Ask HN: What questions did you ask (or wish you asked) your cofounder?
43 comments
Do you have any (personal, business) debt and if so how much?
I worked with a person with the plan to raise money later. It turned out he didn't run his current business well and soon wasn't able to pay for rent, had to sell his car, stopped paying the rent for the office we were sitting in. Looking back it explained a couple of questionable decisions (e.g. claims to debtors, very much over-promising, aggressive release plans, side-projects to make extra money). I'm not saying you have to be well off before going into a months/years long project but living paycheck to paycheck isn't a glorious "[he|she] is hungry and eager to make this a success" but plain stupid.
I worked with a person with the plan to raise money later. It turned out he didn't run his current business well and soon wasn't able to pay for rent, had to sell his car, stopped paying the rent for the office we were sitting in. Looking back it explained a couple of questionable decisions (e.g. claims to debtors, very much over-promising, aggressive release plans, side-projects to make extra money). I'm not saying you have to be well off before going into a months/years long project but living paycheck to paycheck isn't a glorious "[he|she] is hungry and eager to make this a success" but plain stupid.
Mistake #1 is rushing into the relationship. If you're excited or desperate, you'll overlook things that could bite you in the ass later.
Ask yourself a few questions first. Does your cofounder have a track record of execution or do they bounce from scheme to scheme without achieving anything? Are they sane and competent or do they have a criminal history and a troubling social media presence?
Do your due diligence. Run a background check (seriously). Don't be afraid to ask the hard and uncomfortable questions up front.
In my own experience, if I were to bring on a cofounder again I would write a honeymoon period clause into the Founders' Agreement. Something to the effect that if the relationship doesn't work out during an initial period of time, each party's risk is limited to only the money and time they put into it. I'd rather get an annulment than a divorce if possible.
Ask yourself a few questions first. Does your cofounder have a track record of execution or do they bounce from scheme to scheme without achieving anything? Are they sane and competent or do they have a criminal history and a troubling social media presence?
Do your due diligence. Run a background check (seriously). Don't be afraid to ask the hard and uncomfortable questions up front.
In my own experience, if I were to bring on a cofounder again I would write a honeymoon period clause into the Founders' Agreement. Something to the effect that if the relationship doesn't work out during an initial period of time, each party's risk is limited to only the money and time they put into it. I'd rather get an annulment than a divorce if possible.
Speaking from my own personal experience, the most important thing about your co-founder is that she must be good at things you're not. If both of you are good at the same things then you're probably doing it wrong.
Also like that e-myth book, make sure whatever roles you're going to be taking, it is in writing and there is no confusion about who is doing what. This is especially important when the day comes and you have to take a big decision about your company and she sees differently than you.
Also like that e-myth book, make sure whatever roles you're going to be taking, it is in writing and there is no confusion about who is doing what. This is especially important when the day comes and you have to take a big decision about your company and she sees differently than you.
Found this great article!
http://web.archive.org/web/20160220013218/http://founderdati...
http://web.archive.org/web/20160220013218/http://founderdati...
One that I wished I asked, knowing my situation now:
"If either one of us loses interest and wants to move on, how can we handle the situation?"
"If either one of us loses interest and wants to move on, how can we handle the situation?"
this site helps answer that one: http://www.backofanapkin.co.nz/start
Oh dang, that's awesome. If only I had it 5 years ago...
I actually just want to walk away, my point was more about how can I politely tell you that I don't want to do this anymore? Not so much the legal ramifications of who owns what.
I actually just want to walk away, my point was more about how can I politely tell you that I don't want to do this anymore? Not so much the legal ramifications of who owns what.
Can't you just say that you've lost interest and want to do something else with your life?
Worked just fine for me at my previous company- client base shrunk to almost nothing and while we could still pay the bills and our salaries, I quit the company and moved to embedded software/hardware. Probably my best decision career-wise.
Worked just fine for me at my previous company- client base shrunk to almost nothing and while we could still pay the bills and our salaries, I quit the company and moved to embedded software/hardware. Probably my best decision career-wise.
Amazing website! Thank you!
Isn't a shootout / shotgun clause the de-facto standard of dealing with this ?
It's important to determine whether or not the person is qualified and capable. While questions have their merit I'd recommend a more creative exercise.
If you have the means, take a trip half-way across the world and live in close quarters for 3 weeks together (while you work to get the business off the ground). If you can't stand them by the end of the trip; walk away.
I've been working with my cofounder for 15 years now and together we've accrued more than ~$30M in combined revenue from a handful of projects. Being able to argue, disagree, make a decision, move on and then grab a beer after work like nothing happened is paramount. Your personal relationship with this person will be the first domino in every decision you make.
If you have the means, take a trip half-way across the world and live in close quarters for 3 weeks together (while you work to get the business off the ground). If you can't stand them by the end of the trip; walk away.
I've been working with my cofounder for 15 years now and together we've accrued more than ~$30M in combined revenue from a handful of projects. Being able to argue, disagree, make a decision, move on and then grab a beer after work like nothing happened is paramount. Your personal relationship with this person will be the first domino in every decision you make.
Clint Eastwood was on some talk show long ago, and he was asked about relationships, girlfriends, etc. He said he tests potential girlfriends by going on a three-hour driving trip. If they still have anything to talk about at the end of three hours, they have potential. I think that would apply very well to cofounders, too.
This 1000%. I've been with my co-founder for about 10 years, 3 companies and one acquisition. We're actually related but that didn't matter cause we didn't know each other THAT well. Being able to argue and have a beer after is the key here because it shows its not personal and that the other person or you care enough about your idea to defend it.
Some topics worth exploring that I've seen become areas of co-founder conflict:
* When faced with a difficult decision and incomplete information, how do you decide what course of action to take? Can you talk through a real life example of a situation like this?
* Let's assume we decide to be co-founders and start this company together. What kinds of things would cause you to want/need to leave the company you helped start? Are there milestones, financial or otherwise, that the company needs to hit in order for you to keep working on it for the long term?
* When it's just the two of us working on the company, how would you like to divide responsibilities between the two of us? If we succeed in growing the company beyond just the two of us, what do you want your role in the company to be?
* When faced with a difficult decision and incomplete information, how do you decide what course of action to take? Can you talk through a real life example of a situation like this?
* Let's assume we decide to be co-founders and start this company together. What kinds of things would cause you to want/need to leave the company you helped start? Are there milestones, financial or otherwise, that the company needs to hit in order for you to keep working on it for the long term?
* When it's just the two of us working on the company, how would you like to divide responsibilities between the two of us? If we succeed in growing the company beyond just the two of us, what do you want your role in the company to be?
Super helpful! Thank you. :)
Tread carefully starting a business with someone you don't know. If you decide to forge ahead, you'll need to get to know the person not just professionally but personally. I've seen several co-founder relationships (including my own) break down due to personal circumstances that could probably have been predicted had there been a stronger personal relationship prior to starting out. Above all else, discuss at length "what-if" scenarios for every conceivable outcome, in particular the ones that you don't think will happen (like one of you deciding to leave). Get a founders agreement and get a lawyer to translate it into legalese. Put vesting in place so you don't run into tax issues clawing back shares if she decides to leave. Don't wait until you're further down the road, do it straight away.
As for determining if she is the right person professionally, I'd make a list of all of the things that...
1. You suck at
2. You hate doing
...that will be necessary to succeed. In a perfect world, she will excel at many/all of these things and love doing them - allowing you to divide the workload and each focus on your strengths. Don't take her word for it - find out, test her, check references, do whatever you have to do to be comfortable that she is the right person.
As for determining if she is the right person professionally, I'd make a list of all of the things that...
1. You suck at
2. You hate doing
...that will be necessary to succeed. In a perfect world, she will excel at many/all of these things and love doing them - allowing you to divide the workload and each focus on your strengths. Don't take her word for it - find out, test her, check references, do whatever you have to do to be comfortable that she is the right person.
This may be partially unrelated. If one of the reasons of you wanting to deeply know your co-founder is the fear of her leaving the company in future please consider having a vesting schedule with one year cliff. This will allow you ample time to know each other well.
I recommend meeting some people they know family, friends, old colleagues.
Great and simple idea. I actually LOVE her fiancé from our brief interaction. They had me over for dinner days after meeting and were super awesome. :)
The most important element, in my opinion, is one that single questions alone cannot discern: Is this person a workplace psychopath?
I'm not kidding, and this is a real issue. A lot of people who can be great entrepreneurs can also have detrimental effects on your culture, the trust of your clients, and your long-term sustainability. Drive, initiative, passion, aptitude - these are qualities present in great founders and appear to be present in workplace psychopaths.
Get to know this person, and get a strong sense of their values - not from what they say and want you to believe, but from taking in the context of their accounts of what has worked out, and what is not, in their personal and professional life. For people they speak dismissively or negatively of, find them and get their side of the story. You cannot do too much due diligence here - this is critical, especially if you start to become widely successful. Then you're locked in with your partner in the co-pilot seat, and you won't have the desire to bolt or ability to change your decision without significant if not disastrous consequences to your business.
Your values must align, and you must trust this person with your life. Your startup will be your life for the next 7-10 years, by your planning.
I'm not kidding, and this is a real issue. A lot of people who can be great entrepreneurs can also have detrimental effects on your culture, the trust of your clients, and your long-term sustainability. Drive, initiative, passion, aptitude - these are qualities present in great founders and appear to be present in workplace psychopaths.
Get to know this person, and get a strong sense of their values - not from what they say and want you to believe, but from taking in the context of their accounts of what has worked out, and what is not, in their personal and professional life. For people they speak dismissively or negatively of, find them and get their side of the story. You cannot do too much due diligence here - this is critical, especially if you start to become widely successful. Then you're locked in with your partner in the co-pilot seat, and you won't have the desire to bolt or ability to change your decision without significant if not disastrous consequences to your business.
Your values must align, and you must trust this person with your life. Your startup will be your life for the next 7-10 years, by your planning.
The straightforward though not necessarily reliable way to get a basic read on this is how they treat the waiter in a restaurant. Maybe conspire with said waiter to minorly screw up their meal service once or twice.
I'm afraid this doesn't say much. I've worked with two co founders, one of which is a psychopath and the other isn't.
The first one I've never seen treat waiters badly, and the other multiple times. But the first one turned out to be the psycho.
Watch out for people only living for themselves, not caring whatever they say as long as they get their way, trying to manipulate people intentionally. Look out for the ones that have no skill other than extortion, putting pressure. That always put work on others so they can never take blame. People who never apologize, and never admit they're wrong.
Those are the ones you'll want to avoid. Also always trust your gut.
Watch out for people only living for themselves, not caring whatever they say as long as they get their way, trying to manipulate people intentionally. Look out for the ones that have no skill other than extortion, putting pressure. That always put work on others so they can never take blame. People who never apologize, and never admit they're wrong.
Those are the ones you'll want to avoid. Also always trust your gut.
A "well organized" psychopath won't treat the waiter like shit, because it doesn't get him anything, whereas being polite and seemingly forgiving around people (like you) whom he wants to think well of him does get him what he wants.
Meanwhile he'll be playing the long con with you - manipulation and mind games that can be incredibly subtle. I had the misfortune of working with one of those for a few months - we almost became co-founders. Recognizing and getting out of that situation before I got in any deeper was one of the smartest moves I've ever made.
Meanwhile he'll be playing the long con with you - manipulation and mind games that can be incredibly subtle. I had the misfortune of working with one of those for a few months - we almost became co-founders. Recognizing and getting out of that situation before I got in any deeper was one of the smartest moves I've ever made.
This is what the CEO of Schwab does, or did.
http://www.businessinsider.com/charles-schwab-ceo-takes-job-...
http://www.businessinsider.com/charles-schwab-ceo-takes-job-...
Fantastic article. Have the restaurant screw with the person for you so you can test their reaction. Thinking of other places where this might apply—maybe putting an extra 5 on one side of the bench press?
This. I know people dealing with this right now. Not sure what the right screening mechanism is.
I think it's important to be on the same boat money-wise, while also expecting similar things for the near (or not-so-near) future.
Questions: * Do they have any loans that need to be payed? If yes, how would this affect future decisions to stay in the company? * Are they thinking about wanting to do something they haven't been able to do before (traveling for long, living abroad)? * How much do they need the stability of a regular job?
Questions: * Do they have any loans that need to be payed? If yes, how would this affect future decisions to stay in the company? * Are they thinking about wanting to do something they haven't been able to do before (traveling for long, living abroad)? * How much do they need the stability of a regular job?
"If we got an offer to buy the company for $X, would you take it?"
My team had a specific conversation about that when we started the company. We even picked "a number". 4 years later, we got an offer for that number, and one founder was hesitant to take it. We all pointed back to that conversation when making the decision to sell. Had we not had that conversation, it would have been real fight internally.
My team had a specific conversation about that when we started the company. We even picked "a number". 4 years later, we got an offer for that number, and one founder was hesitant to take it. We all pointed back to that conversation when making the decision to sell. Had we not had that conversation, it would have been real fight internally.
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Partnership is harder than marriage, in part because getting on the same page, and staying on the same page is incredibly difficult.
Mix into this the shiny toy syndrome that co-founders can fall prey to over time, and it really becomes about dating before getting married.
Every partnership is about creating value through leveraging an opportunity together, not leveraging against each other.
If the partner's value is adding sales, their equity should be tied to vesting as a percentage of the lasting sales that stay in.
If they are creating value through code, it should be seen the same way.
I also very much value hacking on small problems in the desired space to get an idea if people can work together and ship regularly before going steady and getting married.
Mix into this the shiny toy syndrome that co-founders can fall prey to over time, and it really becomes about dating before getting married.
Every partnership is about creating value through leveraging an opportunity together, not leveraging against each other.
If the partner's value is adding sales, their equity should be tied to vesting as a percentage of the lasting sales that stay in.
If they are creating value through code, it should be seen the same way.
I also very much value hacking on small problems in the desired space to get an idea if people can work together and ship regularly before going steady and getting married.
Be aware of your own human nature: you will want it to work, more than you will want to accept the signs that it won't (confirmation bias).
You will say to yourself that "little things" can easily be overcome, but people rarely change. People make most choices by their external circumstances and influences, even when they truly want things to be different.
You will say to yourself that "little things" can easily be overcome, but people rarely change. People make most choices by their external circumstances and influences, even when they truly want things to be different.
Number one thing is discussing the equity split and what happens if one of you quits.
I have a friend who helped start someone selling a breakfast product. The plan was my friend would invest $20k and the partner would run it as a local business, and they'd split 50-50. Very quickly my friend got excited by the potential and started working full time to help, ends up investing hundreds of thousands of dollars, doing all e-commerce, marketing, negotiations, paying for industrial quality kitchen, etc, while the partner just mixed and packaged. Sales shot up and the company begins to have significant value, but still requires more investment.
They needed to switch from an LLC to a C corp so they could get funding and start giving stock options to attract/keep good employees. The partner conceded that my friend was doing the lions share of the work and had put a ton of money in while he had put in nothing, and that my friend should have most of the initial stock in the C corp. But they struggled to agree on an exact split.
So then the partner talks to friends and family who of course tell him "it was YOUR IDEA, you shouldn't have to give up anything!" and comes back refusing to sign anything (which scotches the C corp conversion). Eventually he's able to force my friend to buy him out for a totally unreasonable price.
So my specific advice is.
1) Never start a new venture as an LLC unless you don't plan to ever share equity with employees AND you expect it to be a cash flow business that will pay out all profits directly to partners.
2) Always force all partners to vest their equity over years. You can do incentive stock options, or restrict stock units, or however you want. If you can't afford a lawyer to draw it up yet, at least put the arrangement in writing and agree to it, so that if you have disagreements and need to part ways, you aren't being forced to buy half the business from some guy who mixed ingredients for 6 months.
I have a friend who helped start someone selling a breakfast product. The plan was my friend would invest $20k and the partner would run it as a local business, and they'd split 50-50. Very quickly my friend got excited by the potential and started working full time to help, ends up investing hundreds of thousands of dollars, doing all e-commerce, marketing, negotiations, paying for industrial quality kitchen, etc, while the partner just mixed and packaged. Sales shot up and the company begins to have significant value, but still requires more investment.
They needed to switch from an LLC to a C corp so they could get funding and start giving stock options to attract/keep good employees. The partner conceded that my friend was doing the lions share of the work and had put a ton of money in while he had put in nothing, and that my friend should have most of the initial stock in the C corp. But they struggled to agree on an exact split.
So then the partner talks to friends and family who of course tell him "it was YOUR IDEA, you shouldn't have to give up anything!" and comes back refusing to sign anything (which scotches the C corp conversion). Eventually he's able to force my friend to buy him out for a totally unreasonable price.
So my specific advice is.
1) Never start a new venture as an LLC unless you don't plan to ever share equity with employees AND you expect it to be a cash flow business that will pay out all profits directly to partners.
2) Always force all partners to vest their equity over years. You can do incentive stock options, or restrict stock units, or however you want. If you can't afford a lawyer to draw it up yet, at least put the arrangement in writing and agree to it, so that if you have disagreements and need to part ways, you aren't being forced to buy half the business from some guy who mixed ingredients for 6 months.
Just because your friend botched his LLC us no reason not to use one. LLC can be fantastic. You think if they were a c corp 50/50 day one the break up would have been any better?
Well it would have been far easier to offer employees stock options, and far easier to raise financing. And faster and easier to codify a different split when his partner was amenable to it.
Tech Investors hate LLCs cause they hate K1 forms.
Tech Investors hate LLCs cause they hate K1 forms.
Converting LLC to S/C corp is not hard though! Your entire chain of evidence was about two founders who had very different commitment levels, and had trouble converting. Of course they had trouble converting. They also would have had trouble diluting for investment if you did not dilute 50/50. There was an underlying problem there, and the corp conversion was the rip the bandaid off moment. It had to happen, and the sooner it happened the better!
Unless you know day 1 you are going to get investment (like, that is your entire goal of your business - say you already have ycom ready to invest), I still contest you should almost always start LLC. If say you putz around and bootstrap for a year, your taxes and accounting and everything else will be SO MUCH EASIER for the first year. Then sure, if you light on fire and need investments from traditional VCs, cool you can convert. What % of random startups founded on hacker news get to the point of VC investment? My gut would tell me 10% or less, but no idea how to measure this.
Unless you know day 1 you are going to get investment (like, that is your entire goal of your business - say you already have ycom ready to invest), I still contest you should almost always start LLC. If say you putz around and bootstrap for a year, your taxes and accounting and everything else will be SO MUCH EASIER for the first year. Then sure, if you light on fire and need investments from traditional VCs, cool you can convert. What % of random startups founded on hacker news get to the point of VC investment? My gut would tell me 10% or less, but no idea how to measure this.
I actually agree with most of what you wrote, an LLC is cheaper/easier especially when you have no money and need to focus on building product.
But when do you bring on employees? ie non-partners. I hugely recommend giving them equity options and now you have to convert, which is more costly than being a C corp from the start.
Also your 10% figure isn't close. investment comes from family, angels, and VCs. Probably over 50% get some type, and now your tax returns and theirs just got much more complex. As does future investment.
If you can afford to start as a C corp, it's often worthwhile.
But when do you bring on employees? ie non-partners. I hugely recommend giving them equity options and now you have to convert, which is more costly than being a C corp from the start.
Also your 10% figure isn't close. investment comes from family, angels, and VCs. Probably over 50% get some type, and now your tax returns and theirs just got much more complex. As does future investment.
If you can afford to start as a C corp, it's often worthwhile.
> But when do you bring on employees? ie non-partners. I hugely recommend giving them equity options and now you have to convert, which is more costly than being a C corp from the start.
I am not giving early employees equity, going market rate salary instead. But you can totally issue shares as an LLC though. In fact they are more flexible. You could add more rules or regulations around it.
Investments from family and angels do not need to be equity, it could also be various debt instruments. In these cases no tax magic to worry about, it stays very simple.
Perhaps my boat is different because from day 1 I was 90% not planning to get VC money. If your plan is 90% from day 1 to get VC money, then I guess you would want to optimize that path.
I am not giving early employees equity, going market rate salary instead. But you can totally issue shares as an LLC though. In fact they are more flexible. You could add more rules or regulations around it.
Investments from family and angels do not need to be equity, it could also be various debt instruments. In these cases no tax magic to worry about, it stays very simple.
Perhaps my boat is different because from day 1 I was 90% not planning to get VC money. If your plan is 90% from day 1 to get VC money, then I guess you would want to optimize that path.
I highly disagree with not giving early employees equity. I've always given them even to the receptionist and they have a substantial impact on building a better team environment. It becomes "their company" and you get more commitment, better efforts and even more honesty.
And issuing employees shares in an LLC is a mess. Giving straight participation is taxable. Giving appreciation rights is complicated to do and manage. Doing it in a C Corp is basically automated with all the tax issues clear and codified.
Complicating your deal with Angels is also a good way to get them to walk away. You can use convertible debt if you are on the verge of a VC round, but you have to be a C corp in that case. And you have to agree on convertible terms that will attract Angels but not scare off VCs. Angels typically want to be investors, even most family members, and an LLC makes that a mess.
If you don't want to get VC money that's fine, but you better be sure.
And issuing employees shares in an LLC is a mess. Giving straight participation is taxable. Giving appreciation rights is complicated to do and manage. Doing it in a C Corp is basically automated with all the tax issues clear and codified.
Complicating your deal with Angels is also a good way to get them to walk away. You can use convertible debt if you are on the verge of a VC round, but you have to be a C corp in that case. And you have to agree on convertible terms that will attract Angels but not scare off VCs. Angels typically want to be investors, even most family members, and an LLC makes that a mess.
If you don't want to get VC money that's fine, but you better be sure.
The questions are mostly useless. Work together for a significant duration. After a while, you'll know if you work well together, if you share the same general goals, and if the person is bringing serious contributions to the project.
If you need to ask them these questions that's an employee, not a cofounder. Maybe it's an employee with a big chunk of equity, but in general you should have a pre-existing professional relationship.
Otherwise, there aren't enough interview questions in the world to tell you the important stuff.
Otherwise, there aren't enough interview questions in the world to tell you the important stuff.
Nonetheless—I want to very thorough and make sure we get to know each other much more.
What questions should we be asking each other? What topics should we be broaching? How do we get to deeply know each other in as short of a time as possible?
The best way to learn this is by hearing about what y'all did or wish you did.
I have some ideas. First of all:
* Would you like to be a cofounder or just a service provider?
If yes, then I would ask Jason Lemkin's two questions:
* Are you willing to do this for the next 7–10 years? * And are you willing to go for 24 months until we have any real traction at all?
Then I think Mark Zuckerberg spending MONTHS vetting Sheryl Sandberg. He particularly wanted someone who wasn't afraid of people better than them. Possible question
* Who is better than you? Would you recruit them?
More ideas:
* What is your learning style? * Are you doing it for the likes, the mission, or the money? How do you rank these? * How would you manage a team? What would your weekly meeting structure look like?
Would love to get even more ideas from y'all! Thanks!