The co-founder relationship is where many startups actually fail

Diligence on a founding team examines how the founders met, how long they have worked together, how they divide decisions, how they resolve disagreement and how they split equity.

10 min read · Level 3

The point

The founding teams I trust most can describe a serious disagreement in detail, including what each of them got wrong. Teams that insist they never disagree have either not been tested yet or are not being candid, and neither is reassuring in a company about to face its hardest years.

What is it?

A founding team's history together is evidence of how it will behave under pressure.

Area Questions to ask History How did you meet? Have you worked together before, and in what roles? Division of responsibility Who decides on product, hiring, fundraising? What happens when you disagree? Conflict Describe a serious disagreement and how it was resolved. Commitment Is everyone full time? Any other roles or obligations? Equity How was the split decided? Does anyone feel it is unfair now? Agreement Is there a signed founder agreement with vesting and leaver terms?

Interview founders separately as well as together. Consistent answers are reassuring; significantly different accounts of roles, decisions or equity are worth exploring gently.

Warning signs include: founders who met very recently and have never worked together, an unexplained equal split despite very different contributions, or one founder answering every question for the others.

Why does an investor care?

Because founder conflict is one of the most common reasons startups fail or stall. It is also one of the hardest problems for investors to fix after investing.

How founders describe their disagreements says more about their relationship than descriptions of their harmony.

Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.

Example

Separate conversations with two co-founders.

Question: Who decides the product roadmap? CEO: 'We decide together, but I have the final call.' CTO: 'Product is my area; the CEO focuses on sales.'

Question: Is the 50/50 split still right? CEO: 'Yes.' CTO: 'Honestly, I have been thinking about it; I built most of the product.'

Neither answer is alarming alone. Together they suggest unresolved questions about authority and fairness. The investor raises the roadmap question with both founders together and asks how they would handle it.

The common mistake

Meeting founders only together, where the most articulate founder presents a united account and underlying tensions stay hidden.

How it works

Step 1: Learn their history

Ask how long and in what capacity they have worked together.

Step 2: Speak to founders separately

Ask the same questions about roles, decisions and equity.

Step 3: Ask about real conflict

Request a specific example of a serious disagreement and its resolution.

Step 4: Check the paperwork

Confirm a signed founder agreement exists and reflects current roles.

When to use this

Before investing in any company with more than one founder.

When not to use it

Do not treat every difference in answers as a problem; founders naturally describe their roles from their own perspective.

How investors actually did it

A recurring pattern: team issues in startup post-mortems

Analyses of failed startup post-mortems published by researchers and industry data firms have repeatedly listed team problems, including co-founder conflict, among the most frequently cited reasons for failure.

Team dynamics are a primary risk, not a soft factor.

Do this now

Plan one question you will ask each co-founder separately
Ask a founding team to describe their most serious disagreement

Create a free account to read the rest and apply it to your own investing.

Related lessons

Look for complementary skills, real commitment and a high learning rate — Team evaluation means examining whether the founders cover what the business needs, whether they are genuinely committed, and how quickly they change their minds when evidence arrives. (12 min)
A founder who leaves without vesting can own a third of the company forever — Founder agreements, vesting and leaver provisions decide what happens when a founder departs. Diligence confirms they exist, are signed and would work as intended. (10 min)
References you chose tell you more than references you were given — Checking the people behind an investment means verifying claims, speaking to sources they did not nominate, and asking questions specific enough that a vague answer is itself informative. (11 min)