⚙️ Pilot's Path to Peace

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Happy Sunday Operators ⚙️

I don’t have a cofounder for The Bottleneck. But I did for my first business. Great guy, but we ultimately wanted two different things. We only worked together for a year before we exited. 

Now imagine exiting 2 startups and scaling another over a billion-dollar startup… with the same 2 cofounders. 

Here’s how Pilots 3 founders flew to a billion-dollar valuation without any cofounder infighting.

Setting the Stage

Pilot’s Founder Trio

Pilot is a $1.2 billion company that provides accounting services to some of the most notable names in the startup world. This includes OpenAI, Lattice, and Airtable. But the story of how Pilot came to be is as impressive as its client roster.

Founded by Jessica McKellar, Waseem Daher, and Jeff Arnold, these three were self-proclaimed "computer nerds" who met at the MIT computer club. 

Their first venture, Ksplice, developed tech that allowed users to update Linux kernels without rebooting and causing downtime. Ksplice grew to seven figures in revenue before Oracle acquired them in 2011.

Next up was Zulip, a group chat app that predated Slack. The company was snapped up by Dropbox in 2014, just two years after its founding.

With two exits under their belts, before the age of 30, you might think the trio would take a break from the startup grind. But the itch to build struck again, and they were dreaming even bigger this time.

As they built their previous companies, McKellar, Daher and Arnold realized that bookkeeping was a major pain point. They had even built their internal software tools at Ksplice to make the process easier.

At the time, they laughed off a comment from Oracle's finance team that their internal tool should have been the actual product.

But that seed of an idea stuck with them. When they sat down to plan their third company, they knew they wanted to solve every business's bookkeeping problem.

And so Pilot was born - a company that combines the best of people and software to provide accurate, pain-free bookkeeping services to startups and small businesses.

Finding that balance of human expertise and powerful software has been the key to Pilot's success and rapid growth.

But so has the rock-solid foundation of the co-founder relationship that McKellar, Daher and Arnold have built over a decade of working together.

While Pilot's co-founders make it look easy, most startup partnerships are far from smooth sailing.

Ops Tactic: Avoid infighting of cofounders by owning separate parts of the business, align values and motivations, and ability to handle conflict

Why this Matters

Cofounder infighting is a big reason for failure

It's not hard to see why. Building a company from the ground up is a pressure cooker of stress, uncertainty, and high stakes. Co-founders are often:

• working long hours

• wearing multiple hats

• making decisions that could make or break the business.

Add in the challenges of fundraising, managing employees, and hitting growth targets, and it's no wonder that even the strongest relationships can start to fray.

But when co-founder conflicts arise, the consequences can be dire.

A study by Michael Gorman and William A. Sahlman found that 65% startups failed because of tensions within the founding team.

That's a higher percentage than failures due to lack of product-market fit (35%), running out of cash (25%), or even getting outcompeted (19%).

In other words, choosing the right co-founders and nurturing those relationships is as critical to startup success as having a great product or business model.

But it's often overlooked in the early days when founders are laser-focused on getting their ideas off the ground.

Even the most compatible co-founders will face challenges and disagreements along the way.

As psychotherapist and relationship expert Esther Perel notes, “conflicts between business partners often fall into three categories: power and control, care and closeness, and respect and recognition.”

These underlying tensions can manifest in various ways, from disagreements over strategy and decision-making to personal resentments and communication breakdowns.

Left unchecked, they can quickly escalate and put the entire company at risk.

So, what sets co-founder teams like Pilot's apart? How have they managed to weather the inevitable storms and emerge stronger on the other side?

It comes down to a combination of careful selection, intentional relationship-building, and a commitment to working through conflicts in a healthy way. As Pilot's Waseem Daher puts it,

Of course, building a lasting partnership is easier said than done. It requires careful vetting, open communication, and a commitment to personal growth. But as Pilot's co-founders show us, it's well worth the effort.

By learning from their example and implementing some of their key strategies, you too can set your founding team up for long-term success..

The Blueprint

So what exactly sets Pilot's co-founders apart? How have they managed to build such a strong and enduring partnership? While every founding team is unique, there are a few key strategies that have been instrumental to their success:

Establishing separate areas of ownership and expertise

From the very beginning, McKellar, Daher, and Arnold have played to their strengths while trusting each other to lead in their domains.

McKellar explains,

Try breaking down your team in the following ways: 

For two cofounders

• Idea & Product: One co-founder focuses on developing the core idea, product vision, and user experience.

• Execution & Operations: The other co-founder handles the business side, including fundraising, marketing, sales, and day-to-day operations.

For three cofounders

• Idea & Product: One co-founder focuses on developing the core idea, product vision, and user experience.

• Business Growth: This co-founder handles marketing, sales, and business development, driving customer acquisition and growth.

• Execution & Operations: The other co-founder handles the business side, including fundraising, marketing, sales, and day-to-day operations.

By carving out clear areas of ownership, they avoid stepping on toes. At the same time, their deep understanding of each other allows them to spot issues and make decisions together.

Aligning on values, motivations, and long-term vision

Another key factor in Pilot's co-founder success is their underlying alignment on what matters most.

From the start, they've been on the same page about wanting to solve a real problem for startups and build a company that could go the distance.

As McKellar puts it,

When you share a north star, navigating the day-to-day challenges that inevitably arise is much easier, and we, as operators need to have some type of frameworks to work

• Celebrate every win: Don´t save champagne for IPO day, A little public praise goes a long way in keeping morale high and reminding everyone you're in this for the long haul 

• Don´t ignore best practices: Do monthly 1:1, performance reviews to keep each other accountable and generate a transparent workspace

• Disagree but commit Jeff Bezos use this in Amazon, even if you disagree, commit with the decision you´re taking and mitigate the risks together.

• Be huge support: Feedback should be given and received openly and frequently, so you know that all of you got each other´s back

Developing the ability to handle conflict in a healthy way

Of course, even the most aligned co-founders will face moments of tension and conflict.

The key is learning to deal with those challenges in a way that doesn't damage the underlying relationship.

For Pilot's co-founders, that's meant being willing to:

• have difficult conversations

• listening to each other's perspectives

• always keeping the bigger picture in mind.

As Daher explains,

They've also learned to play to their conflict styles - for example, knowing when one person needs space to process while another prefers to hash things out in real-time.

Being attuned to each other's needs allows them to work through disagreements more smoothly.

Taken together, these strategies have allowed Pilot's co-founders to build the kind of relationship that can withstand the ups and downs of the startup journey.

While their particular dynamic may not be the right fit for every founding team, the underlying principles of playing to each other's strengths, aligning on what matters most, and handling conflict with care are valuable for any set of co-founders.

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