While pursuing entrepreneurship alone is possible, partnering with others significantly increases your chances of success. Business partners ease the emotional burden of entrepreneurship, share the workload, and bring unfair advantages you might lack.
Beyond simply finding partners, you’ll need to navigate critical decisions about team structure and dynamics with your founding team. This article contains advice from The Unfair Advantage by Ash Ali and Hasan Kubba and The Founder’s Dilemmas by Noam Wasserman to help you determine how many cofounders you need, what roles they should fill, how to prevent devastating conflicts, and how to establish decision-making authority that scales with your company’s growth.
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Finding Your Business Partners
In The Unfair Advantage, Ash Ali and Hasan Kubba say that it’s important to recruit business partners who can contribute valuable skills and insights to your startup. While it’s possible to succeed on your own, the authors advise against it. You must learn how to build a founding team because you need partners. Why? The demands of launching a startup are intense, and business partners can ease the emotional burden and share the workload. Also, business partners can provide unfair advantages that you lack, making your road to success much smoother. For example, maybe you have a brilliant idea for a new restaurant and you’re exceptional at marketing, but you’re a terrible cook. In that case, you’ll likely need to find a partner with cooking expertise.
(Shortform note: Not everyone agrees with Ali and Kubba that business partners are a good idea. Instead, some entrepreneurs recommend that you hire people who have the skills and resources you lack, offering them an hourly wage, a salary, and/or profit sharing, thereby protecting your position as the sole decision maker. Why? They say bad partnerships are common and can be disastrous—and ultimately aren’t worth the risk. One frequent source of conflict is resentment that surfaces when one partner puts in more work than others. Also, partners sometimes double-cross each other to get ahead. For example, two partners might team up to vote out the third, leaving the ousted partner with nothing.)
How many partners do you need? According to Ali and Kubba, two or three is usually ideal. They say you need to fill three roles: an innovator, a promoter, and a specialist, and one person can fill more than a single role. First, the innovator casts a lofty vision and reinforces a worthy purpose for the business venture. Second, the promoter functions as the face of the business, interacting with customers and potential investors to “pitch” the business, get feedback, and secure support. Third, the specialist provides the knowledge and skills needed to build a reliable product.
(Shortform note: If you decide to pursue business partners as Ali and Kubba suggest, most experts who endorse this approach also recommend two or three partners at most. They say investors seldom fund single-founder startups because they consider multiple co-founder ventures to be more credible and robust. This may be because they know that it’s unlikely that any founder will be an effective innovator, promoter, and specialist. Additionally, three co-founders may be better than two because you’ll always have a tiebreaker vote if you end up deadlocked on a particular issue. However, more than three partners slows down your decision-making process, which can hamper business growth.)
When you’re ready to recruit business partners, choose with extreme care, as this is one of the most critical decisions you’ll make. As Ali and Kubba caution, conflict between business partners is one of the primary sources of startup failure. Therefore, trust is essential, and it doesn’t happen overnight. If you already know and trust your prospective partners, it’ll make your working relationship easier from the start.
| How to Handle (and Prevent) Conflicts Among Co-Founders Ali and Kubba accurately state that conflict between business partners is a common cause of startup failures. According to research, 65% of high-potential startups fail due to conflict among co-founders. These conflicts emerge when co-founders clash around their values, ideals, visions, and strategies. No matter how connected and aligned you may initially feel with your co-founders, business leaders say you can’t realistically sustain alignment across all the critical aspects of the business, as you each bring unique perspectives and experiences to the startup. However, you can take steps to identify and resolve potential conflict before it escalates. Business leaders recommend these steps: Have a conversation about values and motivation. Discuss what’s inspiring each of you to take on this business opportunity, and share values that are important to you. For example, is being bold and taking risks more important to you than making a positive difference for others? Talking openly about these factors will increase empathy and promote stronger bonds. Play the “what if” game. Talk through scenarios that you might encounter as your startup grows. For example, have each person answer questions such as “What if an investor offers us $10 million? Should we accept it, and if so, what should we do with it?” Talking through hypothetical scenarios will help you get clear about how people think and problem solve. Exchange feedback regularly. At least weekly, meet to share your respective thoughts about what’s working and what could be improved. Focus on delivering fact-based, empathetic input rather than attacking or being passive-aggressive, as fact-based feedback will facilitate more productive conversations. Identify what really matters and be flexible on the rest. For big strategic issues, make sure you’re clear about how you’ll navigate disagreements. If you reach an impasse, revisit your shared vision and aim for win-win outcomes. Alternatively, seek counsel from an independent advisor who can provide an objective perspective. |
Build Your Founding Team Structure
In addition to choosing the right cofounders for your business, it’s critical that you establish the right team structure with your cofounders. In The Founder’s Dilemmas, Noam Wasserman identifies three dilemmas founders face in establishing that structure: assigning titles, dividing labor, and delegating decision-making authority.
Assigning Titles
Wasserman notes that founders often assume senior roles in the company—with the person who conceived the original idea assuming the title of chief executive officer (CEO). While this might seem appropriate at the outset, it could become less conducive to success as the company grows and matures due to the varied skill requirements of different growth stages.
Initially, writes Wasserman, the start-up phase often demands vision, risk-taking, and out-of-the-box thinking—all attributes commonly associated with founders. Therefore, it might be fitting for the ideas-driven founder to lead as CEO during this phase. However, as the company grows and establishes itself, different leadership competencies may become paramount. For example, the company might require more focus on operational efficiency, process management, human resources, financial control, and stable growth—skills that a founder-CEO may not possess or excel at. That’s when it may be time for another cofounder with the requisite skills to step up as CEO, or the company may bring in an outside hire.
| Beware the Cult of the Founder Some experts have noted that founder-CEOs who people perceive as visionary or unique often present problems for their companies as the firms grow from startups to well-established businesses serving multiple stakeholders. In the tech world, there’s a phenomenon called the “cult of the founder”—a culture that elevates startup founders to near-mythical status, often attributing a company’s success solely to their creative vision and willingness to break rules. For example, cults have sprung up around founders like Apple’s Steve Jobs, Microsoft’s Bill Gates, and Facebook’s Mark Zuckerberg. This belief in the genius founder has frequently led investors to pour money into enterprises with ill-conceived business models or incoherent paths to profitability, based on little more than the charisma or salesmanship of the founder-CEO. In fact, one study showed that companies led by their founders rate lower than those with other leadership structures on a host of management criteria—including setting intermediate growth targets and rewarding talented employees. The study further noted that founders tend to have an unrealistic view of their own weaknesses, leading them to make poor strategic and tactical decisions. |
Dividing Labor
Wasserman points out another common dilemma you’ll face on the cofounding path: how to divide labor among founders without creating rigid silos. Assigning clear roles is appealing—for example, you might make one founder the CEO responsible for strategic decisions, another the chief financial officer (CFO) handling financial matters, and a third the chief operating officer (COO) overseeing daily operations. This enhances each founder’s focus and accountability while minimizing overlap and confusion, ensuring that each area of the business has a dedicated leader driving progress and making informed decisions based on their expertise.
(Shortform note: Some experts expand on Wasserman’s ideas, writing that role division should align with each founder’s natural strengths and passions. This is because people perform significantly better when their responsibilities match their skills and interests, creating a more energized and effective leadership team. These experts recommend mapping each founder’s unique skills and interests to appropriate responsibilities, seeking complementary rather than overlapping skill sets among founders, and striving for balanced workloads to prevent burnout and ensure equity in time commitments and compensation among the founding team.)
However, Wasserman warns about the potential pitfall of siloing—a situation where company leaders overly compartmentalize their responsibilities and focus solely on their designated area without thinking of the impact on the company as a whole. Silos can make founders lose touch with the broader goals of the company. For example, if the chief technology officer (CTO) is too focused on perfecting a product’s features without consulting the marketing team, they might miss aligning these features with market needs. This lack of collaboration often results in limited communication across departments, reducing the company’s big-picture thinking while slowing decision-making and problem-solving.
| How to Break Down Silos: Lessons From the US’s War in Iraq Siloing isn’t just a phenomenon in private sector startups; leaders in governmental and military organizations also have to overcome the challenge of departmental heads losing sight of the overall mission. These leaders’ successes provide a roadmap for how private sector leaders can do it too. For example, in Team of Teams, General Stanley McChrystal discusses the organizational and operational challenges faced in 2004 by the US Joint Special Operations Task Force in Iraq as it attempted a counterinsurgency against Al Qaeda. He writes that one of the main obstacles the task force faced was siloing, in which teams functioned in their own spheres, coordinating with their commands but not with other teams. To change the organizational culture of silos, the task force adopted a policy of “extreme transparency,” or wide information sharing, that provided everyone with an unvarnished, real-time view of the organization. McChrystal created an open-office environment at the task force headquarters, where his staff cc’d a wide range of people on emails and took most calls on speaker phone to “normalize” the sharing of information. His staff also created a daily Operations and Intelligence briefing, or O&I. Anyone who was invited could connect to the meeting via laptop from anywhere, from embassies to FBI field offices to staff at Fort Bragg. The meeting was an unfiltered discussion of the task force’s successes and failures, where everyone could see how problems were being solved and conflicting information was being reconciled. McChrystal writes that the O&I saved untold time by eliminating the need for people to get clarification. While there was a risk of information falling into the wrong hands, the task force never had any leaks, and sharing information saved lives. |
Establishing Decision-Making Authority
Wasserman emphasizes that it’s not only vital for startups to determine who will be making which decisions—but also how those decisions will be made. He notes another tradeoff that founders have to face: committee-style, consensus-driven leadership or a top-down structure with a strong CEO.
Initially, he writes, startups often adopt a committee-style approach where decisions are made collectively with everyone having a voice. This consensus-driven method can foster a sense of camaraderie and equal say among the founder team, encouraging diverse thoughts and ideas. It also has the potential to reduce conflicts, as no single person holds all the decision-making power. However, consensus-driven decision-making can also be time-consuming and may delay important decisions in instances where a unified agreement is hard to achieve.
While startups often start with the consensus-driven approach, as they grow, they might transition to a top-down decision-making structure. In this model, a strong CEO or leader often carries the responsibility of making final decisions. This approach can lead to swift decisions, maintain momentum, and ensure the organization’s forward movement in line with the CEO’s vision.
| CEO Dictatorships: When Corporate Governance Fails Wasserman’s ideas about decision-making in a company speak to the issue of corporate governance—the system of rules, practices, and processes by which a company is directed and held accountable to its shareholders, management, customers, suppliers, and the broader community. Unfortunately, as a company transitions away from committee-style governance, CEO dictatorships can develop in which excessive executive power undermines the organization’s checks and balances. This happens when boards of directors fail to maintain effective oversight, allowing chief executives to consolidate control and make decisions that bypass proper scrutiny. Partly in response to some of the perceived excesses of overly powerful CEOs, some companies have moved back toward a more consensus-driven approach. Notably, Tim Cook, who succeeded Steve Jobs as CEO of Apple, has shifted the company’s leadership style. Under Jobs, Apple was known for its strong, centralized decision-making approach. However, Cook has introduced a more democratic, consensus-driven strategy that aims to foster greater collaboration and inclusivity within the company’s leadership structure. |
Expand Your Founding Team
If you want to learn even more about building your founding team, check out the full guides to the books mentioned throughout this article here:
