Should I bring on a cofounder?
How does a cofounder impact your likelihood of success? Cofounder relationships impact desired learning outcomes and a mathematical approach to evaluating cofounder decisions.
Welcome to A Founder’s Life for Me! I’m Alek, and I provide practical recommendations on how to build your company (or career) through my experiences building tech companies. To get free access to all past and future posts, please subscribe.
Why I’m writing this now
Over the last few weeks, as I’ve worked on SolidlyAI, the thought of bringing on a cofounder has teased its way back into my head. I’m currently a solo founder. I don’t have full-time employees working for me. This is an intentional choice.
You’ll leave this article with a framework for analyzing the tradeoffs of cofounder relationships.
First, think about what you want
In a prior article, “Should I raise money to start my company,” I wrote about the four outcomes I consider when deciding to raise money. I’ll reference them again here, thinking about whether or not you want to bring on a cofounder:
Financial outcomes - what are your financial goals?
Reputation outcomes - how do you want to be seen by others?
Freedom outcomes - what choices do you want to have?
Learning outcomes - what do you want to learn from the experience?
You can read the full article (link below) for detailed examples of how I’ve thought about maximizing my chances of those outcomes when considering fundraising.
Too many people bring on a cofounder or raise money because it sounds like the right thing to do. Instead, I’d encourage any founder to consider what they want from their company.
Next, think about how a cofounder helps achieve your desired outcomes
For me, learning outcomes were the most important factor in my cofounder decision
When bringing on a cofounder, the standard approach is to find someone who complements your skillset. If you’re a software engineer, you’d likely want to find someone who can support the non-technical side of the business (i.e., sales). If you’re more business-oriented, you’d want to find someone more technical. This approach ensures your company has all of the skills needed to maximize its odds of success.
But, my relevant learning outcomes when I embarked on SolidlyAI were:
I want to be the type of person who can build a working version of any idea.
I want to be the type of person who is a jack of all trades.
When I started SolidlyAI in 2022, I was very far from these learning outcomes. I had worked on web products but never handled the end-to-end software engineering involved in “building a working version.” Sales and marketing were also very foreign concepts. I had never been in a sales role. These were all skills I needed to build.
It would have worked against my desired learning outcomes if I had brought on a cofounder because it’s natural to specialize when multiple people work on a new company (i.e., “you handle sales, and I handle the technical stuff”). If I did that, I’d never learn the foundational skills I wanted to learn on the sales side.
What if you didn’t specialize? It’s easier said than done. I did trial a cofounder relationship in 2023, where we said, “Let’s not specialize.”1 The challenge was that people inevitably end up with comparative advantages. In that example, minor software enhancements that would take me a couple of hours would take him days. He was more skilled at the sales and business strategy side. As you go through the inevitably challenging times when learning a new skill, it’s natural to want to throw the problems over to your partner. I covered learning new skills in “How to learn to build a software company” if you want to learn more.
A mathematical approach to evaluate a cofounders impact on your financial outcomes
My relevant financial outcomes when starting SolidlyAI were:
I want to be the type of person who can support his family, own two homes, and afford to travel regularly.
So, bringing on a cofounder would need to increase my odds of achieving this outcome. In “Should I raise money to start my company,” I explain how I’ve thought about the financial outcomes. Over the next ten years, I’d need to earn about $2 million to achieve those financial outcomes. I’d need to earn $200k per year (after tax) to achieve that financial outcome. Bringing on a cofounder would need to increase the likelihood of success of that outcome. Focusing on a binary “I either achieve it or I don’t” financial outcome simplifies the problem. The only thing that matters is evaluating the “probability of success.”
Having another person to help would, most of the time, improve the odds that the company does well. But, it also raises the bar you need to achieve your desired financial outcomes. In my case, a cofounder or early employee would want to be compensated in some form of pay or equity. Let’s go through some examples.
Let’s say I brought someone on, and we decided that our pay would be determined as a percentage of SolidlyAI’s profit.2 For example, if I own 60% and the cofounder owns 40%. Given my 60% share, the company’s annual profit would need to be:
CompanyAnnualProfit * OwnershipPercentage * (1 - TaxRate) = $200,000
CompanyAnnualProfit = $200,000 / (OwnershipPercentage * (1 - TaxRate))
60/40 Example: OwnershipPercentage = 60%, TaxRate = 30%
CompanyAnnualProfit = $200,000 / (0.6 * (1 - 0.3)) = $476,000Whereas, as the sole owner of SolidlyAI:
CompanyAnnualProfit = $200,000 / (OwnershipPercentage * (1 - TaxRate))
Sole Owner Example: OwnershipPercentage = 100%, TaxRate = 30%
CompanyAnnualProfit = $200,000 / (1.0 * (1 - 0.3)) = $286,000So, there’s a cost to bringing on someone new. The cost raises the bar to achieve your desired financial outcomes. The math above is easy, but the tricky question is, “Which of the following is more likely?”
“My cofounder and I will reach a $476k average profit over the next ten years.”
“I will individually reach a $286k average profit over the next ten years.”
I do not have a framework for answering this question. But I do have a strategy for navigating it. Two things largely determine compensation in early-stage companies:
The risk that the person is taking
The skills they bring to the table
If you want a cofounder or early employee with lower compensation, you can lower the risk or find someone with lower skills. I don’t want to sacrifice skills. I want to work with awesome people. That means my primary lever for bringing on someone new is to lower risk.
If I can lower the risk for a potential cofounder, they can afford to accept a lower equity share. If SolidlyAI has no profit, they might want a 40% share of future profits. But, if SolidlyAI has $200k annual profit it would make sense for the cofounder to accept a lower share of profits (i.e., 30%). They aren’t taking on as much risk, so their percentage of future profits can be lower.
Ultimately, the more I demonstrate that SolidlyAI is a low-risk to join, the more the math will justify bringing on a cofounder.
It’s not always about the destination
Being a solo founder can be a long, lonely road. Looking back on 2023, I didn’t meet many new people or build many new working relationships. Being the only person working on your company has definite costs to your interpersonal experiences. I’ve spent more time reconnecting with friends and colleagues to combat this. This helps me not feel so alone as I continue down this path, and I often rely on these people for help and advice. As a natural introvert, I will also point out that this path has not been as taxing for me as I know it would be for an extrovert.
Even if bringing on a cofounder works against some of your desired outcomes, it’s worth finding ways to collaborate with others as you pursue your company.
Making your own cofounder decision
When evaluating whether or not to bring on a cofounder or early employee, consider your desired outcomes from your company and evaluate whether that person will help you achieve them.
As I’ve built SolidlyAI, the most relevant outcomes to my decision were learning outcomes and financial outcomes. I haven’t brought on a cofounder because it would hurt my chances of achieving those outcomes. For financial outcomes, if you aren’t sure, you can lower the risk that a cofounder would need to take. Ultimately, this helps the math justify bringing on someone new.
Recommendation: Think about the specific outcomes you want to achieve from founding your company. Then, evaluate whether a cofounder will help you achieve those outcomes. If bringing on a cofounder doesn’t make sense, that’s fine. Understand why it doesn’t make sense and when it would. If you decide to be a solo founder, find ways to gain the perspective of others as you pursue your idea.
If you are interested in more content like this, subscribe through the link below. If you want to discuss how to apply this, email me at newsletter@alekhagopian.com.
The timing for joining SolidlyAI didn’t work out, with competing priorities from his growing family and things going well with his current job.
This isn’t how all founders pay themselves. If your company has not raised money from investors, this is a common way to pay yourself a “salary.” If your company has raised money from investors, you would typically pay yourself a fixed salary instead.