Embarking on a startup journey is thrilling yet daunting. Brilliant ideas can fizzle without proper execution.

Many founders quickly realize they need a cofounder – someone who shares their vision and fills crucial skill gaps. But what if that cofounder could also bring investment to the table?

In previous posts, we have covered topics like whether you need a cofounder, how to find a co-founder, traits of a good cofounder, and how to overcome conflict.

A cofounder with investment is like striking gold!

Why Seek a Cofounder with Investment?

Money issues are a leading cause of startup failures. A study by CB Insights found that 38% of startups fold due to cash flow problems. Teaming up with an investing cofounder can provide that critical initial capital injection to:

• Build a minimum viable product (MVP)
• Attract top talent
• Fund marketing/advertising efforts
• Cover operational costs

Beyond money, an investing cofounder signals:

• Vision and Commitment: They’re putting their money where their mouth is, demonstrating belief in the idea.
• Relevant Experience: Investors often have entrepreneurial or business backgrounds valuable to startups.
• Patient Capital: Investors take a long-term view compared to impatient VC funding.

“Investors make day-to-day decisions that help startups breathe and survive another day.” – Paul Graham, Y Combinator

Where to Find Potential Cofounders

Sourcing investing cofounders requires tapping into the right networks:

1. Your Own Circle: Scan your contacts for entrepreneurial individuals with capital and compatible skills.
2. Startup Incubators/Accelerators: Programs like Y Combinator facilitate founder matching.
3. Angel Investor Groups: Join meetup groups where angel investors convene.
4. Crowdfunding Platforms: Use equity crowdfunding to find micro-angel investors interested in becoming cofounders.
5. Online Founder Dating: New platforms like YC cofounder matching are founder matchmakers.
6. Linkedin : Linkedin is also a great place to find active and passive folks who are looking to invest and partner.

Key Traits for Investor-Founders:

• Access to investable capital
• Complementary skill set (e.g. technical, business, etc.)
• Strong belief in your vision
• Personal rapport and trust

Evaluating the Perfect Fit

Assessing a potential cofounder is like dating – you want to deeply understand their values, working styles, and long-term compatibility before committing. Key considerations:

1. Commitment Level

Is this a side hustle or their main focus? An all-in founding partner is ideal.

2. Motivation Drivers

Money motivation is important, but pure profit-seekers may cut and run. Look for passion about the vision.

3. Decision-Making Style

Different decision styles (data-driven, gut-instinct) can create friction. Aim for philosophical alignment.

4. Risk Tolerance

Startups are risky – make sure you’re aligned on appetite for risk.

5. Role Clarity

Explicitly discuss who will take the CEO position and own which responsibilities.

6. Founder Personalities

Personality clashes can torpedo startups. Maximize similarities and value differences.

7. Equity Split

Agree upfront on equitable equity split reflecting effort, investment, and role.

Cementing the Partnership

Once you’ve found your ideal cofounder match, it’s time to cement the partnership officially:

1. Vesting Schedules

Set a vesting schedule to incentivize long-term commitment. A typical 4-year monthly vest works well.

2. Investing Terms

Clearly document invested capital as equity, convertible debt, SAFE, etc. and terms like valuation.

3. Founder Agreements

Draft a founder agreement detailing roles, responsibilities, equity splits, vesting, exit terms.

4. Incorporate

Formalize the company by incorporating or forming an LLC to grant equity.

5. Intellectual Property

Ensure any pre-formation IP has been properly assigned to the new entity.

With a solid partnership in place, you’re ready to level up your startup!

TL;DR

Finding a cofounder who can also invest is a huge startup milestone. Beyond providing crucial funding, an investing cofounder demonstrates deep commitment and patient capital.

Tap your network and cofounder-matching platforms to find the perfect cultural and skill complement. Thoroughly evaluate long-term compatibility across work styles, risk appetites, and vision.

Once you’ve found your match, use vesting schedules, founder agreements, and proper incorporation to cement the partnership equity. With a cofounder Investor by your side, you’ll increase your odds of startup success!

Q&A

Q: How much investment should I expect from a cofounder?

A: There’s no set amount, but aim for enough to get your MVP built and sustain 12-18 months of operations. Discussing investment upfront is crucial. Many invest $25K-$100K but amounts vary.

Q: What percentage of equity should a cofounder get?

A: Equity splits vary, but a fair starting point is 50/50 for two equal partners invested full-time in sweat equity. Account for any cash invested or uneven responsibilities in the split.

Q: Should I get a cofounder before or after incorporating?

A: It’s smart to cement the partnership and hammer out details like the founder agreement before incorporating. But you’ll need to incorporate to formalize the roles and equity grants.