Business co-founders in tech startups are less valuable than they think

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes).

My advice is to have this conversation with a potential business co-founder as early as possible to avoid wasted time. I could have saved myself months.

Look out for business guys who severely discount your value as a technical founder. Not saying they're all like this, but a really skewed equity split is typically a red flag.

I don't agree at all. Not even with the premise that "there are significantly more business guys looking for tech guys than the reverse".

There are a lot of business and tech guys and most of all of them are pretty clueless when you randomly meet them in "gatherings".

But a valuable business co-founder brings extensive domain expertise, a network of people, sales skills, management skills, and fund-raising talent.

There's little point in arguing who is "more" valuable -- the business side or the tech side. They're both critical to have.

For some reason, this post equates the "business side" to the person with the "idea". But that's a strawman. Having an idea doesn't make you a "business" co-founder. Being a business cofounder means having a experience and talent on the business side of things. And a good business co-founder generally doesn't have a lot of trouble finding good tech people, because that's one of those business skills that they're good at...

The ideal business co-founder has to be strong in distribution AND eliciting product feedback. This is why the “MBA types” and ex-McKinsey consultants fare so poorly - they’re used to companies spending loads of money to hear what they think. As an early-stage startup founder, nobody gives a shit about your product and no one wants to hear what you think. Your job is to identify where demand is highest in the market and then turn that demand into dollars. They also need to be excellent communicators who understand or at least appreciate how much goes into building products.

For those reasons, the best business cofounders in my experience, are former salespeople (for b2b startups), demand generation marketers (for b2c), and product managers.

The article reads… interesting. A business depends on its demand, competition, scale, operation costs and numerous other factors. If the product is a tech, a technical founder can have immense impact on future success but marketing, customer acquisition, sales, networking, fund raising and other huge headaches are often burdens carried by non-technical counter part.

Of course, the person building something from a vague idea to life wields magical power, but the other aspects of business are more so important.

As an engineer myself, I can see 500 ways I can improve things at my employer’s business, but while I have a technical vision, the non-technical founders of the business has broader picture and what I may wish to spend time optimizing might just be a pocket change issue not worth solving.

We technical folks undermine the mountain of difficulties of marketing and sales as well as interacting with people to convince them to part with their money. Of course, I have seen a fair share of over confident wanna-be founder who would just be next trillionaire if someone would build the 10000th Airbnb clone but for pets so they could sell it and give 5% equity to the builder because their idea was the main thing, but in broad sense of things, tech is just a means to an end for a successful business and simply building is not the 100% of execution step.

I’m not sure it’s fair to say Zuckerberg’s only advantage over the Winklevoss brothers was his engineering skills. I think he quickly understood the whole dynamics of that potential business and had a more clear vision. Being able to digest a lot of seemingly disparate information (e.g. how college students responded to the “hot or not” prank) and create a compelling vision along with a path to get there, that’s both very hard and very valuable.

But I do agree with the overall sentiment that these ex-McKinsey “business co-founders” often lack the most valuable skills. I’d even go as far as saying they are generally quite bad “idea guys”, in the sense that they are more Winklevoss than Zuckerberg.

I even have a sneaking suspicion that Europe is so far behind the US in the startup game partly because the “ex-McKinsey guy on top” anti-pattern is the social norm here.

One thing I've wondered about for awhile: How do you find a business co-founder you can trust?

For one example, the article says that some of the best value that a business co-founder can contribute is disproportionately building the relationships. But those relationships can be more connected to the business cofounder themself, than to the company.

It's a bit different for the technical co-founder, since your perceptible contribution is usually IP expressed in in artifacts like code that is owned by the company, and can't legally be taken with you.

There's also the perception of the value of that IP: much like a novice programmer might think that most of the value is in their own software/knowhow/grind/brilliance, the novice business person might think most of the value is in their own ideas/leadership/network/hustle/brilliance.

The business person might also perceive the technical contribution as being commodity skills, and ones that can increasingly be done by "AI" robo-plagiarism for $20.

So, if the business person is, say, having second thoughts about the 50/50 split, they can make a backroom deal with investors to cut out the technical cofounder, or bring their new relationships with investors and/or customers with them to a different (or 'different') startup.

Obviously, one defense is for the technical co-founder to somehow be a superhumanly valuable non-commodity, and to make sure that the business co-founder understands that.

But, realistically, doesn't the technical co-founder probably need a lot of trust in their character and commitment of the business co-founder? Maybe even more than vice versa?

In reality, it should flipped! The technical person is the one who breathes life into an idea and should get the lion’s share

Then you want an employer/employee relationship, not a cofounder relationship. I would run, not walk, from a company with a founder arrangement where some subset got "the lion's share" for reasons like this.

This post is hilarious and details exactly why so many startups die in infancy. Yes yes, engineers are brilliant and without them nothing ever gets built.

And even still, sometimes things get built and never turn into a real business precisely because of this hubris. And 99.9% of the time, the ones that DO grow over time would have grown much much faster if "the business guy" had been there all along.

Well, pretty much everyone is less valuable than they think!

I've bootstrapped and sold two startups, first time with 5 (!) equal cofounders and second time with 3. I've learned a lot along the way, obviously some of that through mistakes of my own. Have my cofounders been perfect? Heck no -- one lacks the same level of drive, the other is less trustworthy (always multiple irons in the fire kinda guy). But we all have strengths, are all generally better off together, and have the combined skill set to run super lean. Even if you think you can do some things better alone, you can never do it all, and that grind will take quite a toll.

Related: over the years the topic of going into business with some of my best friends has come up, and I always say I would never do that. Running a fast-moving, high stakes business with multiple founders involves a lot of tough conversations and occasional relationship strain. My business partners are business partners first, friends second, and I think that's important to consider if you really value a friendship.

Having started businesses with the explicit lack of biz-co-founders I beck to differ. That is of course unless your da Vinci-like super modal capabilities allows you to feel unlimited joy when doing business plans, taxes & marketing alongside your (hopefully) core competency of product development.

Having seen plenty of businesses throughout my life, both successful ones and less successful ones I'd say the most important traits are:

  - the ability to execute
  - having drive, focus and flexibility to adapt
  - being able to manage a team and keep it focused, motivated and on track

In a perfect team the business founder has a very good understanding of the tech side and the technical founder a good understanding of the business and marketing side. Product is nothing without sales and sales nothing without product. Despite this being obvious I have seen several companies fail on this.

Last not least it depends on the product. The more complex the tech is the higher the share of the technical partner should be and vice versa the more specialist business domain knowledge is needed, the higher the business partner's shares are.

The value of a business co-founder lies in their ability to build business relationships and extract value from them.

The value of one founder to another lies in complementary skills and perspectives engaging start-up issues in a productive way, which usually means deep levels of mutual understanding and trust -- which can be antithetical to business relationships and personal comfort. So: hard.

The CEO/COO split reflects the difficulty of scaling this.

Is the solution to talk early? Maybe, or maybe that interferes with trust-building. The key thing I believe (here and elsewhere) is to avoid projecting what you want or fear into what you have. If it's important to success, validate it. For that, it helps to have people willing and able to be honest and truthful, particularly about unknown unknowns -- even if it is otherwise their mandate and mission to project confidence and gain trust.