Finding a cofounder: thorny topics before you commit

October 7, 2024
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So you’ve been doing the coffee chats and have a potential cofounder. You’ve had the “mile marker” discussions, but before committing, you need to align on key aspects that could determine the success or failure of your partnership—topics like economic splits, funding strategies, and division of roles. These discussions might seem daunting, but tackling them now will save you from friction down the line. 

I’d recommend discussing the following topics over the course of a few conversations. You can introduce ideas, think about them a bit between conversations, and circle back. Here are some ideas of where and how to focus.

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Agreeing on a starter idea to pursue

By now, you have some problems to solve, early thoughts on propensity to pay, and a business calculator. This is a good start, but I’d also recommend bringing together something for your potential cofounder to react to. A few of my favorite assets to bring to a discussion:

  • Prototype of your product (maybe a good application of your AI skills) 
  • Demand testing results from your landing page / Google Ads experiments 
  • An early pitch deck synthesizing the case for your product

This is kind of like a mini demo day, quick market assessment, and sharing information. After you've laid out initial ideas, remember that the goal isn’t to sway each other but to build a shared list of options. Giving each other time to reflect on these options will help with a smoother decision-making process and mutual buy-in for the build phase. 

Give it a few days and regroup to discuss preferences in what to pursue. A few follow up questions to discuss: 

  • What potential ideas are you most excited about, and why?
  • How comfortable are you with the level of risk or novelty in these ideas?

If you agree on something pretty easily, that’s a good sign to keep going with additional topics below.

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Bootstrap vs. raise money?

Since you have had the “mile markers” conversation already, you probably have information about:

  • Financial situations, including obligations, goals, timelines
  • What you each want your business to be when it grows up (go big? Lifestyle business?)
  • Strengths, gaps, and whether you’re each willing to get your hands dirty (a.k.a. skill build) or prefer to hire out

If you know which idea from your “demo day” you want to pursue, discuss high level execution:

  • How long might it take to see revenue? 
  • Is there any way you can build an MVP without spending a lot?
  • How competitive is this market, and is it at all reasonable to build something yourself that could see traction? Do you need to be well funded in order to have hope of competing?
  • Do you need to move very quickly into the market for any reason?
  • How do you each feel about the idea of investing your own money?
  • How do you each feel about starting to pitch and fundraise?

For example, if you’re pursuing a new AI foundation model that requires lots of AI research and complex product development, seeking funding early on might be unavoidable. On the other hand, if your target market is accessible with minimal tech build, bootstrapping can let you keep control and upside longer.

As you discuss funding in more depth, you’ll want to ask yourself

  • Are you and your cofounder on the same page about how much personal financial risk you're willing to take?
  • How urgent is your need to enter the market, and can you move fast enough without external funding?

Deciding whether to bootstrap or raise money early on will shape your business path. By considering both personal and market factors, you can make a choice that fits both your short-term goals and long-term ambitions. Ultimately, the right choice comes down to your timelines, market pressure, and personal comfort with risk. 

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How you might split economics and roles / responsibilities

Roles and responsibilities - the easier discussion

If you have complementary skillsets, it will likely be clear who broadly owns things like the codebase versus marketing. You’ll still want to work together on a list of key activities you expect to be present and who is responsible. An example:

  • Product concept
  • User testing
  • Building the code
  • Design
  • Website building / maintenance
  • Marketing / sales
  • Accounting and finance activities
  • Customer success

Having clear roles, responsibilities, and ownership early on prevents (some) misunderstandings and starts you off with a strong operational foundation. Keep in mind that these arrangements can evolve, but clear starting points help reduce future annoyance.

Economics

You will need to figure out how you are going to split ownership of the business. You’re probably just playing business at this point, but you still need to be clear before you go too far. Here are some things to think through together:

  • Whose idea was chosen, and how developed was it? Were assets or IP already created? How long had the person been working on it?
  • What is the main key to being successful in this business? Is it marketing? Differentiated technology? Just finding the space? Great customer service?
  • Are there benchmarks for how similar businesses have split ownership between cofounders? You can ask around with friends in similar spaces, lurk in Reddit groups, or potentially find signals in public documents like S-1.  You’re really just looking for a range. 

Ultimately, you will have to each come up with a perspective on what seems fair, discuss, compromise, and hopefully come to a satisfactory conclusion. 

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Give yourself a high five for digging into the uncomfortable details

Finding the right cofounder is critical. By having direct conversations around ideas, funding, roles, and ownership early on, you set yourselves up to be better aligned on goals and operating model. No matter how cool your initial idea is, diving into these thorny discussions together will give you and your cofounder more confidence to move forward.

As you continue these conversations, remember that the good cofounder relationships are adaptable. You will both have to be flexible, revisit these topics as your business evolves, and make sure you’re communicating openly. In the end, having a cofounder who aligns with your goals and working style makes navigating the challenges of building a business far more manageable.