How to Find a Co-Founder You Can Trust

Trust with a co-founder comes from working together, and no good conversation can substitute for that. The sensible path is to find candidates in places where you can watch how they work, test the relationship on a small shared project, and put the terms in writing before the company is worth fighting over.

The stakes are high. Harvard Business School professor Noam Wasserman, drawing on a database of about 10,000 founders of technology and life-sciences startups, found that 65% of failures at high-potential startups came from "people problems," such as tension between co-founders, as his talk at Business of Software summarizes.

That is one researcher's classification of one kind of startup, so treat it as a strong signal, with no universal rate implied.

The same data showed that more than half of the startups in his set co-founded with friends or family, and that the most successful teams were often people who had worked together before, according to a CNNMoney report on his research.

This guide covers what to decide before you look, where to look, a five-stage process for building trust, the conversations to have, the agreement basics and the warning signs.

Decide What You Need Before You Look

A search without a clear brief ends with a person you like and a gap you still have. Settle these five questions first.

• Skills gap: Name the capability you lack to reach your first customers, such as building the product, selling it or running operations.
• Working style: Decide how you prefer to work, including pace, tolerance for risk and how you handle conflict.
• Time commitment: State whether you need someone full time now, or part time until money arrives.
• Money: Work out how long you can go without a salary, and what you would expect a partner to accept.
• Roles: Decide who would lead what, so the partnership has a shape from the start.

Then ask whether you need a co-founder at all. If the gap is a task, such as building a website, a contractor or an early hire may fill it.

A co-founder is the right answer when you need someone to share the risk, the decisions and the long hours for years.

Also Read: How to Start a Business While Working a Full-Time Job

Where to Look, Ranked by How Much You Can Observe

The best sources are the ones that let you see someone work before you commit.

• People you have worked with: Former colleagues, classmates and clients have already shown you how they handle deadlines and pressure, which no interview can show.
• Weekend projects, hackathons and events: A build with a deadline reveals how a person copes under pressure, as Sydney organizer Ryan Wardell notes of Startup Weekend-style events in SmartCompany.
• Matching platforms: Y Combinator launched a free co-founder matching platform in 2021 where founders list their skills, interests and what they seek, and it encourages matched pairs to run a time-boxed trial project.
• Communities and accelerators: Founder groups and programs put you in contact with people who are already committed to building something.
• Friends and family: These are the most common choice and often the most fragile, so proceed with the checks below and do not skip them.

Wasserman's advice on friends is caution rather than avoidance, because friends often skip the hard conversations that a business needs, as the CNNMoney report describes.

Matching platforms work as an introduction and nothing more. YC reports that two pairs who met on its platform in 2021 worked together on trial projects, committed, and were accepted into its Summer 2021 batch, as its blog post describes. A match gives you someone to meet, and trust still has to be earned afterward.

The Trust Ladder: Five Stages From First Call to Signed Agreement

Move up one stage at a time, and be willing to stop at any of them. Each stage costs more than the last, so the early ones filter cheaply.

1. The first conversation: Share goals, timelines, finances and expectations in the open. One YC team, Sequin, had both founders answer all 50 questions in First Round's co-founder questionnaire before committing.
2. Reference checks: Speak to people who have worked with the candidate, such as past managers, teammates and clients, and look beyond mutual friends.
3. A time-boxed trial project: YC recommends a trial with clear expectations and goals. Agree the scope, the length, who does what and what success looks like before you start.
4. A trial review: Sit down together and say what worked and what did not, then decide to proceed, extend the trial or part as friends.
5. The written agreement: Put the terms on paper, using the checklist in the sections below.

During the trial, watch behavior more than words. Notice whether the person delivers what they promised, how they respond to criticism, whether they raise problems early, and how they behave when you disagree.

When you speak to references, ask questions that draw out behavior and not opinions.

• Reliability: Ask for an example of a time the person delivered under pressure, and a time they did not.
• Conflict: Ask how they handled a serious disagreement, and how it ended.
• Credit and blame: Ask how they treated others when things went well and when they went wrong.
• Repeat work: Ask whether the reference would work with them again, and why.

A trial project is a good place to try the first version of the product. Our MVP guide, linked below, shows how to keep it small.

Also Read: How to Build an MVP Before You Build a Full Product

Scoring the Trial: A Simple Scorecard

A trial teaches you the most when both people judge it in the same way. Before the project starts, agree on six criteria, and after it ends, have each person rate themselves and the other from one to five.

• Delivery: Did the work arrive on time and at the agreed standard?
• Communication: Did problems surface early, and were updates clear?
• Handling disagreement: Did conflict get resolved, or avoided?
• Ownership: Did the person take responsibility for results, including mistakes?
• Energy: Did their effort stay steady when the work got dull?
• Fit: Would you want to repeat this for several years?

Compare the two sets of scores side by side. A gap of two points or more on any criterion, such as one person rating their own communication a five while the other gives them a two, is worth a long conversation before you sign anything.

The scores are an aid to discussion and a poor basis for a mechanical decision. Their value is in what they bring to the surface.

The Conversations to Have Before You Commit

Most co-founder breakups trace to topics nobody discussed early. Cover each of these in conversation, and write down what you agree.

• Why this company: Ask what each of you wants from it, and how big you each want it to become.
• Time and commitment: Ask whether each person will work full time, and when.
• Money: Ask what each of you needs to live on, what happens when runway ends and how much personal risk each will take.
• Roles and decisions: Ask who decides what, and how you break a tie.
• Disagreement: Ask how each of you handles conflict, and what you will do when you disagree on something big.
• Exit: Ask what happens if one of you wants to leave, or the company is sold.

Our guide to building a long-term business vision, linked below, helps you test whether you want the same future.

Also Read: How to Build a Long-Term Business Vision That Guides Decisions

What the Agreement Should Cover

A written founder agreement protects the friendship by making the hard terms explicit while everyone is still on good terms. These are the usual contents, according to law-firm guides and startup-legal resources.

• Equity split: Decide the shares each founder holds. Wasserman found that 73% of teams in his data split equity within the first month, and he warns against locking it in before roles are clear. Y Combinator's default advice, as summarized from its Startup School talks, is an equal split among committed co-founders. The advice differs, and vesting makes either choice safer.
• Vesting: The common structure is four years with a one-year cliff, so nothing vests until the first anniversary, when 25% vests, and the rest vests monthly, as law firm Manatt describes in its guide to founder stock and vesting. A founder who leaves early does not walk away with a large share.
• Roles and decision rights: State who leads what and which decisions need agreement from all founders.
• Intellectual property: Every founder should assign relevant work to the company, since investors expect it and a gap can stall funding.
• Departure and buyback: Settle what happens to vested and unvested shares if a founder leaves, and how the company can repurchase them.

In the US, there is also a tax deadline. A founder who receives restricted stock subject to vesting generally has only 30 days from the grant to file a Section 83(b) election with the IRS, and the deadline cannot be extended, as the same Manatt guide and Stripe Atlas's instructions explain.

Here is why vesting matters, using a hypothetical company with two founders who each hold 50%, on a four-year schedule with a one-year cliff.

• Leaves at month 10: Nothing has vested, so the departing founder keeps 0% and the company can take back the full 50%.
• Leaves at month 12: A quarter of the shares has vested, so the founder keeps 12.5% of the company.
• Leaves at month 18: Three eighths of the shares has vested, so the founder keeps 18.75%.
• Leaves at month 30: Five eighths has vested, so the founder keeps 31.25%.
• No vesting at all: The founder leaves with the full 50% at any point, including month one.

Without vesting, a co-founder who leaves after ten months can hold half the company for the rest of its life, while the remaining founder does the work. Vesting protects the person who stays, and it protects you too, since the same rule applies to you.

Rules vary by country and by state. This is general information, so have a lawyer and an accountant review your agreement.

Also Read: How to Write a Business Plan That Actually Attracts Investors

Red Flags During the Search and the Trial

Some signals should slow you down, however much you like the person.

• Vagueness about money and time: A candidate who cannot say what they can commit is telling you something.
• Avoiding hard conversations: If they change the subject each time you raise equity, roles or exit, expect the same later.
• A gap between promises and delivery: Missed trial deadlines tend to continue.
• Pressure to lock in equity before any work: A rush to finalize terms before you have seen them work is a warning.
• Taking credit and assigning blame: Watch how they talk about former colleagues and how they treat people with less power.
• Reluctance to put things in writing: A person who resists a written agreement may resist its terms later.

If You Cannot Find the Right Person

Waiting is a valid choice. A mismatched co-founder can cost more than going slower, and a solo founder can still move forward with advisors, contractors and early hires.

If you need help in a specific area, hire or contract for it, and consider offering a small equity stake with vesting for a key early employee. If you need a business relationship without shared ownership, a partnership may fit better. Our guide to strategic partnerships covers it.

Keep meeting people while you build. Evenings and weekends spent on a real project are how many co-founders find each other.

Also Read: How to Build a Strategic Business Partnership That Benefits Both Sides

Conclusion

Finding a co-founder you can trust is a process of reducing risk in stages. Know what you need, look where you can observe people at work, test the relationship on a small project, talk through the difficult topics, and sign a clear agreement with vesting.

None of this guarantees success, and it replaces a hopeful guess with evidence about how someone works. That evidence is the best foundation for a partnership that has to last through the hard years.