The co-founder dysfunction impacts everyone in and around the company, but mostly the team underneath the founders. It is like being in a family where mom and dad aren’t getting along. There is stress and strain, messed up decision making, and everyone is walking on eggshells.
There is tremendous opportunity for things to go badly wrong, especially for first-time founders. A common area of disagreement can be where the original idea was born from the group but as it becomes a start-up not everyone is willing or able to move forward with it.
While that is totally fair (everyone’s personal and professional circumstances will be different), inexperienced founders can end up with unrealistic expectations of how equity should be divided and vested.
Ultimately that can lead to both an unfair distribution of equity (which should be based on ongoing participation, responsibility and investment, not share of original idea) and resentment. Its very easy to end up in a situation where everyone is unhappy and the whole concern collapses or is at least thrown into chaos (which Fred alludes to.)
I have been very fortunate to work with 3 co-founders across 2 companies where we each understood and respected the area of strength of each other. In these situations you can build very powerful complimentary teams of co-founders. And all 3 are still very close friends to this day.