Coach-Soch: How founder and co-founders differ in roles and responsibilities and why it matters

Founder, co-founder, CEO, employee-turned-CoFounder: what’s the difference, really?

A founder is the one who ideates and kicks starts the business in the beginning; works to set its own identity and organisation, and importantly generates profits.

If 2 or 3 others are involved with the Founder, and especially as Equals, they may be tagged as ‘Co-Founder’. Most startups bring in different competencies amongst their founders. For example, the founder may bring finance as an expertise, while the ‘co-founders’ might bring experience in business development or technology or marketing.

Nowadays, the ‘Co Founder’ title is used as a performance motivation and to incentivise key leadership employees to reward them the tag.

But here is the catch. These ‘Founder’ tags are permanent, irrespective of official roles like CEO / Head — Finance etc. One needs to be sure of how these Founder/Co-Founder titles are offered. One needs to make sure that it goes to those who contribute significantly to the building of the company, and those who will continue to play a vital role in the years to come.

If a startup has both a founder and co-founders, this likely means that the founder was the company’s original ideator, while the co-founders joined in along the entrepreneurial journey.

Usually, the founder has a larger share of equity, while later co-founders receive a smaller share.

Founder’s equity is different from Employee Stock Options that are usually given to other key employees.

One of the founders is higher in the business hierarchy than the other founder(s). Co-founders usually assume executive roles in the company’s team, such as the CTO (chief technical officer) or COO (chief operating officer).

Unlike the title CEO, the status of ‘founder’ or ‘Co Founder’ does not grant any formal authority in the business. In fact, there have been more founders-splits that have happened and yet all those founders will always have that ‘founder’ or ‘co founder’ tag, despite no business or business role in those business ventures.

Co-founders are partners, almost family. Hence one needs to choose them carefully. Many founders claim to need a ‘Co Founder’ when they are actually looking for a senior employee to share their business load. It is important to understand this distinction and work with the right set of talent.

One needs to be disciplined in offering the ‘Co-Founder’ tag. That should be a lifelong title, so make sure it goes to the appropriate people who were crucial in the company's founding and will continue to be so in the future.

In a typical startup, almost everyone wears multiple hats and juggles multiple roles. With founders, it’s even more level of role juggling. It is crucial to design functional boundaries in allowing for which founder will decide on what aspect of the business.

Plenty of people start a business with another person — or several. But things will quickly go south if you don’t design and enforce the right boundaries and responsibilities when it comes to who does what.

It cannot be a democratic way where every founder participates in every functional role. Roles and responsibilities, and importantly, business goals have to be designated for each of the founders, as much as the other members of the team. These have to play to the professional competence and personal capabilities of each of the individuals involved.

Here there is a word of caution — one of the lead founders might be the CEO. That role, at times, would need to take decisions that might not be easily acceptable to other cofounders. This needs to be handled with respect to others and in the best interests of the venture’s sustenance.

In short, Founders & Co-Founders have to run their businesses, as executives of the commentary. Hence the special tags have to be held at greater moral value and responsibility, than pure financial.