- Founders should write down agreements and expectations to avoid future disputes.
- It is important to choose a co-founder based on a strong relationship and compatibility, rather than just skills.
- Co-founder disagreements should be taken seriously, as they can be detrimental to the company.
- Understanding how your co-founder deals with stress can help interpret their actions.
- It is crucial to be able to have honest disagreements and resolve conflicts in a healthy manner.
- Proactive measures should be taken to prevent co-founder breakups, as they can have negative consequences for the company.
- The CEO should set up the company in a way that avoids 50-50 deadlocks and allows for tiebreaker votes.
- It is recommended to find a co-founder before coming up with the idea or raising money.
- Having a great co-founder can be a superpower for the company, while not taking the co-founder relationship seriously can lead to problems.
- Investing in the co-founder relationship early on is important for long-term success.

In the first episode of Rookie Mistakes, Dalton Caldwell and Michael Seibel discuss co-founder mistakes.

To create Rookies Mistakes we asked YC founders: Is there a simple fact you wish you knew when you started your company or a rookie mistake you wish you could take back?

https://twitter.com/daltonc
https://twitter.com/mwseibel

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Rookie Mistakes
00:15 - Note from YC founder
00:32 - Write it down
00:49 - Biggest error - Founders looking for someone with a skill match
01:57 - Note from YC founder
02:05 - Co founder disputes
02:05 - Arguments
02:33 - 1. Pause (Don't have to keep the fight going)
02:45 - 2. Stress (How your co-founder deals with it)
03:03 - Note from YC founder
03:20 - Avoidance
05:01 - How should the CEO set up a company?
05:49 - Tactical tips for folks looking for co-founders?
06:12 - 1. Team first
06:58 - 2. Co-founders are a superpower
08:10 - Recommendations recap

Hey, this is Michael Seibel and Dalton Caldwell and welcome to Rookie Mistakes.

We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid these common errors.

Let's start with our first anonymous story from YC Founders on Mistakes to Avoid.

At the beginning, when everything is going well, you don't know how you're going to handle disagreements or bad actions by the other person.

It's extremely hard to deal with a bad situation after the fact if you don't have anything written down.

It's awkward to talk about things like who gets what percentage of the company or do you have founder vesting?

We don't always remember things quite the way they went down, right?

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.

to put some facts on that, how many founder breakups have we seen where the founder says, my co-founder is excellent A+, 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.

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.

And by the way, it's not that it's not true, it's that that doesn't cause a co-founder breakup.

So, 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 tested.

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've known 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?

My best takeaway is that first, you don't always have to come into a resolution.

Like if you don't have 2 people engaging productively, you can pause, you know, you don't have to keep the fight going.

And then the second 1 is like understanding how your co-founder deals with stress.

Like some people deal with stress by attacking, some people deal with stress by retreating, and like if you understand how your co-founder deals with stress you can kind of better interpret what they're doing.

last 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.

It's crazy when you speak to founders where they'll spend 8 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.

You know, and I'm like, what are you guys doing all day?

Like, you haven't talked to him in a week or haven't talked to him in a month or I haven't had a real conversation with them in a year.

And I think when things get that bad, I would argue there's 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.

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, 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's gonna work than to face that head on.

The longer this relationship persists in this way before there's a breakup, the worse the breakup is gonna be.

The more likely there's litigation, the more likely there's, you know, 1 person is vested stock, so now your cap table's affected.

Like 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, you know, if there is a co-founder fight, it's not fatal to the company?

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 splits.

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 1 extra share.

So you effectively have the same ownership, you're equal co-founders, but that 1 extra share is you agreeing in writing early that in the event of a 50-50 deadlock,

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?

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, okay?

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 know, 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.

Which isn't great from our retention perspective.

If you can both really feel like you shepherded the idea through the earliest stages, you're gonna see a lot more ownership and people stepping up when you go through hard times.

To reiterate what we talked about at the beginning, I don't wanna 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.

It's not about doing it well, it's about doing it great.

Like having a great co-founder can be a superpower for your company.

Having an okay co-founder, not taking this seriously can be the seed of big problems.

And sometimes people, they end up with co-founder issues.

And I'm like, well, I guess I'm just gonna quit and start a new company.

And well, it's so easy to start a new company.

And then you speak to them a year or 2 later and it's really hard to get back to where they were in the moment.

And 1 of the regrets is they wish they would have spent the time to set up the co-founder relationship well and choose the right person first, then think they can just blow everything up and get a do-over.

And so the more you can front load this the first time around versus having hard earned lessons?

We recommend that You invest in that relationship early so that you can survive the fights that will inevitably happen.

Like you should certainly get a co-founder, but don't slack.

This isn't the place where you want to slack off, where you want to put 50% effort.

Like this is 1 of the most important things you're doing in the beginning of the company.


Speaker 0: You definitely want a co-founder.

Speaker 1: Hey, this is Michael Seibel and Dalton Caldwell and welcome to Rookie Mistakes. We've asked YC founders for their rookie mistakes so we can share them with you and help you avoid these common errors. Let's start with our first anonymous story from YC Founders on Mistakes to Avoid. At the beginning, when everything is going well, you don't know how you're going to handle disagreements or bad actions by the other person. It's extremely hard to deal with a bad situation after the fact if you don't have anything written down.

Speaker 0: 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 don't always remember things quite the way they went down, right? And so write it down.

Speaker 1: 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,

Speaker 0: to put some facts on that, how many founder breakups have we seen where the founder says, my co-founder is excellent A+, 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?

Speaker 1: Never hear it. 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 1. All right, let's move on to the next 1.

So, YC founder wrote in, take arguments with your co-founders seriously. It's more likely to kill you than anything else.

Speaker 0: What I see with a lot of co-founder disputes is that the relationship has never been pressure 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've known 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 1: My best takeaway is that first, you don't always have to come into a resolution. Like if you don't have 2 people engaging productively, you can pause, you know, you don't have to keep the fight going. Yeah. And then the second 1 is like understanding how your co-founder deals with stress. Like some people deal with stress by attacking, some people deal with stress by retreating, and like if you understand how your co-founder deals with stress you can kind of better interpret what they're doing.

Speaker 0: Alright here's the

Speaker 1: last 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 0: It's crazy when you speak to founders where they'll spend 8 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. You know, and I'm like, what are you guys doing all day? Like, you haven't talked to him in a week or haven't talked to him in a month or I haven't had a real conversation with them in a year.

Speaker 1: And I think when things get that bad, I would argue there's 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 0: 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, 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's gonna work than to face that head on. It's really rough.

Speaker 1: The longer this relationship persists in this way before there's a breakup, the worse the breakup is gonna be. The more likely there's litigation, the more likely there's, you know, 1 person is vested stock, so now your cap table's affected. Like 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, you know, if there is a co-founder fight, it's not fatal to the company?

Speaker 0: 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 splits. 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 1 extra share. So you effectively have the same ownership, you're equal co-founders, but that 1 extra share is you agreeing in writing early that in the event of a 50-50 deadlock,

Speaker 1: There's a tiebreaker vote. 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 0: 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, okay? 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 know, 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 our retention perspective. If you can both really feel like you shepherded the idea through the earliest stages, you're gonna see a lot more ownership and people stepping up when you go through hard times.

Speaker 1: To reiterate what we talked about at the beginning, I don't wanna 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.

Like having a great co-founder can be a superpower for your company. Having an okay co-founder, not taking this seriously can be the seed of big problems.

Speaker 0: Absolutely. And sometimes people, they end up with co-founder issues. And I'm like, well, I guess I'm just gonna quit and start a new company. And 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 2 later and it's really hard to get back to where they were in the moment. And 1 of the regrets is they wish they would have spent the time to set up the co-founder 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? Yeah.

Would recommend.

Speaker 1: Yeah, 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 superpower.

Like 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. Like this is 1 of the most important things you're doing in the beginning of the company.

Speaker 0: ♪♪

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Co-Founder Mistakes That Kill Companies & How To Avoid Them