How late in a startup's life can you bring in other co-founders?


5

Is there a time in the life of a startup after which you can't bring someone on board with the "cofounder" designation? I've observed additional cofounders coming onboard past the founding event, so I wanted to clarify this point.

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asked Nov 27 '09 at 18:07
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Robert
43 points

7 Answers


4

If I were you, I wouldn't worry much about it. People misname stuff all the time, and the usage of certain words is not really precise.

According to an online dictionary, a co-founder is someone who "established or found (something) in concert with another or others." Strickly speaking, to establish a company can take some time, so there's room to have new co-founders after a company started.

After all, most stakeholders probably don't care about it, anyway. (Someone correct me if I'm missing something). The only exception I can think of are VCs and other investors. However, even they probably don't care about the title or designation; they care whether the product looks promising, the business model is sound, and whether the company leaders form a good team which is able to drive the company forward.

Hope this helps.

answered Nov 27 '09 at 20:32
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Claus Schwarm
1,599 points
  • +1. It's just about what compensation makes everyone happy. Titles don't matter. Whoever cares about titles is caring about the wrong thing! – Jason 9 years ago

3

I imagine there is a time when it's too late to add a co-founder. It is just as you sign on your first regular employee.

After that, the 'co-founder' would not be seen as justified on grounds of timing and the co-founders risk taking. It would be seen as the co-founder being perceived as more worthy, more valuable than the employee who 'only' got salary and a few stock options. And as such, it might lead to conflict.

I would assume this issue can be avoided fairly easily. If you need to bring very valuable team members on board later, then just give them a job title that gives the right responsibility (CEO, CTO, etc.), and give them a larger stock options pool, to reflect their fair market value as highly valuable .. employees.

answered Nov 27 '09 at 22:48
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Jesper Mortensen
15,292 points

1

Cofunders are like captains in a ship/fleet, they will set the course of the trip and share the voyage. So back to business, as says Schwarm, the name cofounder is not important. The important issue is that you acknowledge taht the decision making process is shared with them (decide how to navigate), if it is well understood it could actually be excellent to your project.

answered Nov 27 '09 at 23:23
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Pdjota
532 points

1

A startup is like a baby. The founders are the parents. Call anyone who has contributed to
the birth of the child a cofounder. The title is merely a badge of pride. But realize that there are no ex-cofounders of a company though there may be ex-CXOs! If an incoming person is not satisfied with a CXO title and appropriate equity and insists on being called a cofounder I will worry about possible ego issues which will surface when the going gets rough.

answered Nov 28 '09 at 00:50
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Swamimanohar
31 points

0

Companies can add new co-founders after the founding event, and this has been done in practice. There isn't a "rule" that prevents you from doing it, since "founders" aren't designations that have legal implications* (officers and directors, on the other hand, do have a role in the formation of the corporate entity, though these can be adjusted with official filings). However, Jesper has presented some important practical advice re: employee relations you should be aware of.

*Disclaimer: The posting above is general entrepreneurial advice and should not be considered legal advice. Please consult an attorney for legal advice.

answered Nov 27 '09 at 23:08
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Henry The Hengineer
4,316 points

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One way to define cofounder is "a person to whom the business gives a stock grant." If you subscribe to this definition, then it's basically impossible to add cofounders after the business takes on its first major capital investment (VC or angel) because these groups will protect their stake by allocating every share (to cofounders, capital investors, and the options pool) and blocking the issuance of further shares.

You could still become a stockholder through a merger/acquisition or some other special circumstance. But it's unlikely you'll call yourself a founder.

Of course, as other posters have said, you can put anything you want on your business card. :)

answered Nov 28 '09 at 00:49
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Joe
831 points

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It is too late to add a co-founder once the company has issued founders stock. Once that event occurs, the official "co-founder" (for stock purposes) title is no longer valid.

Founders stock is granted when the company incorporates. So, I guess you can say that once the company has officially incorporated, granting founders shares (thus adding co-founders) can no longer happen.

Of course, that is the traditional way things are done. In general, most companies follow this practice since it's never good to stray away from the mainstream of corporate governance(SOX has made that complicated).

There are cases that if you re-incorporate a company, you can reset everything but now we are getting into the "go talk to a lawyer" if you have questions area.

answered Nov 30 '09 at 01:41
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Jarie Bolander
11,421 points

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