Playing Nice Isn't a Plan: What to Ask Your Co-Founder Before You Commit.

Back in 2023, I shuttered a company because of a co-founder conflict. Three years later, co-founder dynamics are one of the top items I consider when writing checks as a VC. I believe strongly that the co-founder relationship is the most under-diligenced, highest-variance asset in a business. Both founders and funders would be better served by a broader conversation about having the hard conversations early.

You don't have to trust just me on it, either. There's data. When Noam Wasserman dug into why high-potential startups fall apart, he found that roughly 65% of failures can be traced to people problems, co-founder conflict being chief among them. Carta's analysis of 22,000 founders found that by the three-year mark, almost 25% of co-founders on venture-backed teams have already departed, and that the percentage is increasing.

I regularly coach young founders at the earliest stage of their entrepreneurial journeys, as a coach for Booth's College New Venture Challenge and as head of Cintrifuse's Builder Fellows program. Using that work and my own experiences as a backbone, I've crafted a modified version of our "Founder's Agreement".  I'll acknowledge that I've seen these types of exercises lead to co-founder break ups, but I see that as a positive. Trust my battle scars when I tell you it's better to know that your co-founding team is incompatible at the beginning than 18 months into building a company together.

One concept to hold onto as you go, courtesy of Wasserman's "The Founder's Dilemma": you can be rich, or you can be a king, but you usually can't be both. In the world of start-ups, wealth and control are largely incompatible. Building something valuable means giving away equity and authority, whether to co-founders, to hires, or to investors, and the founders who grip control hardest tend to make the least money. Fewer than one in four founder-CEOs takes the company all the way to an IPO, and when the transition comes, roughly four out of five resist it. You'll notice the same question hiding inside a good portion of the questions below: when money and control collide, which one do you reach for? If one of you desires to be rich and the other a king, this list will make that clear quickly, and it merits a serious conversation.

It's important to note that none of these questions have a correct answer, and the point isn't to agree on everything. It's to write these things down (and sign it!) before the argument, while you all still like each other, so there's a plan if things go sideways.

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1. Ambition and endgame

• What's the size and duration of what you want to build? Something venture-scale, a great small business, an acquisition? Is there a number at which you'd sell, and does that number change for you if it's taking a long time?
• If keeping control meant a smaller outcome, would you keep it? Would you replace yourself as [your title]  if it made the company more valuable?
• What does your life need to look like in five years? Kids, geography, aging parents, financials?
• What would make this a failure for you personally, even if the company succeeds?
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2. Contribution and commitment

• What does each of us actually do? Define tasks, and who owns which decisions.
• What conditions need to be met for you to go full-time? A revenue number, a funding milestone, a conversation at home? Be specific.
• What's your personal burn? Mortgage, childcare, health insurance, etc. How many months can you run on no salary, and what happens the month after that?
• If you're in a relationship, is your partner supportive? What did they actually say when you told them?
• What other obligations do you have? (Ex: A board seat, an advisory gig, an angel portfolio, a passion project)
• What salaries are you taking, if any, and what milestones/factors would allow that conversation to be revisited?
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3. Equity and control

• How will we split equity, and what's the logic for the split? Consider what each person brings to the table, and have an open and honest discussion. 50/50 is fine if there's a discussion about why, but it shouldn't just be the default.
• What will be our vesting schedule? I suggest a four-year vesting period with a one-year cliff for everyone. If some team members are not full-time, discuss if their vesting schedule should be delayed until they are.
• Which decisions are majority vote, which are unanimous, and which belong to the CEO alone? If things are 50/50, who is the tie breaker?
• Who is CEO, and what does each of us mean by that word?
• How do you feel about dilution? Would you rather own 40% of something big or 80% of something entirely yours?
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4. Departures and exits

• What happens if one of us needs to leave? Can the company buy back the shares, and at what price?
• What happens if one of us wants to sell, or raise venture money, or shut it down, and the other doesn't?
• What happens when one of us isn't performing?
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5. Values and conflict

• Tell me about the worst professional conflict you've been in. What did you do, and what would the other person say you did?
• How do you (actually, not ideally) behave under stress?
• How do we fight, and how do we repair afterward?
• What three words describe the culture we want to build, and what are behaviors or traits we fire people for?
• What would make you walk away?

6. Nitty-Gritties

• Is there anything a background check would surface that I should hear from you first? (NOTE: Actually run mutual background checks before you incorporate. Your investors will do this later anyway.)
• What's your personal financial picture? Do you have debts or obligations that may create financial pressure on you?
• What's your relationship with alcohol, drugs, gambling, etc? Has it ever been a problem? What does support look like if that problem resurfaces?
• What does your current or most recent employer own in regard to your IP? Are you under any non-competes, non-solicits, etc?
• Can I call your former bosses, colleagues, and co-founders? (NOTE: Do the reference checks!)
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Some of these questions are challenging largely because there's a strong instinct to found a business with people you already like. More than half of co-founders start as friends or family (mostly friends). The existing relationship that makes the early days so fun and easy is the same relationship that makes you skip the questions, because asking someone you have a close relationship with to sit for a background check feels like a betrayal. It isn't! It's the most respectful thing you can do for your founding team and for your business.

Entrepreneurship is a long and strenuous journey; it's key to have the right partners along for the ride.As a founder, I dodged the hard conversations, because I had a co-founder I liked and trusted, and mistook my liking them for me having properly vetted them. You can learn from my mistakes! If you tackle the hard conversations early, when the stakes are low, you won't regret knowing where you stand when they're high; when you, your business, your relationships and even some of your sanity are all on the line.

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Ilana Habib is Principal at Cintrifuse Capital, a venture fund and innovation hub backing early-stage founders and strengthening the Cincinnati startup ecosystem. She’s spent her career in and around the entrepreneurial ecosystem and loves rolling up her sleeves to support founders and operators. She’s also an avid traveller, taking her camera with her to capture some of the most interesting places on earth.