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7 Reasons it’s a Bad Idea to Start a Company with a Friend

by Vinay Jain 7 Reasons it’s a Bad Idea to Start a Company with a Friend

Hanging out all day with your buddy, working toward a shared vision of success in a new business venture. What could be better?

That’s what a lot of first-time entrepreneurs think when they decide to start a company with a friend. It’s only natural: by definition you and your friend trust each other and are familiar and compatible. So what could go wrong?

As it turns out, a lot. Beyond causing trouble in your friendship, your dynamic with a friend+co-founder could be bad for your company.

Here are seven reasons why:

1. You can’t be blunt.

Being able to give and receive direct and honest feedback is essential for progress in any career, but it’s especially important in early-stage companies, where time is of the essence as you’re always zooming closer to the end of your financial runway. If you hesitate to be blunt with your friend (or vice-versa) in order to maintain the friendship, you’ll waste precious time trying to find a delicate way to convey feedback and dance around difficult truths. It’s also harder to hold each other accountable when you’re afraid of hurting feelings.

2. You’re too alike.

People usually become friends because of the things they have in common, whether it’s their taste in music, similar hobbies, or a common outlook on life. The fact that you see the world in the same way as your friend has a lot of benefits, but it can also be a liability. Startup success requires unconventional and creative thinking. If you and your co-founder’s brains are wired the same way, you can amplify each other’s strengths, but you can’t compensate for each other’s weaknesses. You don’t want to run your company with someone just like you — you want somebody who is good at important things you’re not, and vice-versa.

3. You distract each other from work.

Let’s face it, if you’re favorite pastime with your buddy is playing Xbox, how long do you think it’ll be before there’s an Xbox in the office you two share? And how much harder will it be to keep focused on your work when you have your friend/co-founder there to share those cat videos which she knows crack you up? The lines between work and recreation blur too easily when your friend is your office-mate.

4. Who’s the boss?

One of the biggest problems co-founding a company with your friend is the likelihood that you’ll be uncomfortable giving him instructions, or taking instructions from him. There are a lot of important decisions that need to be made in the early stages of a company, and often they are decisions that reasonable people can disagree about. But the clock is ticking and you have to decide quickly. Waiting for consensus can be fatally slow. One person has to have the final say when you disagree, something that can be uncomfortable with a friend.

5. You can’t escape.

Chances are that you and your co-founder friend have a lot of friends in common; that’s how the social graph works after all. Which means that, after a 16 hour day when you want nothing more than to relax with your friends over a drink and get your mind off of work, your co-founder might be part of the group you go to the bar with. And even if not, running in the same social circles means that work is bound to come up with your mutual friends more often than it otherwise would. For your sanity, it’s better to have more separation between your work and social life.

6. Money.

Nothing can destroy a friendship faster than a conversation about money that goes awry. And you can be sure that you’ll be having lots of money-related conversations with your co-founder. The good news? You and your co-founder can sign a Founder Accord to lay out financial expectations and divide responsibilities at the outset, forcing you to clarify and talk about things upfront and preventing friendship-shattering misunderstandings.

7. You might fail.

The harsh reality is that the vast majority of startups fail, and failure can be hard on a friendship because it’s easy to point fingers when things don’t go as planned. As a profession, the tech industry is remarkably forgiving of failure — many of the most successful entrepreneurs failed many times before they ultimately succeeded. But while failure is relatively easy to recover from professionally, a broken friendship is harder to mend. 

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In case any of this sounds overly pessimistic, rest assured I’m not saying that co-founding a company with a friend can never work, nor that you should avoid building a friendship with your co-founder or co-workers. At the very least, you have to respect a person if you’re going to be working with them, and it’s pretty important that you like them too, because you’ll be spending a lot of time together.

What I am saying is that when you have a business idea that you’re excited about and your first impulse is to bring your friend on as your partner, take a step back and ask yourself if it’s worth putting the friendship at risk.

What do you think? Tell us in the comments below or tweet us at @shakelaw.

 

photo of Vinay Jain
Vinay Jain

As Chief Legal Officer, Vinay serves as Shake's general counsel, is responsible for the company's legal contracts and content, and leads efforts to educate consumers and small businesses about the law.

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