Why Drawing Up A CoFounder Agreement is as Important as Tying Your Shoelaces.
Updated: May 4, 2021
As a 12 x cofounder, I’ve come to learn that without a cofounder agreement, you’re pretty much co-fucked! Here’s why.
‘We will begin by learning how to tie our shoes' ~ John Wooden
Imagine you’re a teenager at school, and you’re getting ready to get on the pitch for a much awaited football match with your team. You’ve been training for months. It’s the first game of the season, and it’s the first time you’ve been promoted from the reserves and selected for the first team squad.
Warm ups: done. Team pep talk: done. You run onto the pitch alongside your team, but pretty soon you find yourself face down in the mud with a sprained ankle before the game even started. You’re now watching the match from the sidelines with an ice pack on your foot, all because you didn’t tie your shoelaces properly.
We’ve all heard numerous horror stories of business ventures that went wrong because of a rift between the founders. We all vow that our project will be different; the ship that doesn’t sink. But how do we ensure that?
Drafting a cofounder agreement is as important as tying up your laces. Ensuring the fundamentals are taken care of before you start running the pitch. It’s the process of creating this agreement with your cofounder that is key to the success of your business.
The exploration that the process presents you with will bring insight and clarity on the varying aspects of your business, starting with the three core building blocks: Vision, Values, and Venture.
By putting together your agreement, you’ll be taking a deeper look at your dynamic as cofounders, and the areas of your partnership which need more attention or support:
How aligned is your vision: where do you envision your north star to be?
How would you break down the venture in terms of processes? Is the way you define your venture aligned?
What is your agreed form of arbitration? How do you resolve conflict?
What are your individual roles; what are you accountable for?
The Art of Decision Making and the Importance of Accountability
Running a business, much like life itself, is ultimately down to a continuous series of decisions. A lot rests on how well you make these decisions, which you’ll look back on as pinnacle points in the growth of your business.
The advantage of going into a 50:50 cofounder arrangement is that the responsibility of making these decisions is shared. Clearly defining your roles as cofounders is therefore imperative to creating a framework for how decisions are dealt with.
Who's more extroverted and better suited to sales? Who is more confident in making hiring decisions? Who has the skill and experience to be accountable for finance?
Whether you’re just starting out and laying new foundations, or you’re further down the path with your venture and looking to smooth out some cracks, there are questions which need asking and answering, and both cofounders need to step up to how and where they ought to be accountable.
Accountability is the Say:Do ratio of your role as a founder.
It’s how you rise up to a place of intentional action, and out of that murky territory of overthinking and underacting. But who is there to hold you accountable?
In order to hold each other accountable as cofounders, clear and open communication is necessary, which is where sitting down to draft up an agreement comes in.
Get to know what makes each other tick. Get to know where he/she faces resistance. Create a framework for any eventuality; without that in place, you’ll meet unnecessary issues along the way.
The Practice Of Planning
‘In preparation for battle I have always found that plans are useless, but planning is indispensable’. ~ Dwight D. Eisenhower
You’ll not only be better equipped from having put a cofounder agreement in place, but you will also benefit from developing the practice of planning.
Make planning an integral aspect of how you operate as a team. Take the time to constantly reassess and reevaluate your goals, reflecting on what worked and what didn’t in order to revise your systems.
Through planning, you’re reflecting on your own action (or inaction) and holding one another accountable; what got in the way of you doing xyz? What made that more important? Really, it’s strengthening your accountability muscle which makes revisiting the planning process invaluable.
Getting a ‘third eye’ onboard is a surefire way to ensure you’re being held accountable. It’s the coach who will be there to ask you the imperative, often difficult questions, to encourage you to develop a solid practice of planning, and to ensure you’re focused on intentional action at all times.