When you start something, the first and most crucial decision you make is whom to start it with. Choosing a co-founder is like getting married, and founder conflict is just as ugly as divorce. Optimism abounds at the start of every relationship. It’s unromantic to think soberly about what could go wrong, so people don’t. But if the founders develop irreconcilable differences, the company becomes the victim. In 1999, Luke Nosek was one of my co-founders at PayPal, and I still work with him today at Founders Fund. But a year before PayPal, I invested in a company Luke started with someone else. It was his first startup; it was one of my first investments. Neither of us realized it then, but the venture was doomed to fail from the beginning because Luke and his co-founder were a terrible match. Luke is a brilliant and eccentric thinker; his co-founder was an MBA type who didn’t want to miss out on the ’90s gold rush. They met at a networking event, talked for a while, and decided to start a company together. That’s no better than marrying the first person you meet at the slot machines in Vegas: you might hit the jackpot, but it probably won’t work. Their company blew up and I lost my money. Now when I consider investing in a startup, I study the founding teams. Technical abilities and complementary skill sets matter, but how well the founders know each other and how well they work together matter just as much. Founders should share a prehistory before they start a company together —otherwise they’re just rolling dice.
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