There is a Chinese proverb: “Get a partner, get trouble.” But adding cofounders and splitting equity is quite common in a new venture’s launch, although few founders realize it is the first step on one of two paths: being rich or king. Which means, involving highly motivated and ambitious cofounders and giving them large equity stakes can help maximize the value of the venture (rich) by adding expertise and connections, but can adversely impact the founder’s control of the venture (king). Founding teams must have at least three characteristics: players, purposing, and reward.

Players – Should I take on cofounders? And who should they be?

Founders often feel more comfortable with people they know and like, such as classmates, friends, and family members. Choosing such people as founders, however, may not capitalize the benefits when the team members are too similar and do not have complementary skills and/or networks. Teaming up with close friends or family becomes problematic, especially, when the team members have different time limits, financial constraints, and risk tolerance levels. Furthermore, maintaining harmony in close relationships can become a liability. A best friend, for example, may continually feel resentment because they are doing more for a venture than their cofounder/best-friend, but they will stay quiet rather than risk an argument. They may settle for a handshake to establish an equity split (even though they know that a contract is a better way to document the agreement) because asking for a written contract may signal distrust. Avoiding these “elephant in the room” issues causes the team to fester until these become destructive for the team and the venture. Conversely, if the team members vent their concerns on contentious issues, the relationship itself can disintegrate. For these reasons, founding a venture with close friends or family can be akin to “playing with fire.” The wise founder will choose partners who fill specific gaps in the founding team to maximize their gain, rather than hang out with people they like.

Purposing – How should we define the roles?

Founder and cofounders must examine their own abilities, working preferences, and motivations for working on a new venture in order to take formal titles and informal tasks, and make the right choice. All team members need to believe the venture has urgent and worthwhile purposes, and they want to know what the expectations are and how to live up to them. If founder and cofounders do not clarify their roles and expectations in the first place, ambiguity about who is in charge of what may result; the team can even end up with very little gain and a lot of frustration. Indeed, the more clear and meaningful the rationale of the expectations and roles, the more likely it is that the team will live up to its performance potential. The best teams invest a tremendous amount of time and effort exploring, shaping, and agreeing on a purpose and role that belong to them both collectively and individually. This “purposing and roling” activity continues throughout the life of the team. By contrast, failed teams rarely develop a common purpose. For whatever reason— an insufficient focus on performance, lack of effort, poor relationship—they do not coalesce around a challenging aspiration.

Reward – how should I split the pie?

Before founders move forward with a new venture, they need to decide whether or not to split equity in order to attract cofounders, when to have the equity discussion with those potential cofounders, and how the split will be determined. Choices that most founders think are logical can in fact cause problems with the founding team down the road. Founders must think about how to enlist, motivate, and retain them. Using an equity split is one way to entice partners, but even this seemingly straightforward tool is fraught with layers of decision making that can easily derail a new venture. Therefore, equity splits for cofounders should be in alignment with the roles that each founder plays in the venture. Equity split decisions (and the resulting rewards each cofounder reaps from the venture) are impacted in part by the cofounders’ relationships, the role cofounders play in the start-up, and how much importance they place on their own role and the roles of their partners.