Bringing on co-founders introduces immediate equity dilution and long-term relational complexity. Stern illustrates that even adding one co-founder can cut a founder’s ownership in half, and with multiple co-founders, the original founder may end up with a minor stake before raising capital.
Equity agreements are permanent, making removal difficult compared to employees. Stern emphasizes clear decision-making structures to prevent dysfunction, such as the “Three CEOs” problem, and recommends protective provisions like special share classes to safeguard control.
SmartUp proposes an alternative to traditional co-founder splits: rather than diluting equity to solve loneliness or skill gaps, founders can raise a small angel round to hire collaborators. This preserves the founder’s control and allows standard employment contracts, avoiding the permanent and potentially painful commitments of a co-founder arrangement.
