Starting up with friends: Good idea or Bad?

Starting up with friends: Good idea or Bad?

Thursday February 07, 2013,

3 min Read

There are a lot of people who worry about partnering with friends when launching a new startup. The usual worry is that if things go bad, the friendship goes down the drain. There have been many instances of this happening, but can the experience of a few startup founders be generalized into a rule? There is also a cultural bias at play here. Borrowing money from friends or getting into deals is usually considered a grey area, and often advised against. So does it make sense to get into a partnership with your close friends to do a startup?

There are some obvious issues with starting up with friends. You are usually friends with people that are similar to you. You either went to school/college together, you probably think alike and have similar value systems. While these characteristics make for good friendships, it can induce dangerous "group think" in your startup. Unless there is active disagreement and creative conflict, you may miss out on a lot of good ideas. Also, if there is no previous professional relationship between you and your co-founders, you may find yourself in unfamiliar territory of disagreeing with the person for the first time, and you may not be equipped to handle the disagreements and conflicts.

The value of diversity in a workplace has been well established. Companies that have founders from diverse backgrounds do better than competitors. This is not surprising, since for success, two things need to happen: (1) Lots of diverse ideas need to be generated and (2) Ideas need to compete on merit - Where the bad ones die and the good ones are implemented. If all of your co-founders think alike, neither will there be a diversity of ideas, nor will bad ideas get rejected, because you're too worried about your friendship to point out a stupid idea.

On the other hand, though, having co-founders you know and have a personal relationship with can make decision making faster and easier. Paul Graham believes that co-founders should have known each other for at least a year, and have worked together before at least as students on projects. Several successful companies have co-founders that were room-mates in college, and have gone on to build successful companies. But in every case, you'll find that they went out of their way to hire people from backgrounds different from their own to actively bring diversity into their companies.

The big question, though, is how will you handle it when things go wrong. If your co-founders are previous friends, you may find it hard to recover from a decision that you cannot agree over. You may also find yourself in a growth trap, where none of your ideas seem to be working, while your competitors are taking off! On the other hand, if you have a purely professional relationship with your co-founders, you may find it easier to disagree and still continue to function. It may also be easier to break off a relationship when things don't seem to be working.

At the end of the day, there is no one formula for success. Do you have any experience with this? What advice would you give entrepreneurs just starting off - Should they do a startup with friends?

[poll id="1"]

Share on