If you want to start a startup, we recommend finding a co-founder. But then, how many co-founders do you need?
There are some famous companies – like Amazon – with just one, others – like Airbnb – with three, and some with even more. We recommend that most people, though, start a company with one other person.
There are three good reasons not to have too many co-founders: it introduces too much relationship complexity; it is expensive; and it’s hard to focus.
At EF, we recommend people build a co-founding team of two. We’ve found teams with three or more co-founders succeed even less often than solo founders. In external data, two is also the most common number of co-founders for billion dollar startups.
Having too many co-founders introduces too much relationship complexity.
The number of relationships in a team goes up disproportionately with each team member added.
In a co-founding team of two, you have one interpersonal dynamic to manage. Adding an extra co-founder doesn’t make it 50 per cent but three times more complex – there are now three dynamics to manage. At five co-founders, there are ten co-founding relationships which need to be built. This is why teams often scale less and less efficiently as they grow, and why large co-founding teams often have arguments or dysfunctions.
Building and maintaining one effective co-founding relationship is hard enough. Co-founders are not the same as friendships or colleagues, so even if you got along with your co-founders before, it still takes a lot of time and effort to build an effective co-founding relationship.
The more co-founders you have the more co-founding relationships need to be built and maintained. So having lots of co-founders creates a damned if you do, damned if you don’t situation. If you have a lot of co-founders, you’ll end up spending lots of your time working on the relationships, instead of building the company. If you don’t, the relationships will fall apart. Either way, you and your company will suffer.
At EF, we’ve seen hundreds of founders try to build co-founding teams of three or more. Not only do they rarely succeed, unfortunately, the ending is almost always ugly.
Having too many co-founders is expensive.
You might think that the more co-founders your startup has, the more skill sets your company has available and so the faster it will grow. This isn’t true.
A co-founder is more than just their raw skills – they’re someone unwaveringly committed to your mutual success. So, while the best co-founder will more than pay for their share by doubling the outcome of your company, they’ll do so with more than their initial skill set. They’ll carry the company when it is too heavy for you alone.
We recommend founders get equal shares of the company. But whatever way you do it, splitting equity more between more than two co-founders can get expensive. Splitting equity three ways instead of two, means two would-be co-founders give up more than thirty percentage points of equity between them, a third of their equity each. This is a big deal.
Early employees who receive a salary usually get low single-digit percentages of equity. There’s nothing stopping you later hiring a friend you think could be helpful. And almost any skill set can be hired for. So if you’re bringing on a co-founder to get a specific skill set you could hire with an early employee, it’s not a wise decision. You misunderstand what your co-founder is paid for.
At EF, we’ve seen the best founding teams be ambitious with who they hire as early employees, not with the number of co-founders they pick up.
Having too many co-founders makes it hard to focus.
The ‘co-founder’ title is, practically speaking, the most important title within a company, at least until it is very successful. Having too many co-founders can paralyse a company, because it’s too hard to reach alignment on where to focus.
In the early stages, startups benefit from being incredibly focused, even if the direction they’re taking isn’t quite right. It’s better to pursue idea A aggressively, then pivot from idea A to idea B, than to kind of work on A and B simultaneously. You can’t go in lots of directions slowly, because you’ll be beaten on every front by competitors who are faster.
The co-founders, therefore, have to be able to reach alignment on the vision and direction of the company. They have to focus. Having lots of co-founders makes it harder and slower to do this – if you’re not trying to reach consensus and alignment, why bother having the extra co-founders at all?
At EF, we’ve found the best founding teams are aligned and focused throughout their journey. Over time, we find that co-founding teams of more than two tend to end up with at least one of the founders becoming alienated or redundant.
It’s tempting to make an exception for yourself. To go it alone or to build a three plus co-founding team. But we think this is rarely the wisest choice. So, when you’re deciding who to start a company with, staring at your list of potential co-founders, pick one.