Tim Jackson
Mar 8 · 7 min read

The five factors in successful founding teams, the three fixes that can help solve problems, and a new tool to diagnose them

We need to talk about our equity stakes

This piece tells the story of a pro-bono tool I’ve created to help startup founders figure out how long their relationship is likely to last.

But before we get to that, a health warning: sadly, the tool can’t help you with investment decisions if you’re a VC, because it depends on getting largely honest answers from the founders you’re trying to understand. You’re not going to get those honest answers when doing due diligence on an investment. Smart founders know they need to look like they get on great; those who reveal cracks in the relationship during pitches are unlikely to be smart enough to make the cut anyway, so you’ll probably have other reasons to pass on teams that take the test and get a low score. Even after the investment has closed, VCs have to recognise that co-founders are never going to be fully frank about their relationships — until the strains get serious.

When a VC gets the call, it’s likely too late to fix.

But if you’re a founder, you have a vested interest in the truth, so you’re in a far better position to assess the strength of the relationships and the likelihood that you’ll stay together. After investing in 50-ish startups and sitting on 19 boards, I’ve done some thinking about the sources of co-founder breakup. Although there isn’t enough data to be statistically robust, I’ve observed that five factors are important in determining how long founders will stay together.

If you’re a sole founder, this could still be relevant to you. Investors also want to identify who your key team members are, and evaluate the risk that they might walk and the effect on your business if they do. And you probably would like to have answers to the same questions even if you’re not fundraising. So some of what follows, though not all, is worth considering and working on.


1. Advance planning and negotiation

Since founders often fall out as a result of disappointed expectations, one way to reduce the risk is to talk in detail, right at the outset, about all the stuff that matters. How you like to work. How long you want to stay with the company. What your jobs will be. What you want to get out of it. That kind of thing.

Unfortunately, if you’re already eighteen months into a startup, and you’ve realised that you and your co-founder have big differences on these points that are putting pressure on your relationship, then it’s too late. This is something you’re going to want to bank for your next startup. But when you’re at the planning stage of a startup, it makes sense to discuss these (and other) things in detail, and commit what you’ve agreed to paper.

A written co-founder agreement (of which there are plenty of free templates out there) can help to get the differences on the table. Interestingly, I’ve observed that when two founders start a company together but have unequal stakes, that often reflects an honest and detailed conversation about who’s contributing what, which resulted in a consensus. The more obvious 50–50 or one-third-each splits are easier to agree, but can sometimes result in postponing a confrontation.

Unequal stakes often prove that founders have had an honest conversation

2. Well-matched personal contexts

Since you typically spend more waking hours a week with your co-founder than with your lover, it stands to reason that if they have personal habits that drive you crazy, then it’s going to be hard for the relationship to survive for long. But it’s not so much about personal hygiene or taste in music; more about whether the contexts of the founders’ lives are similar. It matters whether you have similar energy levels and outside personal commitments, whether one of you has health issues, a side project, even a longer commute. I’ve seen companies succeed where there are big differences here, but founders have to work harder to compensate.

3. A shared sense of fairness about the stakes and responsibilities

Aside from the context, a basic issue often emerges after founders have been working together for a while: is the deal fair? That is, is each founder putting in time and effort commensurate with their stake in the business, and are they making proportionate contributions to the success of the company? There’s nothing as lonely (or frustrating) as the feeling that you’re the person pushing the car while your co-founders relax in the passenger seat — especially if you also feel you’re not being fairly rewarded for it.

4. The present state of the relationship

The most obvious question is of course how close the relationship is. That’s why VCs often prefer co-founders who shared dorm rooms at university or who worked together for three years in a previous company to those who met each other two weeks ago at a hackathon.

But it’s not just about history; it’s also about how well the founders think they work together today: whether they like each other, chat over coffee or meals, or socialise together outside work. Again, there are plenty of successful companies whose founders leave their work relationships at the office and do their own thing at weekends. But other things being equal, deeper friendships with co-founders are likely to correlate with longevity.

5. Transparency between founders

As in a marriage, you’re likely to stay together longer if you can discuss the issues in the relationship. So it matters whether you have learned how to give each other candid feedback, whether you talk freely about how the business is going, whether you think responsibilities are allocated fairly between you — and whether you’ve had conflicts in the past that you have successfully overcome.

You might think that if your business is going well, you don’t need to worry about these things. The paradox is that success with the product and the plan can often mask failure with the people — not surprisingly, since there’s more at stake, and more reason to stay, if it looks as though the founders’ shares in the company are going to be very valuable. So if your business is on track for a billion-dollar exit but you have a recurrent worry that your cofounder hates you, you may be right. And you should do something about it before you file for the IPO.

Strains become visible when the business hits trouble

The flipside is that co-founder strains often become visible to investors when the business runs into trouble. That’s because without the gravitational pull of a giant pile of money, at least one person has reached the point of wondering whether walking away and doing something else could look like a better option.


If you’re wanting to make sure your relationship with your co-founder is as good as it can be, the factors I’ve listed above each give rise to an obvious list of action points. But beyond these specifics, it’s worth remembering that there are three general ways in which co-founder tensions usually get resolved.

First is renegotiation. If I’ve got a gig on the side and want to get home in time for kids’ dinner, then a surprisingly modest reallocation of equity in the company may be enough to defuse the resentment and make everyone happy. The renegotiation isn’t easy, because it requires honesty on both sides about what’s really happening, plus a willingness to see things from the other person’s point of view — but with help, it’s achievable.

Second is personal change. If your cofounder is always at her desk by seven, inbox at zero, while you are still yawning into his cappuccino at eleven and not quite ready to start work, that’s a source of tension. Again, an honest conversation may have different outcomes: you may decide you need to show more commitment in order to stay on as co-founder, or she may learn that actually, you’re extremely productive and she shouldn’t be clock-watching.

Third is exit. In most startups, this is thought of as a catastrophic outcome, but if it’s handled properly it need not be. Plenty of strong founders like to work in small, friendly teams, but then find themselves out of their depth once they no longer know everyone they’ve hired. When the company grows beyond the skills of one of its founders, it’s hugely more productive to have an honest discussion. Often, the surprising outcome is that a reasonable deal can be reached on vested and unvested equity, and the departing founder is free to move on to their next gig. That can bring about separation that is surprisingly amicable.

Founder exit need not be a catastrophic outcome

Sometimes it’s helpful to have a third party moderate a discussion between founders about how it’s going, and that’s something I commonly do with CEOs when I’m acting as a coach. (Sadly, it’s rarely possible to help in this way when you’re the VC; for the reasons I mentioned above, founders usually tell you about the issues when they’re too late to fix.)

But the starting point of all this, if you’re a co-founder, has to be understanding where you are right now in your co-founder relationship. Hence this pro-bono diagnostic tool, which takes co-founders through 25 Likert questions covering the five factors that I suggest can help to predict the longevity of the relationship. If you’d like to try it, the form is here; the calculation is too complex to deliver instant results, so it spits out a PDF report complete with comparisons with the aggregated results of other startup founders, and sends it to you by email.


About me

I’m Tim, and I run a seed fund out of London that invests in SAAS, platforms, marketplaces and tools. I’ve backed 50 companies and sat on 19 boards, and I also coach Series A and B CEOs introduced by VC firms in Europe, America and Asia. I founded a startup and took it to an IPO on the NASDAQ, and before that worked for The Economist and the Financial Times.

About this publication

Lessons From Startup CEOs is a series of blog posts covering nine of the most important skills I’ve seen in founders who are most successful in scaling their companies. If you’d like to read more of them, please follow.

Lessons From CEOs

Tales from walks with Series A and B founders. By Tim Jackson, CEO coach and VC

Thanks to Dave Bailey

Tim Jackson

Written by

Startup founder, former Economist and FT journalist, CEO coach, and seed VC at www.walking.vc

Lessons From CEOs

Tales from walks with Series A and B founders. By Tim Jackson, CEO coach and VC

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