cofounding

Cofounding is the process by which a company is established by two or more individuals who share ownership, decision-making, and risk. The people who initiate the venture are called cofounders, collectively forming the founding team.

Cofounding arises to combine complementary skills, networks, and capital, which can accelerate product development and market entry. It can also distribute workload and reduce individual risk. However, it requires alignment on core goals, values, and long-term strategy to stay cohesive as the venture grows.

Legal and governance arrangements are a key part of cofounding. Founders typically form a company through incorporation and establish a founders’ agreement that covers equity splits, vesting schedules, intellectual property assignment, and decision rights. A cap table tracks ownership, and vesting helps align incentives over time, ensuring continued contribution. Intellectual property created by the founders is usually assigned to the company.

Common challenges include unequal contributions, disagreements over strategy, and governance conflicts. Remedies emphasize clear roles and decision-making processes, formalized equity arrangements, and proactive dispute-resolution mechanisms. Buy-sell provisions or cliff-based vesting can address early departures or unresolved tensions.

Examples of notable cofounding pairs include Bill Gates and Paul Allen at Microsoft, Steve Jobs and Steve Wozniak at Apple, and Larry Page and Sergey Brin at Google. These cases illustrate how shared leadership can drive rapid growth, while also highlighting the need for clear governance to manage ongoing collaboration and divergent interests.

Overall, cofounding can enhance resources and legitimacy but introduces complex governance and equity considerations. Success depends on transparent communication, well-defined roles, and robust legal agreements that align incentives over time.