential, but they're so helpful. It's such a powerful tool, especially in the hardest part of the startup — the pre–product-market fit stage. We still encourage everyone to have a co-founder. But this startup game — it's not about doing it well, it's about doing it great. Having a great co-founder can be a superpower for your company. Having an okay co-founder and not taking this seriously can be the seed of big problems.
Absolutely. Sometimes people end up with co-founder issues and think, "Well, I guess I'm just gonna quit and start a new company." It's so easy to start a new company. Good luck. And then you speak to them a year or two later, and it's really hard to get back to where they were. One of the regrets is they wish they had spent the time to set up the co-founder relationship well and choose the right person first — rather than think they can just blow it up and get a do-over. That's just not how life works. The more you can front-load this the first time around, versus learning the hard way, the better. I would recommend that.
So we recommend you get a co-founder. We recommend you do it well. We recommend that you invest in that relationship early so that you can survive the fights that will inevitably happen. And man, grab this superpower. You should certainly get a co-founder — but don't slack. Don't slack off. This isn't the place where you want to put 50% effort. This is one of the most important things you're doing at the beginning of the company.