The #1 Startup Killer: Why Co-Founder Conflict Destroys 80% of Ventures in the First Two Years

The Biggest Reason Startups Fail

A venture capitalist reveals that the number one reason companies typically fail in the first 18 to 24 months is that founders fall out with each other or don't get along.

Reece Chowdhry, founding partner of Concept Ventures (Europe's largest pre-seed fund), emphasizes that early teams often split within two years because their co-founders clash or lack a shared vision. His firm recently raised $88 million for its newest fund, focusing on startups at the ideation stage.

Concept Ventures was an early investor in billion dollar AI firm Eleven Labs.

Investing in Founders, Not Just Products

Chowdhry told CNBC Make It that he invests based on founders' personalities and traits before they even have a product. "I think 80% of our decision is on founders and we are typically the first investor in every company we invest in," he said.

"The number one reason companies typically fail in the first 18 to 24 months is that founders fall out with each other or don't get along, don't have the same vision alignment, purpose, and so that is something that we think is really important," he explained.

The Four Key Traits Venture Capitalists Look For

In initial meetings with founders, Chowdhry emphasized that co-founder chemistry is one of the key characteristics he evaluates. He asks probing questions like:

• "How well do you know each other?"
• "Have you gone through something meaningful in life?"
• "If I interview you both separately, will the answers match?"
• "What will that person's strengths be? What will that person's weaknesses be?"

Other core traits that Chowdhry looks for in founders include:

1. An obsession with a specific field or industry
2. Relentlessness and grit
3. A growth mindset
4. Evidence of exceptionalism in something outside of work, such as sports or chess

Success Story: Eleven Labs

Concept Ventures was an early backer of $3 billion voice AI company Eleven Labs, co-founded in 2022 by Mati Staniszewski and Piotr Dąbkowski. Chowdhry said two key traits in his meeting with Eleven Labs' co-founders stood out and persuaded him to invest.

"The two things that stood out were domain obsession, so literally thinking about that problem for a long time and the team dynamics. They were like childhood friends. They knew each other super well. They complemented each other really well," he added.

Expert Validation from Paul Graham

Y-Combinator co-founder and startup guru Paul Graham shared similar wisdom in his blog. He warned that solo founders face an uphill climb, noting that most successful startups have at least two or three founders.

In one post, Graham wrote that a startup with only one founder is "a vote of no confidence" because it suggests they couldn't convince any of their friends to join. However, failure is possible, even with multiple founders.

"The relationship between the founders has to be strong. They must genuinely like one another and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be," Graham said.

The Complete Package Approach

Concept Venture's Chowdhry added that his investment decisions in early-stage startups involve examining "the whole package," rather than just one founder.

"It has to be a package and I think what many VCs optimize for is they'll meet the CEO typically and they'll put a lot of lens on the CEO, although 50% of the business is two people or three people," he explained.

He noted that many companies being built in Europe have very technical founders, but he looks for a founding team with complementary skill sets.

"It's not just technical and non-technical. Is one a very fast thinker, and the other ones are balancing them out. A slow thinker slows the other person down. Does one have magnetism, as in they can attract world-class talent to them," he added.