# The 6 Biggest Cofounder Mistakes We’ve Ever Seen...

Channel: Rob Walling
Video: https://www.youtube.com/watch?v=rVd4ZEBz1ew
Duration: 12 min
Language: English
Words: 2265
Transcript page: https://viewrankai.com/tools/youtube-transcript/rVd4ZEBz1ew

---

[0:00] Between my startup accelerator and my personal portfolio of SAS investments, I'm invested in more than 170 companies and I have seen my share of co-founder and partnership mistakes that have led to the company imploding. So in this video, I'm going to be joined by founder and executive coach Dr. Sherry Walling and we're going to talk through the six

[0:19] biggest partnership mistakes we've seen. If you stick around to the end, I have a seventh bonus mistake that just might be the most important one in the video. Dr. Walling, thanks for joining me on the channel today. Always good to be with you, Rob. You want to kick us off with the first partnership mistake? Yeah, man, partnership mistakes will take down your business as you well know. Uh but the first one that I wanted to talk about is people not beginning with the end in mind. That means they sort of launch into running a business together and it's a very exciting and things are flowing, maybe customers are popping and

[0:53] they're ready to go, but they don't really stop to have any conversations about what this ending looks like. Do they want an exit? Do they want a lifestyle business? What are their goals? What are their plans? And they don't sit down and have the very important conversation around the sort of terms and agreements that govern the relationship that they have as it relates to leading their company. It's easy to kick this can down the road, especially when it's like maybe I'm not 100% sure if I want to sell for a million, 10 million, 100 million, but maybe I'm 80% sure that if we got an offer for X million dollars, I would

[1:34] take it, but realistically long-term, I just want to take out dividends. Whether I'm sure or not, having that conversation with the co-founder is critical because if you get involved with a co-founder who's like someone puts a million dollars on the table, I want to sell and you're like, "Oh, that's totally not my goal." It's going to be a problem. But a document that governs how that conversation happens and the acknowledgement that there may need to be a conversation like that at some point is really, I think, the point here. Is understand that there are all of these intricacies to this relationship over time and it's going to

[2:06] be tricky. There will be moments when your values and needs and desires aren't aligned, but that's why you have an operating agreement. That's why you sit down with a lawyer. That's why you have these difficult conversations right at the beginning so that there's a system in place. Yeah, and there's going to be some things, preferences, or desires that aren't going to be captured in an operating agreement. Like I was saying, if some co-founder may be like, "First time I see a million dollar check, I'm selling the company." You know, and and someone else may want to go bigger than that and just having that conversation at least with a preference thing of

[2:34] like, "Well, these are These are the options and these are the ranges of things that I'm thinking about. These are kind of my goals for the company." I think is critical. Absolutely. Mistake number two is not vesting ownership. And if you don't know what that means, vesting is where you receive your shares over a period of time. So usually two co-founders will vest over four years where the standard is you don't get any stock for the first year, then you get 25% of it at the end of 12 months and then it vests monthly after that up to your, you know, whatever your allocation is. The problem with not doing this is

[3:07] we've seen companies where two co-founders each own 50% of the company, they get five months in, six months, eight months in, one leaves and they own half the company. They own the shares and there's nothing you can do at that point. You can't take them back legally unless they want to give them back, which in some cases people have, but you've effectively killed the company or at least crippled it. You can't raise investment. No investor will invest in that. If you build the company and grow it to millions and sell it, that co-founder who barely put any work in gets half the money and so that the

[3:35] other co-founder usually doesn't want to do that. Yeah, the third mistake that I've seen partnerships make is really not being clear about the type of relationship that they have. Again, this is interchange between humans and it's important to be really clear about the the tone of the relationship and how that will eventually affects the company culture. You know, I've seen co-founders who are best friends. Maybe they were roommates in college or best friends from high school. So they have this deep working relationship, but how does that then transfer into running a business together? It's not the same kind of relationship. So being clear about the boundaries of how much sort of personal

[4:13] life and personal experience is shared between the two of the founders or if there are more. I really don't like it when co-founders refer to themselves as family or they refer to their teams as a family. I think that really communicates a level of sort of personal responsibility and long-term commitment that is really not representative of what it means to be in a business together. So getting clear early, what is the language that we use for this relationship? How does that filter down to the kind of culture that we set up for our company when we do have employees or team members? And how do we

[4:46] have some segmentation or separation between our professional partnership and our personal lives? The fourth mistake that I've seen several times actually is when two or more co-founders have pretty much the identical skill set. So you imagine two software developers getting together to start a SAS company and guess what they both want to do? They want to develop software all the time. They want to write code. So nobody wants to do operations, no one wants to do sales, no one wants to do marketing, no one wants to talk to customers. And similarly, I'd imagine if two sale I've never seen this, but two sales people try to start

[5:19] a SAS company, you know, what? They They want to sell, they want to sell, but they have no technical expertise, right? So this is it can cut in a lot of ways with people stepping on each other's toes or with there just being a real lack of diversity of skill set. I've also kind of seen it on the other end of the spectrum where you have two co-founders where I think this is the the best combination of two co-founders with very different skill sets, but the problem that can arise there is they don't really understand or appreciate the other person's skill set, right? The person who's maybe more technical

[5:49] doesn't fully understand or appreciate the like deep intelligence and energy and time effort that goes into creating a sales funnel. And vice versa, your your like more people person sales oriented person may not really understand the complexity and intricacy of architecting a piece of software that's really amazing. And so it's really important for co-founders to do the work to sort of get in each other's zone of genius enough to understand and

[6:15] appreciate and really give it value. Yeah, some of the best combinations that we see come through TinySeed, especially since we invest in SAS, right, which is software companies, it's a developer and then either a sales or a marketing focused co-founder. And sometimes subject matter expert can be good, too, if they're an expert in in a specific niche, but having either a sales or a marketing bent plus a developer seems to be a winning combination. The fifth partnership mistake that I've seen a handful of times and I've seen it wreck companies is uneven compensation. And I want to couch this. This one's almost a little hard to explain, but I've seen

[6:48] companies where there's two or three co-founders and one of the co-founders lives pretty inexpensively and has money in the bank that they can live for a year or two. And so they don't take a salary, but the other founder or other co-founders do take a salary. And that all sounds like, "Hey, we're all doing this for the good of the company. We're all on the same page. We're all moving forward." Flash forward a year, that first co-founder has drained a huge chunk of their savings and the other founders have not. And there's this, you know what I mean? So it's it's not that everyone's salaries have to be

[7:16] identical, but it's like are we all putting in the same amount of skin in the game? And what that means for people's level of safety and communication and I mean, it just has all kinds of relationship dynamics implications when there's uneven compensation without a lot of clarity about why that is, how long that will be. There's some equalizing force, whether that's sweat equity or other kinds of risk that make that feel okay and fair. Right, because otherwise resentment creeps in over time. And that

[7:49] can kill can and has killed companies. Yeah. Yeah, the last one that I want to talk about, which is it's a big overarching one, but is simply co-founders not spending the time to really work on their relationship. To understand that the amount of time they spend together, the way they communicate, the cadence of maybe in-person meetings if they're distributed, all of those things matter a great deal to the working relationship, to the sense of trust, to the ability to pick up when something is maybe going wrong, when your partner is approaching burnout, when they are having problematic patterns. Like you don't notice that stuff if you don't

[8:28] have eyes on or you don't have a cadence of being together. So when people are doing a good job at co-founder relationships they are practicing forgiveness. You know, they have a system where they're saying they're checking in about, "How is this working for you? Am I bugging you? What's going wrong in the ways that we're interacting and how do we keep that clean and clear and without a lot of baggage or relational resentment that will come in and create a lot of havoc in the business?" The metaphor of a co-founder relationship being similar to a marriage, it holds up in a lot of ways and this is another example of that. If

[9:09] you're married for any length of time and you're not working on the relationship, it will fall apart and it's same thing with co-founders. And the need to do that consistently. I think sometimes people give it more attention at the beginning of a business, but there has to be a cadence of staying current, of making sure that your relationship is growing alongside your business, alongside your lives so that you're not relating to the person that you started your business with as the 25-year-old when now they're 40, right? Time has passed. How do you stay current and keep those relationship patterns really healthy? And there's no way to do that except to do it

[9:42] intentionally. In a second, I'm going to give you a seventh bonus mistake, just might be the most important one in the video. But before I do that, I want to recommend one of the best YouTube channels on the internet. It's Dr. Sherry Walling's. It's youtube.com/sherrywalling. We will link it up in the description for this video. What type of topics do you cover? The whole range of things from mental health, personal growth and development, relationships, anything that's important to a founder entrepreneur high performer type and they when they're thinking about what's going on between their ears, in their mind, their mindset. So it's focused on people who do hard things,

[10:21] entrepreneurs, executives, and the like. That's youtube.com/sherrywalling. The seventh mistake I've seen several times and it just might be the most important one in this video is not putting things in writing. And what's interesting is everything doesn't need to be a legal doc signed by two people and notarized. Just having a bulleted list that communicates something between two co-founders that is not legally binding, but is just a list that people can refer back to can be invaluable. And the idea here is that human memories are faulty and over time people remember things differently, they forget commitments they made. And just having an email exchange, having a bulleted

[10:57] list in a Google Doc, or maybe a legal doc if if you want it to be legally enforceable, but just having something like that can make things a lot clearer when you get down the road. Even with all the headaches and potential drama that can come with having a co-founder, it's often the right choice for many people. And if you're trying to find a co-founder for your startup, check out

[11:13] this video. Do you want to dive in to the first partnership mistake? My first one that You want to kick off the first

[11:31] [Music]

---

About this transcript
Read from YouTube's own caption track and laid out by ViewRank AI (https://viewrankai.com).
ViewRank AI finds the videos already beating a creator's own average on Instagram, TikTok and YouTube Shorts, transcribes them from the audio itself in more than 60 languages, and turns what worked into new ideas and scripts.
Free transcript tools, no account needed: https://viewrankai.com/tools
How to read any video this way: https://viewrankai.com/llms.txt