The changing co-founder dynamic

Unequal Cofounders

One of the big myths in Silicon Valley is that cofounders should be equal.1 However, if you look at the most successful tech startups of the last 50 years, many of them had a dominant cofounder. This includes: 2

Amazon. Jeff Bezos.

Apple. Steve Jobs famously split equity unequally with Wozniak.

Facebook. Although Zuck had multiple cofounders, the website used to be called “A Mark Zuckerberg production” and he had many times as much equity and power as his cofounders. 3

Instagram. Kevin Systrom was the dominant founder. Intel. Robert Noyce led the company for seven years and then Gordon Moore for 12 years. 4

Intuit. Scott Cook was the dominant founder.

LinkedIn. Reid Hoffman had multiple cofounders but was really dominant in terms of equity and control (despite hiring a CEO to take over pre-Jeff Weiner).

Microsoft. Paul Allen stepped down after a few early years, leaving Bill Gates as dominant founder.

Netflix. Reed Hastings took over as CEO from Marc Randolph early in the life of Netflix.

Oracle. Larry Ellison was the sole founder.

Pinterest. Ben Silberman has driven the success of the company.

Salesforce. Marc Benioff.

Square. Jack Dorsey is primary cofounder.

Uber. Travis Kalanick was the primary force until recently.

WhatsApp. Jan Koum was the dominant founder and equity holder.

Most of these companies are examples where both power and equity splits between founders were unequal. In general, equal power sharing yields worse outcomes than having a dominant cofounder (or at least one who emerges as dominant once a company starts working). Founding a company is hard, and having a cofounder helps balance the work and stress of a startup. The key is to have clear decision making so that a single individual (the CEO) can set a clean path forward.

The set of counterexamples with more equal cofounding partnerships includes Google (cofounded by Larry Page and Sergey Brin, with a bit of a founder-like contribution by Eric Schmidt being hired as CEO early in its life). Having an equal cofounding relationship is not impossible, it’s just rare among the most successful companies.

The changing cofounder dynamic

If you have multiple cofounders, one of the biggest executive transitions that will happen is a change of influence and role for one or more of your cofounders. At many early startups multiple cofounders weigh in on every decision. As a company grows you will need to define the boundaries of decision-making and roles more tightly.

There are basically three end points for most cofounder dynamics:

  • Some cofounders may move to individual contributor roles and are happy there (Steve Wozniak at Apple).
  • A cofounder may remain as a key executive and help drive the success of the company as CTO, president, VP product, or another role
  • One or more cofounders may leave if they feel they do not have enough influence at a company, if they want the CEO role and know they will not attain it in the short run, or if there is a mismatch between their skills and the role they want to play. Some may also leave due to family circumstances—a sick family member or needing to move for a spouse.

The change in cofounder status is driven either by (i) the need for there to be a single strategic direction and view point driving a company as it scales or (ii) the cofounder getting out of their depths or competencies relative to the scale of the company. As you grow employee headcount, people need to know who to go to for final decisions or the company will slow down and grind to a halt. You need to allocate resources to the areas of greatest need and value. In parallel, your cofounder may or may not have the skills and experience to play the role they want in the future of the company.

To manage the cofounder transitions:

1. Think through what roles your cofounder would optimally play for the next 12–18 months of the company. What functional role should the cofounder play (CTO versus VP Eng or an individual contributor onengineering)? What cultural role should they play (interview every candidate? Something else)? What are other ways you want them to be involved (public speaking or events that fit their knowledge or that you do not attend? Certain types of deals or partnerships?) And what input and decisions should they play a role in what are the key types of topics you should be discussing with them ongoing)? Remember that this will be an ever-evolving story as the company scales, so you do not need to think too far ahead—12 to 18 months may be enough.

2. Ask your cofounder to think through what they want to do. And have them write a job specification for themselves.

3. Have a discussion. You and your cofounder need to resolve differences between what the cofounder wants to do and what you as CEO think they should do. This will most likely be a series of conversations if there is a mismatch.

4. Enlist an advisor, investor, or board member you both trust to do the right thing for the discussion. If you and your cofounder are unable to resolve the role change together you many need to enlist a third party for mediation and help.

5. Once you reach agreement. What are the things you can do for your cofounder to help them succeed in this new role? Do they need a management coach?

Remember at all times that your cofounder took an early bet on the idea or company just like you did, and that they are a major equity holder (and potentially board member) of the company. While a lot of emotion is tied up into cofounder relationships (like any long term partnerships), it is critical to the success of your company that you find a solution.

If you and your cofounder are unable to reach agreement, you will likely need to negotiate the exit of that cofounder from the company. In some cases this may be contentious. Alternatively, your cofounder may be relieved that the company has reached a level of growth and success that allows her to leave without hurting momentum. If a cofounder is not playing the CEO role, she may eventually feel disempowered and want to go work on

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  2.  A number of private companies also do not have equal co-founding relationships or equity splits, but since these companies are not yet public it is harder to talk openly about them.
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  4. An underreported phenomenon is the number of times one cofounder is replaced by another as CEO. This happened at Intel, Logitech, and other companies.