SPEAKER_00: You definitely want a co-founder. If you don't have anything written down.
SPEAKER_01: It's awkward to talk about things like who gets what percentage of the company or do you have founder vesting. And you know how human beings are. We remember, we don't always remember things quite the way they went down, right? And so write it down.
SPEAKER_00: I think the biggest error that I see is founders looking for someone with a skill match versus someone that they actually maybe have had a fight with before like 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. And in my experience, almost everything you learn, you learn on the job. So you rather work with someone you really like and learn together than work with someone you don't know at all and get into fights and then break up. I mean, to put some facts on that, how many founder breakups have we seen where the founder
SPEAKER_01: 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. Right? Like how many people are like, what a great person that I like a lot. They just didn't end up, I shouldn't have made them my co-founder because they just didn't have the right skills. Michael, do you ever hear that? Never hear it.
SPEAKER_00: 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. So the 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
SPEAKER_01: tested. They've just been friends. They've been like, oh yeah, we chat all the time. And then the first time there's a disagreement, it's just a blow up. And the relationship is broken and you'll never be able to put the pieces back together again. Versus if it's someone you know in 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, right?
SPEAKER_00: My best takeaway is that first, you don't always have to come into a resolution. Like if you don't have two people engaging productively, you can pause. You don't have to keep the fight going. And then the second one is like understanding how your co-founder deals with stress. Some people deal with stress by attacking. Some people deal with stress by retreating. And if you understand how your co-founder deals with stress, you can kind of 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.
SPEAKER_01: It's crazy when you speak to founders where they'll spend eight hours a day with someone and more 12 hours a day with someone and they'll be like, I haven't spoken to them in a week. Like, you know, and I'm like, what are you guys doing all day? Like you haven't talked to him in a week or I haven't talked to him in a month or I haven't had a real conversation with them in a year.
SPEAKER_00: And I think when things get that bad, I would argue there is a point where breaking up becomes inevitable and the CEO's job is now not how to repair the relationship. It's basically how to separate in like the most effective and least destructive way.
SPEAKER_01: 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. And so that's what's again, when you talk to these folks, they know, they know that it makes it the right thing for the company is to go their separate ways. But they, for whatever reason, they're willing to go through years of pain or actually reduce the chance the startup is going to work than to face that head on. It's really rough.
SPEAKER_00: 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 there's one person is vested stock, so now your cap table is affected. There are all these things that get worse by leaving it alone. How should the CEO set up a company so that if this battle, if there is a co-founder fight, it's not fatal to the company?
SPEAKER_01: The closest to equal you can get the better because it avoids this, oh, this person has 10% more, so it's their company. You see all this drama that happens over equity split. So equal is good. However, here's a pro tip for you. A straight 50-50 deadlock is rough and we see that kill companies a lot. And so 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
SPEAKER_01: a tiebreaker vote.
SPEAKER_00: Dalton, before we close, what are some tactical tips you'd give folks who are looking for co-founders now who are extremely early in their journey or thinking about starting a company?
SPEAKER_01: I hear from a lot of folks starting companies where they want to come up with the idea first, maybe they want to raise money first, and then they want to add a co-founder. And I actually think that's going about it in a less than ideal way and actually might cause more problems. I would recommend figuring out who the co-founder is first. And then if you come up with the idea together and perhaps you fundraise together, then you'll have collective ownership that it's your idea and it's your company versus a lot of times when you add co-founders later, in their mind, it's your company, it's not their company. And even though you worked on the company an extra month than the other person did, which is so silly, right? You'll always have this like, 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.
SPEAKER_00: To reiterate what we talked about at the beginning, I don't want to say co-founders are essential, but man, they're so helpful. It's such a powerful tool, especially in the hardest part of the startup, the pre-product market fit startup. We still encourage everyone to have a co-founder. But like the startup game, right? It's not about doing it well, it's about doing it great. Having a great co-founder can be a super power for your company. Having an okay co-founder, not taking this seriously, can be the seed of big problems. Absolutely. Sometimes people end up with co-founder issues and they're like, well, I guess I'm just going
SPEAKER_01: to quit and start a new company. Well, it's so easy to start a new company. And then it's like, well, 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 in the moment. And one of the regrets is they wish they would have spent the time to set up the co-founder
SPEAKER_01: relationship well and choose the right person first, then think they can just blow everything up and get a do-over. That's just not how life works. And so the more you can front load this the first time around versus having hard earned lessons, would recommend. Yeah.
SPEAKER_00: Yeah. 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 super power. You should certainly get a co-founder, but don't slack. Don't slack off. This isn't the place where you want to slack off, where you want to put 50% effort. This is one of the most important things you're doing in the beginning of a company.
