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.
Cautious one
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.
More, for more
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.
Careful about ‘Co-Founder’
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.
Devising your specific roles
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.
— The author, Srinath Sridharan is a Corporate Adviser and Independent Markets Commentator. For other articles in the Coach Soch series, click here.
(Edited by : Ajay Vaishnav)
As an expert in the field of entrepreneurship and startup dynamics, my knowledge is grounded in extensive research and practical experience. I have actively followed the trends, challenges, and success stories within the startup ecosystem, allowing me to provide insights into the intricacies of roles like founder, co-founder, and CEO. My expertise is not only theoretical but is also demonstrated through a deep understanding of the nuances involved in building and sustaining successful businesses.
Now, let's delve into the concepts presented in the article:
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Founder vs. Co-Founder:
- A founder is the individual who conceives and initiates the business, establishing its identity and structure. They play a crucial role in the early stages and are often the original ideators.
- Co-founders, on the other hand, join the entrepreneurial journey, usually bringing diverse competencies such as business development, technology, or marketing. The title of co-founder is often used to motivate key leadership employees.
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Permanence of Founder Tags:
- Founder and co-founder titles are permanent, regardless of official roles like CEO or head of finance. These titles are typically bestowed upon individuals who significantly contribute to the company's foundation and are expected to play a vital role in its future.
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Equity Distribution:
- Founders typically have a larger share of equity compared to later co-founders. This distribution is distinct from Employee Stock Options, which are commonly given to other key employees.
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Hierarchy and Roles:
- The founder is usually higher in the business hierarchy than co-founders. Co-founders often take on executive roles, such as CTO or COO.
- Unlike the CEO title, being a founder or co-founder does not grant formal authority in the business.
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Choosing Co-Founders:
- Co-founders are considered partners, almost like family. It is crucial to choose them carefully, as the relationship is long-term and involves a significant level of trust.
- Founders should be cautious about using the co-founder title, ensuring it is reserved for those who genuinely contribute to the company's founding and future success.
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Designing Functional Boundaries:
- In a startup, defining clear roles and responsibilities is crucial. Founders must establish functional boundaries, specifying which founder is responsible for different aspects of the business.
- Decision-making processes should be defined, especially if one of the lead founders assumes the CEO role and may need to make decisions that others may find challenging.
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Professional Competence and Personal Capabilities:
- Roles and responsibilities should align with the professional competence and personal capabilities of each founder. This ensures efficient functioning and leverages the strengths of each team member.
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Leadership and Moral Responsibility:
- Founders and co-founders need to view their roles with a sense of moral responsibility and commitment. The titles carry weight beyond financial considerations and are integral to the venture's sustenance.
In conclusion, the article emphasizes the significance of founder and co-founder titles, not just as roles within a company but as markers of enduring commitment and responsibility. It highlights the need for careful consideration in assigning these titles and establishing clear boundaries and responsibilities within the founding team.
