Co-Founder Mistakes That Kill Companies & How To Avoid Them

Michael Seibel says to agree in writing on issues such as equity splits and founder vesting while the relationship is going well. Written terms can help avoid disputes when memories differ or circumstances become difficult.

Dalton Caldwell says founders often focus too much on a co-founder’s current skills, which can be learned on the job. He and Seibel say co-founder breakups are more often driven by a relationship that becomes unbearable than by a skills mismatch. Caldwell recommends pausing an unproductive argument and learning how each person responds to stress.

Seibel describes conflict avoidance and dirty fighting as signs that co-founders may not be able to disagree constructively. If they have stopped having real conversations and the relationship cannot be repaired, he says the CEO may need to plan a separation. Delaying can worsen the breakup and create complications involving litigation or vested shares.

Seibel recommends ownership splits that are as close to equal as possible, while warning that a 50/50 deadlock can kill a company. He suggests agreeing in writing on a tiebreaker, such as giving the CEO one extra share. He also recommends finding a co-founder before settling on an idea or raising money, so both people can feel they built the company together.

Seibel and Caldwell say a strong co-founder can help especially before product-market fit, while an ill-considered partnership can create serious problems. Starting over after a breakup can be harder than expected. They encourage founders to choose carefully and put effort into the relationship from the beginning.