The pattern · Partners
How to choose business partners: what research teaches
Conflict between founders is among the most cited causes of startup failure, says Harvard's Noam Wasserman. How to choose whom to build with.
Choosing a business partner is one of the most important decisions in a business, and one of the most often made in a hurry. Research shows that problems within the founding team are among the main reasons promising companies fail. Those who built something big almost always learned, sometimes the hard way, that the question "with whom?" is worth as much as the question "what?".
What the research shows
Noam Wasserman, a Harvard professor, studied about 10,000 founders for the book The Founder's Dilemmas (2012). He estimates that 65% of high-potential startups fail because of conflict among the founders (CNN, 2014).
The number has an origin worth telling. It rests, in part, on a 1989 study by Michael Gorman and William Sahlman, who asked investors why portfolio companies were at risk. Problems in the management team appeared among the top three causes in about two thirds of cases. In other words, it's an estimate, not an exact count. But it points in the same direction as almost everything studied on the subject.
Wasserman also found a surprising detail: teams made up of people who had already worked together tend to do better. Partnerships between friends or relatives with no shared professional history, on the other hand, tend to avoid the difficult conversations and pay for it later.
Who lived it
In 1983, Steve Jobs persuaded John Sculley, then president of Pepsi, to run Apple. Two years later, the two clashed over the company's direction. In May 1985, the board sided with Sculley, and Jobs lost control of the Macintosh division. In September, he left the company he had founded.
He founded NeXT. Twelve years later, Apple bought NeXT, and Jobs came back. In September 1997, he took over as interim CEO (Cult of Mac). In 2005, in a commencement speech at Stanford, Jobs said that getting fired from Apple had been the best thing that could have happened to him.
In Bairo's journey
Bairo Leandro Gonzalez Martinez knows both sides of this story.
With the cosmetics brand up and running, he proposed the next step: applying touchscreen technology to the business. The answer didn't come from outside; it came from inside. His partners pushed him out of the business, and the idea stayed with them. Years later, in a currency, bank and network project, he was left stranded by the very people he had helped.
He never names anyone. The story is his, not theirs. What he kept was the most expensive lesson his partners left him: choosing whom you build with. And another, even harder: your decision can't depend on anyone's gratitude.
The end of that chapter matches what Wasserman found. After six months working alone, Bairo found help and connection in three old acquaintances. People he already had history with. The four came together to continue, finish and raise together what he had begun. For someone who had been left stranded, the word "together" isn't a detail. It's reconciliation with the idea of a team.
How to develop this trait
- Prefer people you've already seen under pressure. Working together first, on a small project, reveals more than years of friendship.
- Have the difficult conversations at the start. Who decides what? How is the company split? What happens if someone leaves?
- Put everything on paper. A partners' agreement, with share split, vesting periods and exit rules. Talk to a lawyer.
- Seek complementarity, not copies. Partners with the same skills compete for space. Complementary partners divide the work.
- Protect your idea with registration. Trademark, domain and documents in the right name keep the idea from leaving with whoever leaves.
- Leave without a war, if you have to leave. Don't attack, don't expose. Your reputation is worth more than the dispute.