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“Would you rather own 50 percent of something or 100 percent of nothing?” We saw this idea in an Entrepreneur article recently, and it got us thinking: Are two minds genuinely better than one in a business sense? It worked for Steve Jobs and Steve Wozniak (Apple), William Procter and James Gamble (P&G) and Ben Cohen and Jerry Greenfield (Ben & Jerry’s). Let’s unpick what it is that makes co-founders work.
Relationships often fracture when money gets in the way. But that’s exactly what being co-founders is all about. Business partners tread the line between being colleagues and being friends. It’s certainly not for everyone, but it can have huge benefits.
Do you need a co-founder?
The co-founder relationship is a fine tightrope to walk. You need to decide how to split the profits, set up legal contracts and deal with issues when one of you makes a mistake. Understandably, lots of entrepreneurs would rather keep their friends out of these difficult and frank conversations. However, starting a business is a challenge – especially for someone to do by themselves. Having a partner by your side to help make decisions can be a huge benefit for a start-up. During research for the book The Founder’s Dilemma, only 16% of the 10,000 business studies were set up by single founders, and it’s easy to see why. Being able to spread the risk, stress and workload can help relieve the pressure.
The benefits of having a co-founder
We believe the main benefits of starting a business with someone else are having different perspectives, being able to share the stress and extra financial power. Let’s look at each of these in more detail.
When someone starts a company on their own, they only have one set of experiences and opinions to bring to the table. Part of the reason why Steve Jobs and Steve Wozniak were so successful is one had a sales-driven mind while the other had the technical knowledge. It’s almost impossible to find all the great entrepreneurial traits in one person. How often do you find someone who’s creative, pragmatic, pioneering and has a financial background? Having someone else to think about your business in a different way can open more doors. Collaboration improves problem solving by encouraging us to think differently about situations. People can bring their individual experiences to the table to better explore the pros and cons of each avenue. For solo entrepreneurs, there is another way to collaborate. You can become part of a network, or seek help from advisers. At Fora, we encourage our Residents to get to know each other, share ideas and offer support throughout their journeys.
Share the stress
In a CNBC article, self-made millionaires said they worked anything from between 12 to 18 hours a day developing their businesses. Being able to share some of this workload can make your life as a business owner easier and more enjoyable. Although lots of co-founders will say they each work long hours – they will, inevitably, get more done. It’s not just the physical workload, it’s also the mental one. When you have a big hurdle to tackle, your co-founder is someone to turn to. They’ll be just as emotionally connected to your business as you are, so they’ll understand the full extent of the stress. The phrase ‘a problem shared is a problem halved’ really does ring true for business partners. Fora Residents are never far away from other entrepreneurs going through similar experiences. Whether you’re a solo entrepreneur, co-founder or part of a bigger team, you can reach out to a ready-made support network for any tips and an objective view.
Extra bargaining power
Getting capital together is a challenge every entrepreneur will face at some point – most likely at the beginning of a venture. It makes sense that it’s easier for two people to raise cash, but it may also be a benefit when it comes to securing funding. Paul English, an angel investor who co-founded Kayak.com, made 12 investments in the past two years and all of them were set up by partners. He explains that having more than one founder acts as an insurance policy for an investment. It’s a promise that if a founder drops out, the other is there to continue developing the business. A lot goes into getting funding and it doesn’t only come down to the people. Having said that, an excellent working partnership may help conversations swing in your favour.
Nurturing the co-founder relationship
It’s thought that personal tensions count for 65% of business partnerships failures. Cracks in the relationship can start to show for lots of reasons. Perhaps one of you feels the other isn’t committing as much time or capital, or you have different ideas about where to go next with your business. It could even be something as simple as a personality clash. Before entering into a partnership, you and your potential co-founder need to have an open conversation. You should decide what you’re both committing and what you’ll do with the profits. Set a clear vision that you’ll both work towards and make it clear what each of you is responsible for. Being clear from the beginning helps you to address any issues that crop up along the way. It’s also important for business partners to be honest with each other when they’re finding things difficult. Co-founders are there to support each other, and there is no harm in getting advice from an outsider if you’re unsure on how to tackle an issue. This openness is something we encourage among our Fora Residents. The co-working environment means you’re surrounded by likeminded people who understand your struggles. Whether you’re a solo entrepreneur or part of a team, you can draw on other professionals’ knowledge and experiences to work out how best to tackle an obstacle. Come and see how we make collaboration possible at our co-working spaces across London and Reading. We also run networking events that enable our Residents to share ideas on current hot topics in business. Find out more here.