cofounding startups

The Pros and Cons of Co-Founded Startups

Linkilaw Business Structures, Family Business, Startup Advice & Tips 2 Comments

So you think you’ve finally found THE one? The two of you have great conversations, similar interests and almost identical short and long-term goals. You’re thinking about a proposal, but you want to be sure. How can you know?

We’re talking about business, of course – not marriage – although the two are eerily similar. Think about it: when both are healthy they’ll last 30+ years, they both require consideration, patience and compromise. And, (perhaps most importantly) when either doesn’t work out – it can cost you a lot of heartache and money!

Before you pop the question, you need to weigh out all the scenarios. Here’s our guide to the ups and downs of co-ownership.

The Downside

Every relationship has its low points, and business relationships are no exception. Knowing the implications of co-ownerships can help you make an informed decision about whether it’s right for you.

Here are a few reasons why you may want to opt out:

1. The commitment is real. Okay, so you don’t walk down the aisle or exchange vows and rings, but signing on the dotted line is still a union you can’t take lightly. We’re talking late nights, long flights and all the time in between. Can you see yourself with this person during all hours of the day?

There’s a good chance you’ll spend more time with your business partner than your family, so it’s important that your chemistry exists outside of the workplace, too. If you’re not sure, slow it down. Agreeing to give away half of your business is a decision you can’t always take back. Be sure you know what you’re committing yourself to, and seek a lawyer for help with the fine print.

2. It’s for better (and especially) for worse. Let’s be honest: bad days are inevitable and disagreements will happen. The conflict that can arise from not seeing eye-to-eye is certainly a downside to partnerships. Stress can change people, and especially with startup co-founder scenarios it can make or break a company for good.

It’s important to know how you and your partner fight with one another – and especially – how you’ll make up. If compromise is hard for one (or both) of you, the solo route may be a better way to go.

3. What’s yours is theirs. With joint ownership everything is shared – and sometimes sharing is hard! In healthy relationships, workloads are distributed evenly and each partner is assigned tasks best suited to their strengths. But occasionally things get off balance! You could find yourself putting in more work than your partner, but getting equal recognition in return. Are you okay with that?

If you like getting applauded for your ideas, and think the limelight is best suited for one person (you), then co-ownership may not be your cup of tea.

The Upside

The good news is: when business partnerships are good, they’re really good. Finding the right person to share in your vision can lead to a ‘honeymoon’ that lasts many years.

Here are a few reasons why copartnership is a great idea:

1. You share the burden. Sure, having to share the rewards can be a downside to partnership, but being able to share stress is a huge advantage! With a co-founder, even the biggest “to do” lists get split in half and high-pressure decisions are divvied up.

Don’t forget about the legal implications, either. Signing your name – and only your name – on leases, agreements and other contracts can be incredibly intimidating. Having another person to help lighten this load is an invaluable reason to opt in.

2. It’s a happy union (of resources). In business, everyone knows it’s all about who you know. And, taking on a business by yourself leaves you with just a single contact list to use. With a co-founder, however, you instantly double your network and sales power.

And while fattening up your contact list is great, what about plumping up your wallet? Having a co-founder means having access to another important resource too: money. Even if neither of you have much to give, being able to share the responsibility of a loan repayment could mean the difference between qualifying for a loan, or not.

3. There’s strength in numbers. What’s the tipping point for business success? Whatever the number, it’s greater than one! Pitching your business to potential investors or consumers is a little easier when there’s already one person on board. Even if that person is a partner, it shows that someone (besides you) believes in the model. This sort of tipping power is an obvious perk. Think about it: would you be more likely to try a product if one of your friends swore by it – or if two of them did?

Look Before You Leap

Only you can decide if a co-founder is right for your business. Make the decision like you would any other: with careful consideration. Make a list of the idea qualities you’d like to find in a mate and be transparent with yourself – and them – about your goals. Honest conversations with contenders will usually reveal your compatibility.

Lastly, Prenuptial Agreements for businesses exist and they can save you loads of money and distress if things don’t work out. Let a lawyer draft an agreement that protects your assets and interests in case of a separation.