“All happy families are alike; each unhappy family is unhappy in its own way.” - Leo Tolstoy, Anna Karenina
Whether or not he was correct about families, Tolstoy’s philosophy does not seem to hold true for business startups. In fact, the opposite is true: startups can succeed for a variety of reasons, but most fail for the same reason: poor relationships among co-founders. Studies suggest that the majority (62%) of failure in start-ups is attributable to irresolvable conflict among co-founders. This is unfortunate not only because some great business ideas never come to fruition, but also because it is preventable.
Answering two important questions can help assess whether your co-founder relationship is likely to beat the odds:
What is Each Co-Founder Really Adding?
Conflict is often the result of unmet expectations. In the same way that you must be able to clearly articulate the vision of your business, you must also be able to clearly state why, exactly, this is a great co-founder team: what each person adds and what is expected of them.
It is never as easy as the labels: you are the business person, I am tech. If a co-founder’s area of expertise is in marketing, but you place greater value on her experience in bringing a company public, and access to capital, this should be made clear. This will be important later if some of her marketing ideas are challenged.
Sometimes it is personality attributes that are highly valued. You may need someone better able collaborate with staff and external communications, even if they have no direct industry experience. Many partners value the judgment or decision-making ability of their co-founder above other direct skills. Specific acknowledgment of what your co-founder brings, and does not bring, will help avoid conflict later.
Do You Share Similar Values?
It is very difficult for co-founders to work well together if they do not share some core values. Values do not need to be perfectly aligned, but if co-founders are too far apart then making strategic decisions will be very difficult. A common example is the timing of exit events, and the underlying values that play in to that decision. Knowing how driven your co-founder is by financial rewards versus professional recognition, for example, or by the draw of non-business activities, is critical.
Co-founders who are struggling with their relationship often acknowledge that this is an area where red flags emerged as they were getting together, but they were ignored.
Startup co-founders are often under tremendous time pressure to advance their business and often fail to take a deep dive into what can be perceived as the softer elements of compatibility and communication. Delving into these two basic questions in seeking co-founders is the most important thing you can do to prevent failure.
You can take steps to assess how well aligned your values are with your partner by taking our Partnership Compatibility Assessment.