How to find the right co-founder

Hi. I'm Hans Stagger and I'm a partner at Y Combinator. And today, I'm gonna be talking about what I think are gonna be the most important part of starting a company, which is finding the right cofounder. So let's start by talking about why should you have a cofounder at all. Well, I think there's three main reasons you really want a cofounder when you're starting a company.

The first is productivity. You can get a lot more work done if you have someone to divide the work up with, and you can get much better work done if you have a cofounder who maybe has complementary skills so they can do things that you can't.

And there's someone you enjoy discussing ideas with so you can brainstorm and come up with better ideas than you could alone or help have someone to talk you out of potentially bad ideas. So you get a lot of uplift in just the amount and quality of work you can do with a cofounder. The second reason is moral support.

Startups are an incredibly intense and taxing journey, and it's great to have someone you can lean on for support during the tough times. And what I've noticed about the best cofounder relationships is they have this dynamic where both cofounders kind of balance each other out.

So if one founder is having a bad day, they're feeling a little down, despondent, and they've become a little pessimistic and feel like the start up's about to die, the other cofounder can just help bring them up a little bit and keep them going, keep them motivated, and vice versa. Sometimes you get too carried away.

You sign a customer and you think you're guaranteed to IPO, and you could use someone to just ground you and bring you back to reality a little bit. And so that's where I kind of find the best cofounding relationships can help kinda even out some of the highs and lows of the emotional roller coaster that is a start up.

And while you can get sort of productivity increased by hiring people or bringing on contractors, contractors, you don't get that same emotional support that you do from a cofounder because ultimately, anyone who's working for you, you're the boss, and they're not as invested in the success of the startup as you are.

And you can't really be as open or honest with them about the company as you can be with a pick, and that's what you get from a cofounder. The final reason, I'd say, to have a cofounder is pattern matching to success. If you look at a list of the most successful startups in history, you think of Apple, Facebook, Google, Microsoft, they all had cofounders when they started.

And now I think sometimes people forget this point because when you think of these great iconic companies, you associate them with a single person, usually the CEO, who's over time risen to become prominent, famous, and a bit of celebrity. So, you know, when you think of Apple, you think of Steve Jobs. When you think of Microsoft, Bill Gates, and when you think of Facebook, Mark Zuckerberg. Right?

And I think it's completely true that over time, and we're talking at this point decades because that's how long successful startups are around for. Over that time period, it's pretty common for one person to kind of really drive the company, become the figurehead for it, and stick out a company for a long, long period of time, and that's why remember those people.

But we're talking about the earliest stages of starting a company. And in those days, all of these founders had cofounders that they lent on for all the reasons I just mentioned. So I think it's always important to remember that when you're starting a company and wondering whether you should have a cofounder or not. Okay.

So, hopefully, I've convinced you that you really do want a cofounder when you're starting a company. But what if you're really keen to get started in a company right now and you don't have a cofounder that's immediately available or someone that you can bring on board, should you wait to get a great cofounder before you start the company, or should you just go ahead and get started?

Well, I think the default answer is that you should wait because of all the reasons I just mentioned, all the benefits that you get from having a cofounder. But Y Combinator has funded single founders, and we have done so successfully. So I've noticed that there are some exceptions to this rule, and they tend to follow a particular pattern.

And that pattern is that the single founder, a single site company by themselves, has two things that are true. So one is they have an idea that they have incredibly high conviction about, either because they're solving a personal problem for themselves so they really know solution is necessary, and or they're a domain expert.

They're working in a field where they know for sure sort of technology that's missing, who the customer's role might be. So the result of that is they have such conviction in the idea that they don't need a cofounder to convince them that this is a good idea to get started on. Like, they're they're ready to go.

The second condition is that those single founders, they're able to make progress on that idea without a cofounder in the short term at least. And that almost always means that they're technical or at least technical enough to be able to build the first version of the product so they can show it to potential investors or maybe even to potential cofounders who may wanna join the company.

And that second point is something I've noticed that the best single founders are also able to do is not only are they tremendously productive in building product and talking to users themselves, they're also able to run a great background search and keep their for cofounders and keep their eyes open. And if the opportunity arises, bring on a great cofounder.

And I think the best example I can think of here would be Drew Harrison with Dropbox. So Drew applied to Y Combinator way, way back now in 02/2007. He had a really solid idea for building Dropbox because he'd already felt the pain of losing his own files, so he knew for sure there was a better solution to build.

But he didn't have a cofounder, and so Paul Graham, the Y Combinator founder, messaged him back saying, we love your application. You're great. The idea is great, but we really won't fund you without a cofounder. So come back to us when you have one. And Drew kind of went away, continued building the Dropbox prototype while also looking for cofounders and found Arash.

He would be later the Dropbox CTO and his cofounder, and he applied again and welcome me to fund him. And now Dropbox is obviously a tremendous be successful company. So that's kind of what I'd I'd ask you to bear in mind is if you're really keen to get a start right now, then you don't have a cofounder, ask yourself. Like, do you have absolute high conviction in this idea?

You know for sure that this is the idea that you wanna work on. There's no other ideas that you'd be open to. And can you really make progress without having a cofounder? And if those things are true, sure. Go ahead and give it a give it a shot. But if not, I'd really suggest you wait until you do have a cofounder to start a company.

So when you're thinking about bringing on a cofounder, what should you be looking for in them? Well, I actually think the single most important thing to know about someone before you start a company with them is how do they handle stress. And so second most important is how well are they gonna help you handle stress.

And the reason I say that is start ups are incredibly stressful, intense experience that I mentioned before.

And, you know, a great cofounder should be able to support you through those and help you through those because if you're determined and motivated and enjoy working together, you'll keep working on this start up for a long period of time, and that's usually what it takes to build a really successful company.

So you really don't wanna start a company with someone that you don't know particularly well because even if you've spent time with them in social events or you hung out together a little bit, you don't really have insight into how they're gonna respond to pressure and stress. And are they someone that's gonna stick around when things are tough?

And are they someone that's gonna help you or stick around when things are tough? So the best people to start companies with are always people that you've got some set of personal experiences where you kinda know their character and how they're gonna respond to those tough situations.

And that usually means there's someone that, you know, a close friend or someone that you've worked with under some stressful conditions. So I'd certainly recommend that you be on the lookout and think about that when you're considering co founders.

The second thing I think you really wanna look for is understanding the goals and values someone has for starting a company or wanting to do do a start up. Honestly, I think when I was younger, I used to think of some goals and values as being sort of fuzzy terms that didn't mean too much.

But over time, I realized really what they mean is understanding the motivations someone has for doing what they do. And in this context, I think it's really important to talk with someone, even if you know them very well, about why they wanna do a start up, what are they hoping for, and the kinds of things that can come out are avoiding conflicting goals. Right?

So for example, let's say that you really wanna build a high growth, high intensity, high risk startup, and, you know, you wanna push forward, you wanna raise venture capital, you wanna hire a bunch of people, you wanna just really go for it. And your goal is to take the company public, and you're okay kind of taking lots of risks along the way to get there.

That's a totally fine set of motivations. It's a very common set of motivations of start up founders. But let's say your cofounder prefers to take kind of a slow and steady approach. Maybe they're more motivated by building great software for a small group of people, and they would be totally fine if you just made enough revenue to pay yourselves good salaries and just grew a little bit every year.

That's also a completely fine set of motivations for wanting to start a company, but the two motivations there aren't compatible with each other and will lead to inevitable conflict. So what I'd suggest is make sure that you have this conversation, and it's not a perfect predictor because people's goals and ambitions for a startup change over time.

I've seen people start companies because, honestly, they just wanted to get rich, and their hope was that they were able to sell the company in two to three years for a good amount to a bigger company. But they got two to three years into the company, and they loved it so much. They got so excited by the challenge that they kept working on it, and they're still working on it a decade later.

So that's totally fine. I'm not saying that having this conversation means you're gonna know for sure whether your goals and values are aligned over the next decade, which is, again, how long it usually takes if a startup is successful. But at least having the conversation gives you a better chance of have finding a cofounder who you're aligned with around high level important stuff.

Now I think you're probably wondering, I'm talking about what you should look for in cofounders, and I haven't mentioned kind of the obvious thing, which is what skills do they have. So it's obviously really important to have a cofounder who has the right set of skills to help you then grow the company. And usually, that means someone who's got complimentary set of skills to you. Right?

So if you're really great at sales, talking to users, getting customers, ideally, you'd have a cofounder who's really great at building product and writing code and building software because the two of you can divide and conquer and get a lot done. Why do you think that's really important? I don't think it's what you should overly fix in on. Right?

So more important than anything is just working with someone that you like working with and you trust. And so if sort of the person who best fits that description doesn't necessarily have the perfect set of complementary skills to yours, I think that's fine. You should still bring them on as a cofounder, and then you can start hiring people.

Assuming you can make enough progress in the company to get investment, you can hire people to kind of fill in the skills gaps, and that's okay. Another point I just make on this is when you are trying to decide if someone's got complementary skills to you, don't go too much into the details of how well do their skills map onto the specific idea you're working on right now.

So common example of the SVC sometimes is someone's considering bringing on a technical cofounder, and they wanna build a iPhone app. But the cofounder, even though they know them, they trust them, they've worked with them before, that cofounder isn't necessarily an iPhone app developer if they haven't built iPhone apps in the past. That's not a reason to rule someone out as a cofounder. Right?

What does matter is that they're willing to learn what they need to learn. So if they're not an iPhone developer, they're willing to learn how to do that. And particularly, they're willing to learn things that maybe aren't glamorous. Like, startups are often just a grind of doing a lot of some boring, fun work to get the thing going.

And so long as you have a cofounder who's okay with that, it's totally fine if they don't have the perfect set of skill sets.

So don't rule someone out who's potentially a great cofounder because they don't sort of have this checklist of specific skills you're looking for, But do make sure you count them in if it's someone that you trust, you like working with, and you've got a good sense of how they're gonna handle the stress and pressure of the start up journey. So where should you look for to find cofounders?

Well, the answer here is a little obvious. It's to start with the people you already know. So, ideally, your friends and colleagues. And kind of ironically, the best times to find a cofounder are when you're not actually necessarily looking for a cofounder to start a company with right now.

And what I mean by that is if I were gonna giving myself advice ten, fifteen years ago, what I would say is rather than sort of trying to pick a startup idea and go and find cofounders to work on with it, I would suggest that I just look for people to do projects with. Right?

So if you're in school, look around, see who's in your class, who's in school, and, like, identify people you think would be cool to work on a project with. And this project doesn't have to be a takeover the world idea or company. Just has to be something you find interesting. Like, maybe you're into games and you wanna build a cool game together.

Like, the thing that's awesome about projects is that it's much less scarier and asking for a far lower commitment if you ask someone to work on a project with you than it is to go straight into, hey. Let's start a company together. Right? So you have sort of a a higher chance of people saying yes if you ask them for this.

And the other thing that's great about projects is you can work on different projects with different people, and you can start developing a taste for who do you work well with, what kinds of personalities, like what kinds of skills are you actually good at as opposed to what you might think you're good at? And so what kind of complementary skills might you look for in a cofounder?

And, again, being in school for college is a really ideal time for this because you're surrounded by lots of people who, you know, usually have a decent chunk of spare time. And so you can start getting together to work on things that you think are fun.

And, again, kind of ironically, although this is I'm suggesting you don't try and start a start up, Projects that you work on in your spare time often tend to be some of the greatest sources for actually finding great startup ideas and building huge companies. You know, Facebook's an obvious example.

Something that started out as a project while Mark Zuckerberg was an undergrad at Harvard, and now it's turned into one of biggest companies in the world. But that's not why I'm suggesting you do this.

I'm suggesting you kinda look for people to work on projects with because that's a great way for you to get a sense of what kind of person do you enjoy working with and what specific type of personality do you work well with. And this advice also applies if you're not in college or school. Maybe you're if you're working at a company, like, look at your coworkers.

Like, keep a list of people that you think are particularly smart, particularly capable, who impresses you, and start getting to know them better. And ask them if they're up for working on things in the evenings or weekends.

Like, that's the kind of personality that or the kind of person who's interested in working on evening and weekends weekend projects is the kind of person that's likely to make a great cofounder. I actually remember years ago, YConn made a startup school when it was a in person physical event. We had Phil Liven, the founder of Evernote there.

And he kinda gave a a somewhat extreme version of this advice, which was that he, sort of years and years before he started a company, knew that he wanted to start a company someday. And so he would only make friends with people that he thought could someday be a cofounder.

And now while I think that advice is maybe a little bit extreme, if you don't just wanna be around people who might be cofounders. There is truth to it. Right? So I think this is kind of the thing where if you make this sort of a a conscious effort well before you start a company, it will probably be the best bet for finding a great cofounder.

But let's say you do know for sure that you wanna start a company and you're kinda ready to go again right now. Like, how do you start finding cofounders? Well, again, you start in the same place. You start with people that you know, and what I've noticed is an issue people run into here is that they can be really reluctant to just ask people they know to start a company with them.

And that kinda it's all kind of reasons there. Like, maybe you're worried about how your relationship will change. Like, maybe you don't sort of value the personal relationship more than the the risks of of working with someone, and those are fair concerns, but it's not the right optimization for starting a company. Like, you have to make the ask.

And so what I suggest is a pretty simple algorithm here for finding. Founders. It's make a list of the people that you know, who you're closest to, that you think would be great co founders, and start from top to bottom and ask every single person on there to go grab coffee and talk to them and ask them if they'll start a co company with you and be your co founder.

And if they say no, that's totally fine so you understand, but, like, who would they start a company with? And make it very specific. Ask them if you were starting a company, who would be sort of your top three or four cofounders that you wanna try and convince to work with you? And ask them for an introduction to each of those people. So your list keeps growing now. You ask the people you know.

If they say no, you at least get some more ideas for names. And then you meet with those people and you ask them, and you similarly repeat repeat the same algorithm. Ask them if they'd be interested in being a cofounder with you or not, and if they say no, ask them who they try and recruit.

And so this way, you start growing the tree of potential cofounders beyond those people you immediately know, but at least they're still connected by people that you do know. So they're not just sort of completely random strangers. The final sort of bit of advice I'd say for where to look is go out and try and meet people that just have similar interests to you. Right?

This is kind of sounds a little bit just like how to have a social life, but this is essentially what finding cofounders reduces to. So if you're an engineer, attend, like, developer meetups or work on open source projects or go to hackathon. So do things where others, engineers, and builders are hanging out, and you'll likely find some leaks.

And even if you're not technical, if you're interested in those things, you should totally attend those kinds of events too. But maybe you'll also just attend or find people who are interested in the kinds of things you're interested in.

Maybe you're interested in economics and finance, and that's kind of the pool of things or that's a pool of interest where you think you'll find a start up idea from. Well, make a real effort to go out and meet people who have similar interests. And maybe in in sort of these COVID times, there's lots of online groups and communities that you can join.

But even in regular times, there's always ways to find people that have similar interest for you. And because of consciously on the lookout for people who might make cofounders, you have a higher chance of finding someone who could be a good fit.

So once you found a potential cofounder, how do you test out and know for sure that you both wanna start a company together before making kind of the final commitment? Well, it's not a perfect process. And at some point, you just kinda have to make the leap and hope that it will work out.

But one way to derisk it is to allocate a chunk of time where you agree to kinda work together and set yourself a deadline by which time you wanna have ideally sort of like a MVP or a prototype of something built or you at least want to have gone out and tried out pitching some customers and convincing them to pay you if you did build a particular product.

These are all the things you'd usually do when you're signing up with a new company or testing out a new idea anyhow. And do that together and agree that, you know, at the sort of end of the time that you've set aside that you'll both have an honest conversation, decide, did we both enjoy kind of work together on this? And if so, great. Let's go ahead and make the lead.

And if not, be honest and say, hey. Let's go around separate ways. So making that a little bit more tangible. If you both have, you know, no other commitments, you know, which is pretty uncommon, but sometimes happens if, you both graduated college and you didn't go and get a job because you wanna start a company, then I'd say treat this like your full time job. Right? Like, say that, hey.

We're gonna set aside a month or three months, and let's just sort of pick idea we're excited about and get as much progress made as we can on building the first version of it and going out and signing customers. And even if you can't do that full time because you have other commitments, then do it on evenings and weekends. Right?

But you'll have to sacrifice some amount of time doing other things in order to actually spend time working together. But the more times and more hours you can accumulate of working together on the idea, the better sense you'll have for sure if you wanna start the company or not. Right? So once you've kind of done that, let's say you decided that, hey.

We do wanna start the company when and we wanna be cofounders. Then I think there's two important points you wanna make sure that you're in agreement on. First is the equity split. Right? Like, who owns how much of the company? Now I think the way to think about this is your default equity allocation should really be fifty fifty. That's where you wanna start from. Right?

Because assuming that nothing's been built yet, you're at the earlier stages of the company, You're both going to make some equal contributions. You both want to be equally motivated to work super hard in the company, and all the work is years and years ahead of you. So there's not really too much reason to deviate from fifty fifty equity split earlier.

However, we have seen different equity arrangements, and they have been successful. And so I kinda think the underlying thing that you're solving for here is making sure that both of you are happy with what the equity arrangement is and will be motivated to keep working on the company for a long period of time. Right?

And so, again, usually that means fifty fifty, but let's just say that you have been working on the company for a little bit longer or you that you derisked it somehow by yourself and you're bringing on what is commonly we call a later stage cofounder, then sometimes deviate from fifty fifty might make sense. But, again, the thing I would really encourage you to do is not optimize the short term.

Right? So just because you made a little bit of progress in the idea by yourself and you have a great cofounder, and you're sort of thinking, hey. Maybe I should take 70% and just even 30%, like, because you've made progress in the last six months. I would encourage you not to do that. Startups are a really long term game, and you wanna you win by making the best decision in the long term. Right?

So if you have a great potential cofounder and even though you made a little bit of progress in the company yourself, if you know that they won't be all in and fully committed to assess the company unless they're a fifty fifty partner, you should do that. You should make them fifty fifty equity partner so you can keep them as motivated and get as much out of them as possible.

The second thing I think you really wanna decide is who's the CEO? Now this can sometimes be an uncomfortable conversation. And to be honest, it's actually, I think, a bit of a red flag if it is an uncomfortable conversation.

And so as far as the actual title itself goes, early on in a start up when it's just two or three cofounders, in terms of how it impacts your day to day and how you define up responsibilities, the title doesn't actually matter. Like, early on, you're all gonna be doing a little bit of everything.

There's, like, plenty of, like, unglamorous grunt work to go around, and just because you have the CEO title doesn't mean you get to sort of abs gone from that. Right? So practically, it doesn't matter, like, in terms of who does what.

One exception to that might be, you know, if you need to be doing sales, it usually might be good if the CEO is a person or whoever has a CEO title is a person talking to customers and and users and convincing them because they might feel a little bit more flattered if the CEO is pitching them.

And this kinda gets to the point of where, really, the only impact the CEO title has, and that is externally. And I would say specifically for investors. So investors care about seeing that there is sort of a clear leader and a clear final decision maker or a tiebreaker, and that person should be the CEO.

So when you're pitching investors, it's usually better for whoever is to do does most of the talking, whoever is gonna be leading those conversations, that that person is the CEO. And now where you run into problems in a very, very common source of cofounder friction we see at Y Combinator is where two people really wanna be the CEO. Right?

And this can sort of we can see this in Y Combinator interviews where you end up with two people who kind of talk over each other, they interrupt each other, they can look at each other with a little bit of contempt and when the other person's answering. These are all really, really bad signs. Right? So be honest with yourselves.

If you think it's really important to you to be the CEO and you both feel that way, you're not good cofounders for each other. So just avoid all that pain and heartache and don't start a company together.

You ideally wanna start a company with someone who doesn't care about that stuff if you do, or you're both indifferent to it and you're fine picking whoever you feel is best suited to the role for now even if that changes sometime in the future. So let's kind of wrap up everything we talked about.

Once you're sure you want a cofounder, which I hope I've convinced you you do, once you run the process to find some good candidates to be a cofounder and you've identified someone that you really do wanna start a company with because you spend a little bit of time working on projects together and testing each other out, so to speak.

Then you have the conversations around what's the equity split and who's gonna be the CEO. Now you're ready to formalize things. And formalizing really means, you know, the legal act of incorporating a company, setting up a vesting agreement. This is really important. Vesting means that the shares in the company, you don't all get them at once.

They vest over a period of time, and there's very standard templates and documents for this that you should really ensure that that you have in place. And then you're pretty much good to go. And, you know, the when exactly should you sort of leap from, hey. We're hanging out working together to, hey. Okay. Let's, do some paperwork. Not a perfect answer to that, but it's just kind of a gut feel.

Like, once you're, like once you've made the commitment to yourself and each other that we are gonna make a real go of trying to build a company together, that that's kind of the trigger for when you start making things real by the names of the legal corporation and hiphopdot. So that's all the advice I have for how to think about finding the right cofounder and how to make it happen.

I hope that helps, and good luck.