Startup Due Diligence Begins With Your Cofounder(s)

By Bretton Putter


Deciding to start a business is a momentous decision. Any entrepreneur will tell you that in the early years – with no guarantee of long-term success – you will pour more blood, sweat and tears into your venture than you even knew possible. There’s a reason why so many founders talk about their business as their “baby”: it takes just as much work as raising a family, you become just as depleted, and you are just as invested.

It is no wonder then that some people decide to cofound a business: after all, a good cofounder relationship can transform the experience of founding an enterprise. Rather than facing the monumental and rather relentless challenges of launching a startup by yourself, suddenly you have a co-pilot and confidante, someone to weather the tough times with, someone to bounce off and make the difficult, strategic and exciting decisions with, and someone who can plug the gaps in your skill set. Work with more than one cofounder and you can create a founding team that is a force of nature. For venture investors, it’s all about risk mitigation and most prefer to invest in a cofounding team rather than an individual founder.

A good cofounder relationship generates a wealth of business benefits. There is the combined human, social and financial capital; the varying and complementary strengths, working styles and skills that each person brings to the table; the increased ability to identify and fill the knowledge and experience gaps across the founding team; and the relationship itself, which can be a source of ongoing motivation and a space to share the successes and difficulties along the way.

It is no secret, however, that the cofounder relationship is complicated. The many relational and power dynamics that the founders must navigate, the pressures of building and leading a team, as well as the hard business decisions can all make or break the venture. In addition to the stress of leadership, there is the added layer of pressure that comes from having to manage the relationship with your cofounder. Research by Michael Gorman and William A. Sahlman found that 65% of startups fail as a result of cofounder conflict. There are many reasons why a cofounder relationship can fail, doing your due diligence, setting up the structures and carefully thinking a potential cofounder relationship through is critical.

So, what are the potential pitfalls for mismatched cofounders, and how do you know, when you have the right one?

The potential pitfalls

Cofounder mismatch is a real but solvable problem. Look out for these potential pitfalls and address any issues as soon as you spot them.

Ability to accept and process feedback

Stubbornness as a character trait can serve entrepreneurs well. As Seth Godin writes, knowing when you’re in a dip versus when you’re at a dead end can change the course of a business. The world’s most successful founders have seemingly endless grit, resilience and perseverance – but there are times when a founder can be so attached to their ideas that they refuse to …read more

Read more here:: B2CMarketingInsider

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