Startup Divorce: Six Conversations To Have With Your Cofounder Before You Go Into Business

Shortly after the controversy over Tinder first hit the news I was sitting with a group of former and current founders having lunch. There was an interesting juxtaposition between the way we viewed our own experiences with cofounders and the way we viewed Whitney Wolfe’s situation. Each one of us condemned the stripping of Wolfe’s cofounder status and the diminishment of her role in the company’s success. However, when it came to our own departed cofounders each one also admitted to wanting to figure out a way to seize back equity and rewrite the company history.

Working with a cofounder is like getting married, and breaking up with a cofounder is exactly like getting divorced. It is not fun. VCs and startup gurus talk a lot about the importance of team and cofounder dating, but very few people give specific advice about what you should be looking for. How do you know when you have a solid match? How do you find the red flags before equity is divided up?

For the most part my experience with cofounders has been overwhelmingly positive, but even within that sample there were some red flags I ignored that came back to bite me in the ass later on.

Here are six conversations you should have with your cofounder before you tie the knot:

Ask them how they would want to exit in a perfect world

You’re thinking IPO, they’re thinking acquire. In the end you might not get either. It may not matter, but the two goals have completely different timetables and often require completely different strategies.

Ask them where they see themselves in five years (no really)

After a year, your startup will have burned through most of its buzz. Tech blogs won’t really care if you’re killing it, they want shiny new products to write about. After three years if you’re not rolling around in a giant pile of cash everyone assumes your dead, broke and humiliated by your failure. Yet the reality of startups is that they take years of long, hard work. A cofounder who sees himself as only being a cofounder for two or three years is going to be trouble well before the company’s first birthday.

Pick something that fits their role and ask them how they would set it up

This isn’t about quizzing your cofounder, it’s about seeing how well they can explain things to you and whether they are aware of the consequences of the choices they would recommend. When you start a startup there’s a lot that needs to be setup and a lot of established companies willing to throw free accounts and credits at you. If your cofounder leaves, the remaining cofounders need to understand the terms of those freebies, when do they run out, how much will they cost when they do?

Give your cofounder time to research a full and complete answer to this, but press for details. If they don’t realize that you’ll have to file a change with the state to remove a register agent (a common trick used by companies offering cheap incorporation services) that could create a problem later on.

Pick a topic specific to what role your cofounder will be playing. If a technical one, ask about server setup. If a business role, ask about taxes. If a marketing role, ask about social media.

Ask them about their past jobs and startups

It’s not about qualifications, it’s about interests. Do they seem to jump from trend to trend, more concerned with striking it big than with following their passion? It’s easier to weather the stress of startup land when you love what you’re building. The number of sacrifices you’re willing to make increases and the burdens of startup life seem less demoralizing. When you’ve chosen your idea based on an assumption of what will be popular, popularity becomes the glue holding the team together.

Fair weather cofounders are the first to screw you over and the first to fight for more equity if the startup takes off.

Could they live on $1,000 a month? How close could they get to that level?

Would they move to Detroit? Live with their parents? Dumpster dive for food? It’s not necessarily important that they do any of these things, but understanding what cofounders consider essentials is a really good indicator of how long they’ll last. A cofounder who isn’t willing to drink tap water and has to live in certain trendy neighborhoods is going to be under way more pressure than one who considers those things expendable.

Also worthwhile asking them if they’ve ever actually cut back to that level. We all say we’re going to budget better just before we splurge.

Do they have any skills they can leverage to bootstrap comfortably? What about passive streams of income?

You will in all likelihood get to the point where your personal financial situation is negatively affecting the company. It’s not necessarily because of something you did wrong. Opportunities cost money. Here’s what happened with Exversion: YC threw us a little cash to fly in for our interview, but no where near enough to cover costs of the journey. TechCrunch insisted we fly out to SF for rehearsals in order to participate in Battlefield in Berlin. The Open Data Coalition offered us a free booth at their government conference, but we had to get to DC on our own.

I needed a few hundred dollars a month to balance things out, so I went back to teaching ESL (something I had done while traveling around Europe years before).

Having a skill or a resource that can provide injections of cash if needed is really useful. It can be the difference between having to leave the company or not.

If your cofounder says he can always freelance, press him on the specifics of contracts. The nice thing about freelance teaching is that classes have a definite start time and a definite end time. We agreed exactly how much time I would spend on that in advance and it would be extremely difficult to modify those plans.

However, working freelance for other startups or small businesses is different. They act like they own you, wanting you to be on call 24/7, changing project goals and specs on a whim, setting new last-minute deadlines. Add to that the additional work of finding clients, writing proposals, pitching them, negotiating terms, chasing after them for payment … freelance work can and will take over your life

In the end do you really need a cofounder?

No cofounder is always a better choice than a bad cofounder. Bad cofounders can do a lot of damage, often when the startup is the most vulnerable. At the same time, the existence of cofounders is used as an easy filter for VCs and incubators and I suppose that makes a degree of sense. If you can’t convince one person of your product how on Earth will you convince millions?

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