Good morning, fellow founder! 👋

Welcome to another edition of FounderForge. Your Europe-focused startup digest - just because we do things a little differently here! 🇺🇸 👀

If you missed our last issue, you can still read it at the link below! 👇

Today's topics are all about your significant other:

• Co-Founder Splits - Equity and Breakups 💔

• [SPECIAL] How Founder Matchmaking Is Done Right 💑

📊 Data Dive: Co-Founder Splits

“It's the most wonderful time of the year” 🎶

When every snowflake adds to the magical winter tapestry.

When families reunite, sharing warmth and love in the heart of winter.

When projects are finished before everyone is off and nothing happens for weeks.

And it's that time of year when people break up. 🥹

Let's use that as a starting point for today's topic, "Founder Splits" - which can sometimes hurt more than breaking up with your girlfriend/boyfriend.

The Equity Split

Before we get into the ugly stuff, let's look at another form of "Co-Founder Split" - The equity split 

Or, in layman's terms: "Who gets how much of this (potential) billion-dollar baby". 🤑

Once upon a time, the startup gods at YCombinator came to us and helped us with this important question.

Instead of creating the world's most complex formula with input fields like who has the most valuable skill, invested the most capital, or has the most LinkedIn followers, they kept it simple.

Their recommendation: split it equally.

Why?

• Things like "I started working x months before my co-founder" don't matter because all the work is still ahead of you.

• If you don't value your co-founder, why should anyone else?

So 50/50 (or 25/25/25/25 whatever) seems to be the easiest way to go.

In the real world, however, equity is rarely shared equally. 👇

At FounderForge, we believe that the equity split should be close to equal, but not necessarily equal. ⚗️

In founder teams, there is often a "main founder" who takes on more risk, more pressure, more exposure, etc. In this case, it is fair to have a symbolic recognition with some additional equity, e.g., 51/49.

What we do not believe is that structures like 50/20/20/10 are the way to go. More often than not, if these splits are considered fair, these people shouldn't be co-founders in the first place.

If you still want to go the data-driven route, Carta has created a handy tool to calculate a "fair" ratio! 👇

P.S. They are still missing some important fields like the LinkedIn follower count, but it is a start. 🤷

The Relationship Split

Now we know that co-founders tend to own a significant amount of a company's equity (duh - what a surprise).

What really sucks now is when one of the co-founders leaves. 💩

And believe us - this happens waaaaay more often than you think.

In fact, 10% of co-founders end their relationship within a year of starting a business, and another 45% end their relationship within four years!*.

Co-founder conflict is often cited as the #1 reason startups fail: 65% of all startups fail due to co-founder conflict!*

The items on these lists change, but they all seem to have the same core failure: a crumbling founder team...

While some founder breakups are almost inevitable, others can be avoided by taking action early on.

Look for early signs of the above and address them before a micro problem becomes a macro problem. 👇

Take care of each other! The ride is much more fun when shared! ❤️

_{*According to Noam Wasserman, a professor at the University of Southern California and author of the must-read book "The Founder's Dilemma”.}

🛠 Founder's Toolkit: Matchmaking Done Right

Starting a company together is a lot like a marriage. 💍

You and your co-founder will go through many difficult situations together.

These situations can either break you or make you an even stronger team.

To make sure you're on the side of the 50% of teams that DON'T break up, it's important that you're a true match. ❤️‍🔥

Crazy - the divorce rate and the founder breakup rate are almost the same at almost 50%. Maybe founding a startup really is like getting married. 🤔

But how do you make sure you truly are compatible?

In an ideal world, by having known each other for years AND having worked together for years (good friend =/= good co-founder).

However, most people don't have that luxury, and even if they do, you've probably never gone to the level necessary to make sure you're really, really aligned.

But don't worry, we've got you covered! 💪 

We have created the ultimate Notion Template to check your and your (potential) co-founders' compatibility.

No more guessing, just streamlined discussion and alignment.

Spot problems before they go from micro to macro. 🔭

Check it out below! 👇️

The template includes:

• 50 curated questions that dig deep into your psyche, visions, and motivations.

• A skill/passion mapping tool to best quantify each other's core strengths and interests (who does what).

• An automated comparison page to easily go through the questions together and discuss possible misalignments or surprises.

And the best part: It is super easy to use!

If you use it with an existing co-founder, we are sure it will help you bond even more! 🤗 

🔗 Founder's Library: Curated Resources

A collection of random reads that the FounderForge team enjoyed.

• What Good Product Onboarding Looks Like in 2023 by Bandan Jot Singh (for both B2C and B2B)

• TikTok What's Next 2024 Trend Report by TikTok (we know... but these days, we just can't ignore TikTok anymore)

• Some Nice Acquisition Loops to Learn From by Adam Fishman

• How to Build a Founder-Led Company by Brett Adcock (more relevant than ever with the recent OpenAI debacle)

Newsletter we like: If you are into data (like us), we recommend taking a look at Chartr: https://www.chartr.co/

😂 Meme of the Fortnight

Pre-Seed founders pitching investors... “Our CLTV:CAC ratio is 1000:1!” 🤓

🤔 Your Thoughts on Today's Edition

• 🔥 It was great!

• 😒 Meh - it was okay.

• 👎 Not interesting to me.

That's all for now!

If you find this newsletter valuable, share it with a friend!

Cheers,
The Founders Blacksmith 👋

Issue #8 | 14. December 2023