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4 things to consider before starting a business with a friend

The founder of GRADIA and partner at PythonAnywhere shares his expertise.

Conrad Ho, our newest contributor, has a passion for empowering the startup community, both from the perspective of an investor and as a technical founding team member — more on that here. Ho is active across the global open-source data science communities, speaking in and chairing various international conferences championing both technology and entrepreneurship, so, we thought, well, who could be better to talk business with?


It’s not uncommon for people to start businesses with their friends. After all, the best ideas come from talking with people you admire and trust. It can be a great way to keep costs low in the beginning, leverage each other’s expertise, and even explore another dimension of your friendship together.

1. Expectation management is key

No matter how close you are, don’t just jump in. It’s important for both of you to know what you’re getting into: There’s fun to be had, riches to (potentially) be made, but you’ll need to respect the hustle, too.

If you feel like your partner is not pulling their weight or that they are doing things “wrong”, you could become resentful and uninterested in your venture, and no one wants that.

Credit: Jason Goodman / Unsplash

Know what each of you expects in this partnership, from team size at different stages, how you each want to allocate funding to different parts of the business, your day-to-day working style and hours, and how it all lines up. A great question to ask each other is: What does that (for instance: Your role, the specific skill you are contributing, or the day-to-day work) look like in practice? 

2. Talk about equity — early

This is a foundational question, particularly if you’re looking to bring in external investment at any point.

It’s hard enough to figure out how much your business is worth, considering that you don’t know if it’ll grow or stagnate so soon in its life, but splitting up shares can be an even tougher endeavour to navigate.

A 50/50 split is very rarely the answer, although it might be a starting point. You would have to make it extra clear to everyone who the final decision maker is for each part of the business. Roles and responsibilities are rarely split in this ratio, so being honest and upfront about what you each bring to the table is key. If you cannot have the hard conversations now, you probably shouldn’t go into business together.

Credit: Helena Lopes / Unsplash

3. Establish how to define success and failure

There are oftentimes different types of both — talk through the entire spectrum of potential possibilities and align on what you care about the most.

Possible successes: A successful exit, top line revenue growth, positive profit and cash flow, going viral, learning as much as you can, building up your network, strong recognition, appreciation and support from your audience, customer base or community.

Potential failures: Running out of money, a product not selling, failure to launch or launching too late, long periods of stagnation, team disenfranchisement or co-founder disagreements. There are many more possibilities and you may find that you differ from your partner in what you care about most.

Credit: Lagos Techie / Unsplash

4. Roleplay worst-case scenarios

A great exercise to do together as a potential co-founding team is a pre-mortem — imagining the absolute worst-case scenarios and talking about what led to those outcomes and how you might deal with them as a team.

You can’t predict everything, but working together to find and avoid potential pitfalls helps set your business up for success and allows you to suss out how your friend thinks and reacts to different situations. And remember: Growth happens in seasons. Springboards and stalls happen all throughout a business’s life, and the timelines that you may have in mind might differ vastly from that of your friend.

When all is said and done, these conversations do get easier with time. So, don’t be discouraged if things seem a bit daunting at first. It might take a few tries to find the right partner, but having these discussions upfront may make all the difference to the success of your future venture and the health of your friendships.


Cover image courtesy of Ilyuza Mingazova, featured image courtesy of Helena Lopes.

Conrad Ho

Conrad is a techie entrepreneur and investor whose curiosity has led him to many places over the years: Exhibited photographer, chess national master, global data science conference organizer and community builder, diversity and inclusion advocate, angel with successful exits, and more. Happiest around water (the ocean) or alcohol.