The Pyramid of Co-Founder Success

Written by Pete Flint
Pete is a General Partner at NFX, a seed-stage venture firm based in San Francisco.

Co-Founder Relationship NFX

Much has been written about how to find and select your Co-Founder — and that’s important — but what’s rarely covered, yet equally important, is how to manage the relationship over time.

Founders tend to overweigh finding a Co-Founder but that’s only the start. What happens after you choose the right Co-Founder?

I have observed from my experience starting Trulia, advising other Founders, and investing in 100’s of companies that Co-Founder success forms a 3-part ‘pyramid’:

  1. Values: Three core tenets for how to cultivate healthy relationships, which apply in work and life.
  2. Operating Principles: There are five principles for regularly reinforcing your values.
  3. Failure Modes: There are also five failure patterns that often signal failure in the company as well.

Successful Co-Founder relationships are about the practice of having a Co-Founder relationship. This essay is the operating manual for Founders to continuously manage this relationship that’s at the core of their startup.

A strong relationship is an output that has a clear set of inputs, it’s much more than a personal connection.

Co-Founder Quote

 

3 Essential Values in Co-Founder Relationships

All healthy relationships start with shared values. They are what engender trust and link relationships together. Many different types of values can emerge in relationships but there are three essential — foundational — values:

  1. Transparent Communication + High Frequency
  2. Clear Ownership
  3. Alignment of Vision

Co-Founder relationships are unique, but nearly any healthy relationship will feature these three values.

Pyramid of Co-Founder Success

1. Transparent Communication + High Frequency

Communication is often the first casualty when startups start to gain speed; be sure to guard against this. It can be hard, but schedule time no matter the trade-off for high-level conversations about the company and your relationship.

Co-Founder Quote #2

Fortunately, as I was starting Trulia, my Co-Founder and I were taking “Touchy Feely” at Stanford, the famous course on interpersonal dynamics. The course taught us about effective communication and seeing yourself through other people’s eyes. It was actually hard to put into practice at first but the skills and rituals we gained from “Touchy Feely” helped us establish a transparent relationship from day 001 ahead of starting Trulia.

 

Touchy Feely' Course Notes

 

Be Explicit About Telling the Truth

Founders are known for saying “We’re killing it” a lot. It’s an example of hyperbole you should take care to avoid because it’s not true for anyone. That kind of communication is not only exhausting, but it also creates distance between you and your other Co-Founders.

Creating an environment of truth starts with the Co-Founders and it’s only possible with transparent communication. At the core, we have to be willing to allow ourselves to be known. Only then can we create environments where:

  1. Other Co-Founders and employees feel safe that they can be more known.
  2. We can learn how to have conflict that’s productive.
  3. We can feel invested in each other’s success.

It all starts with Co-Founders telling each other the truth. If you say, “I’ve got this covered” when you are struggling, or “I didn’t make that mistake” when your plan goes awry, you’re hiding the truth from your Co-Founders.

In this understanding, the truth isn’t just about what you say to each other. It’s also about what you are telling yourself. Transparency starts within.

Not communicating transparently breaks down Co-Founder relationships. Articulating clearly — from the start — the spectrum of truth and how that will be reinforced throughout your company is at the core of a strong relationship that emanates to the rest of your team.

 

2. Clear Ownership

Having clear ownership so you don’t constantly step on each other’s toes and waste valuable time requires effort, but the payoff is worth it. Map out the full spectrum of work to be done across your company, and make sure someone has clear ownership for each initiative and functional area. This is a critical exercise in proactive planning and communication that will only serve your Co-Founder relationship.

Trust Flows from Clear Lines of Responsibility

It will be necessary to make tough decisions in your startup to ultimately break ties and move fast. That’s why every successful startup has a clear decision-maker — typically the CEO. Every Co-Founder is still involved in the critical conversations but they trust the CEO to make the final decision.

Trust ideally flows from clear delegation and lines of responsibility — and it’s not only reserved for the ultimate decision-maker. Every Co-Founder should be able to operate autonomously in their domain with the trust of their peers. And when trust breaks, so does the relationship.

But first, Founding teams must identify who owns the various parts of the business from product, sales, marketing, engineering, recruiting, and operations and the critical dependencies therein. Founders typically have high levels of intrinsic motivation but there still needs to be clear expectations both ways.

Roles Inevitably Change in Startups

This happens quickly. And what’s rarely made public but can break teams is that it happens to Co-Founders too. It’s typical for them to get stuck in a role they don’t enjoy or are no longer qualified for. When this happens, it’s your job to help them find a new path to transition to over time.

Founders naturally like to start things and don’t always enjoy scaling or optimizing a product or process. However, throughout the life of the company, they are uniquely capable in the following 4 areas:

  1. Recruiting
  2. Key customer relationships
  3. New product development
  4. Culture

Think about these as areas where they might transition, if they decide to stay with the company.

Co-Founders Are Unique Assets

It’s natural that people and roles evolve and unless there is a serious breakdown, it’s important to work hard to find ways for the Co-Founders to find new responsibilities and stay with the company as it scales. Co-Founders not only often hold significant equity in the company, but they also possess unique insights and relationships internally and externally that are often impossible to replace.

 

3. Alignment of Vision

Get clear on the vision, mission, and personal purpose for starting the company early on. It’s important to communicate honestly and upfront the hard conversations. Spend the time to build a shared vision and revisit this frequently.

The shared vision needs to extend beyond the vision statement on your ‘About Us’ page. You need to go deeper to share what personal impact you want to have on the world, what kind of company you want to build, and what kind of work you want to spend your time on. More often than not, this is a collective effort that requires introspection.

Costs that Compound with Time

The best teams can move fast because they’ve already asked the hard questions. Anyone can see that the reasons why they’re working on the company are consistent. Similarly, you can see when teams avoid these hard, open-ended questions, incurring a cost that only compounds with time.

Understand that tough times will happen — more than you might expect. They’re often defining periods for successful startups. But teams that are not aligned will be unlikely to survive them.

 

How to Find Your Company Values

 

5 Operating Principles to Reinforce Your Values

Putting your values into practice is hard. It’s where most Founders miss the mark.

The operating principles are how you regularly live out your values. They’re critical to building a healthy relationship. I encourage Founders to integrate their own operating principles, but to start, you can use these five principles:

  1. Elevate Your Co-founders
  2. Don’t Ignore Best Practices (1:1s, Performance Reviews…)
  3. Drop Pebbles on People’s Desks, Not Rocks
  4. Disagree, but Commit
  5. Offer Support

 

5 Operating Principles

1. Elevate Your Co-Founders

The best Co-Founders give credit regardless of seniority or impact.

Every Co-Founder should have clear responsibilities, so it should be easy to make it known when they’re producing great work. Your praise will spread trust in their abilities throughout the organization.

The key is to elevate each other. Recognize the other’s contributions and build them up in the eyes of employees, investors, and key stakeholders. It creates a positive work environment.

One way to do this is to create a Slack channel for celebrating the work of your Co-Founders and employees. Praise must be earned, but there’s no reason it can’t be given frequently.

Great Founders build processes that give their employees the opportunity to give praise — and it’s modeled first with the Co-Founders.

 

2. Don’t Ignore Best Practices (1:1s, Performance Reviews…)

Founders often think management best practices (frequent 1:1s, performance reviews, and so on) are strictly for employees. That’s simply not true.

The best Founding teams feel perfectly comfortable ‘managing’ their relationship.

Setting up regular 1:1s and performance reviews with your Co-Founders does not signal a lack of trust, it’s a sign of transparent and frequent communication. They enable you to quickly get back on course and spot challenges in the relationship.

Start these from the outset, it is harder to add them in over time and sets a good example for the rest of the organization.

 

3. Drop Pebbles on People’s Desk, Not Rocks

It’s better to drop pebbles on people’s desks instead of rocks. In other words, feedback should be given freely and frequently.

The tendency is to say, “It’s not a big deal, it’s still not a big deal,” until it becomes a big deal. Establish norms to address ‘pinches’ when they’re small.

Two Types of Conflicts: Task and Relationship

Task conflict is about a project deadline or method of implementation. “What product feature should we include?” is different than “I don’t think my ideas are being heard.” The latter points to relationship conflict, which develops when feedback is rarely given or taken personally.

Feedback Requires Curiosity and Truth

Giving feedback is like an art, it requires that you’re curious about the person you’re giving feedback to. It’s critical not to make up stories about what’s going on for the other person so you don’t make them defensive. Make sure both of you know what the intent is and that your orientation is toward problem-solving.

Making space to tell the truth to people is one of the most important things you can do. But for the truth to flow freely, people need to first feel safe, learn how to have productive conflict, and be invested in each other’s success.

You can employ different tactics to promote truth-telling, such as:

  • Weekly dinners to build deeper personal relationships to offset the risk of relationship conflict.
  • Dedicate 5-10 minutes in 1:1s for giving and taking feedback.
  • Schedule a post-mortem after every project strictly for giving and taking feedback.
  • Promote task conflict within your team. It’s safe to do this if there’s a high degree of trust and you can handle conflict constructively.

 

4. Disagree, but Commit

Healthy discourse is necessary, especially when you disagree.

It’s important to address any disagreements 1:1, but you also need to provide a united front. Even if you are split on a tough decision, you need to commit together. Disagreement without commitment results in slower decisions and divided teams, stripping you of the #1 advantage in startups: speed.

Founders are passionate about their companies and won’t always agree. But, as long as you address disagreements together, provide a united front, and support your decision-maker, you can still move forward.

 

5. Offer Support

Starting a company will affect every aspect of your life. It’ll test you both personally and professionally.

Unfortunately, it can be hard to relate with family and friends when you’re going through tough times. Many of your challenges will be unique to the startup, which makes your Co-Founder relationship even more important.

Offer an Invitation

Make yourself available to your Co-Founders. Let them know that you’re there to support them.

It’s a sign of a healthy relationship if you can ask for help, but it’s often hard to do. Knowing that it’s hard to ask for help, offer an invitation ahead of time. Let your Co-Founders know that they can come to you in tough times.

 

5 Failure Modes

Failure patterns in Co-Founder relationships often signal failure for the company as well, especially at the earliest stages.

I’ve observed 5 failure modes that explain most Co-Founder breakups:

  1. Power and Ego
  2. Lack of Alignment
  3. Poor Communication
  4. Competency Gap
  5. Commitment Gap

5 Failure Modes

1. Power and Ego

The desire to amass power and build ego is immediately damning among Co-Founders.

Power and ego can especially thrive when clear ownership, lines of responsibility, and decision-making processes are absent. Some people naturally try to exert their control when power is not clearly defined. This tension only builds with time.

Recognize Your Co-Founder

Ego and taking credit commonly pushes Founders apart. A way to avoid this or mitigate its risk is to elevate your Co-Founders publicly. Always make sure your Co-Founders feel recognized in ways that are important to them:

  • Point out their successes and contributions in team meetings, investor updates, public conferences, and on social media.
  • Don’t forget the power of remembering important days for them like birthdays and anniversaries.
  • Send them personal notes relating back to the early days to reiterate your shared experiences building the company.

 

2. Lack of Alignment

Alignment is only possible with transparent communication. It’s critical to set expectations and upfront hard conversations.

Some Founders want to sell for $20m, some want to IPO, and others want to create a positive impact. All of that can co-exist within a startup, but it is important to have that underlying conversation and help your Co-Founders achieve their personal goals as well as the shared company vision.

Impact-Money Matrix

Make sure you’re aligned on the impact-money matrix and also feel comfortable enough with each other to be honest about that. Money and impact are both possible at the same time but Founders may have different definitions.

But, more often than not, Founders realize the best way to have a big impact is to build a successful, self-sustaining organization, which typically means a valuable one.

Destination > Path

The best teams are also aligned on the destination, not on the path taken. They are open to ambiguity and are focused on the job to be done instead of a specific implementation of the idea. They have a bias toward action as opposed to analysis or debate, and they often make small or hard pivots.

 

3. Poor Communication

This is the inverse of transparent and frequent communication.

Founders who are guarded or not open with their Co-Founders tend to hide information and hidden information introduces vulnerabilities that only compound with time.

Founders don’t typically hide information on purpose, they just tend to keep a strong facade. While that facade can be accretive externally, internally it creates distance in the relationship. Even more common, Founders get trapped in the day-to-day and fail to look at the bigger issues.

What I’ve seen that typically precipitates poor communication is ignoring management best practices (frequent 1:1s and performance reviews). Co-Founders set the example for working relationships in the company. Be intentional about what you want to model for your employees.

 

4. Competency Gap

The company is effectively paying you and your Co-Founders with equity for your unique — and hopefully useful — competencies. Ideally, the equity matches someone’s competencies, but that’s not always true.

It is true that the exact equity split is less about determining who is the more skilled or experienced or whose idea it was, but more about optimizing for what everyone will think is fair to enable Co-Founders to focus on doing their best work, together.

Before drawing lines of responsibility and granting your trust to someone, ensure they have the relevant competencies for the job. Remember that competencies in an early-stage startup are less about specific functional or technical skills, but more about a person’s ability to gather insights, solve problems, collaborate, and execute.

Gap Analysis

It can be hard to analyze a person’s competencies, especially in unfamiliar domains. Working with other Founders and domain experts in your network can help you assess a wide range of competencies.

You can perform a competency gap analysis at various points in a startup. The requirements and lines of responsibility shift for Co-Founders as the company matures. Be sure to re-assess as the company grows to help ensure that Founders are working on the most important projects for their skills.

 

5. Commitment Gap

It’s hard to measure someone’s commitment level before working with them. That’s why some early Co-Founders drop off as the company gets started.

Animosity builds up quickly when some Co-Founders are out-working others. And relative differences in commitment levels can grow with time.

More often than not, a growing commitment gap is a result of a Co-Founder not having fun, not enjoying their work or the culture, not feeling a sense of purpose or impact in what they do, or an issue in their personal life. Try to understand what is going on before critiquing a Founder’s commitment.

Few things are more discouraging than working with a Co-Founder that doesn’t appear to be earning their way.

 

Culture Starts with the Co-Founders

Choosing a Co-Founder is only the beginning. Your relationship forms the core of the company and how you manage it will set the values, operating principles, and normative behavior for your entire culture.

A healthy Co-Founder relationship creates a strong culture where truth flows freely, people feel safe, conflict is resolved productively, and everyone is invested in each other’s success.

Download the Culture Manual