# Dalton & Michael: Co-founder mistakes that kill companies and how to avoid them

**Author:** Dalton Caldwell, Michael Seibel
**Type:** Video
**URL:** https://www.ycombinator.com/library/DZ-dalton-michael-co-founder-mistakes-that-kill-companies-and-how-to-avoid-them
**YouTube ID:** dlfjs_eEEzs

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In the first episode of Dalton & Michael , Dalton Caldwell and Michael Seibel discuss co-founder mistakes.   
  
We asked YC founders: Is there a simple fact you wish you knew when you started your company or a rookie mistake you
wish you could take back?

## Transcript

you definitely want a co-founder hey this is michael cyball and dalton caldwell and welcome to rookie mistakes we've asked yc founders for their rookie mistakes so we can share them with you and help you avoid these common errors let's start with our first anonymous story from yc founders and mistakes to avoid at the beginning when everything's going well you don't know how you're going to handle disagreements or bad actions by the other person it's extremely hard to deal with a bad situation after the fact if you don't have anything written down

it's awkward to talk about things like who gets what percentage of the company or do you have founder vesting and you know how human beings are we remember we don't always remember things quite the way they went down right and so write it down i think the biggest error that i see is founders looking for someone with a skill match versus someone that they actually maybe have had a fight with before like a friend a lot of founders assume that whatever skills their co-founder has at the moment they join the company are the

only skills they'll ever have and in my experience almost everything you learn you learn on the job so you rather work with someone you really like and learn together then work with someone you don't know at all and uh get into fights and then break up i mean to put some facts on that how many founder breakups have we seen where the founder says my co-founder is excellent a plus they just don't have the skills that we need versus my co-founder is a living nightmare and i can't take it anymore

right like how many people are like what a great person that i like a lot they just didn't end up i shouldn't have made them my co-founder because they just didn't have the right skills michael do you ever hear that never hear it and by the way it's not that it's not true it's that that doesn't cause a co-founder breakup that doesn't kill a company it's an error but not a fatal one all right let's move on to the next one so the yc founder wrote in take arguments with your co-founders seriously it's more likely to kill you than anything else what i see with a lot of

co-founder disputes is that the relationship has never been pressure tested they've just been friends they've been like oh yeah we we chat all the time and then the first time there's a disagreement it's just a blow up and and the relationship is broken and you'll never be able to put the pieces back together again versus if it's someone you know in a while maybe it doesn't seem as shiny but you've already had some disagreements you've already had the relationship ever ebb and flow over years right my best takeaway is that first you don't always have to come into a resolution

like if you don't have two people engaging uh productively you can pause you know you don't have to keep the fight going yeah and then the second one is like understanding how your co-founder deals with stress like some people deal with stress by attacking some people deal with stress by retreating and like if you understand how your co-founder deals with stress you can kind of better interpret what they're doing all right here's the last um here's the last comment that ayc founder wrote in i chose a co-founder with whom i could

not share my honest disagreement we didn't know how to fight well or come out of those fights better and wiser some part of that was conflict avoidance on my part and some part of that was him fighting dirty it's crazy when you speak to founders where they'll spend eight hours a day with someone and 12 hours a day with someone and they'll be like i haven't spoken to them in a week like like wait you know and i'm like what what are you guys doing all day like you haven't talked to

him in a week um or i haven't talked to him in a month or i haven't had a i've had a real conversation with them in a year and i think when things get that bad i would argue there's a point where breaking up becomes inevitable and the ceo's job is now not how to repair the relationship it's basically how to separate in like the most effective and least destructive way when you talk to folks about this

they know in their hearts that that's what needs to happen but they just can't bring themselves to actually do it because it feels bad and so that's what again when you talk to these folks they know they know that that it makes the right thing for the company is is to go their separate ways but they for whatever reason they're willing to go through years of pain or actually reduce the chance the startup's going to work than to face that head-on it's it's really rough the longer this relationship persists in

this way before there's a breakup the worse the breakup is going to be like the more likely there's litigation they're more likely there's you know one person has vested stock so now your cap table's affected like they're all these things that get worse by leaving it alone how should the ceo set up a company so that if this battle you know if there is a co-founder fight it's it's not fatal to the company the closest to equal you can get the better

because it avoids this oh this person has 10 percent more so it's their company you see all this drama that happens over equity split so equal is good however here's a pro tip for you a straight 50 50 deadlock is rough and we see that kill companies a lot and so it might be reasonable for the ceo to have one extra share so you effectively have the same ownership your equal co-founders but that one extra share is you agreeing in writing early that in the event of a

50-50 deadlock there's a tiebreaker vote dalton before we close what are some tactical tips you give folks who are looking for co-founders now who are extremely early in their journey or thinking about starting a company i hear from a lot of folks starting companies where they want to come up with the idea first maybe they want to raise money first and then they want to add a co-founder and i actually think that's going about it in a less than ideal way and actually might cause more problems okay i would recommend figuring out who the

co-founder is first and then if you come up with the idea together and perhaps you fundraise together then you'll have collective ownership that it's your idea and it's your company versus a lot of times when you add co-founders later in their mind it's your company it's not their company and even though you know you worked on the company an extra month than the other person did which is so silly right you'll always have this like well this wasn't my idea this wasn't my company um which isn't great from a retention perspective if you can both really feel

like you shepherded the idea through the earliest stages you're going to see a lot more ownership and people stepping up when you go through hard times to reiterate what we talked about at the beginning um i don't want to say co-founders are essential but man they're so helpful it's such a powerful tool especially in the hardest part of the startup the pre-product market fit startup we still encourage everyone to have a co-founder um but like the startup game right it's

not about doing it well it's about doing it great like having a great co-founder can be a super power for your company um having an okay co-founder not taking this seriously can be the seed of big problems absolutely and sometimes people they end up with co-founder issues i'm like well i guess i'm just going to quit and start a new company and we'll well well it's so easy to start a new company and then it's like well good luck and then you speak to them a year or two later and it's really hard to get back to where they were in the moment and one of the

regrets is they wish they would have spent the time to set up the co-founder relationship well and choose the right person first then think they can just blow everything up and get a do-over that's just not how life works and so the more you can front-load this the first time around versus having hard earned lessons yeah would recommend yeah yeah so we recommend you get a co-founder we recommend you do it well we recommend that you invest in that relationship early

so that you can survive the fights that will inevitably happen and man grab this superpower like you should certainly get a co-founder but don't slack don't slack off this isn't the place where you want to slack off where you want to put 50 effort like this is one of the most important things you're doing in the beginning of the company you
