This Could Derail Your Startup, But No One Talks About It

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Tonight’s London City Meetup speaker shares with us one of the hard, rarely-talked-about truths about being a startup founder.

By Inmaculada Martinez (Entrepreneur & Angel Investor)

What if I were to tell you the one piece of the puzzle that will make or break your startup is not the funding or the MVP gone rogue, but the person sitting right next to you who’s been in it with you since the start? My words would screeeeeeeeeeeeeeeeech like the needle on the vinyl criss-crossing to a halt the soundtrack of your entrepreneurial life.

So I’ll to give a cool, off-the-walls name to grab your attention and drive you through to the logic. I call it “the founders’ game.” You either learn this empirically, which is painful and dangerous. Or, someone who’s been there and done that will share this with you with brutal honesty. It may feel a bit like the one nutcracker of “Santa is your parents” to a six-year-old. But I promise you’ll be glad I told you before you get slapped in the face with it. As it will, believe you me.

The False Security of “Togetherness”

When I meet founder teams, they display a wondrous picture of togetherness. In the nooks and crannies of the startup industry, this sometimes surfaces as dangerously fictitious. I sit at those pitches wondering how soon I’ll bring up the issue with the team. And when I meet startups founded by couples or trios of BFFs, a tear runs down my cheek as I channel the spirit of former friends creating common destinies and love stories -- but then ended in court or in the movies.

“Together” is a word that recalls the fight of the people versus the powers-that-be, chanted on the streets by the oppressed. The founders’ game is played on a field called the startup, so the players contribute to the common destiny singlehandedly and are accountable for their individual contribution. If they underperform, the coach takes them off the game.

For an entrepreneur journey is a lonely road of self-sacrifice, with each person giving up certain perks of life (more money in the bank, postponing having kids, affording cool stuff like the rest of your salaried friends) in exchange of a dream to be delivered in the future. A founders team is the Avengers: a pack of lone wolves brought together by a common goal and an Alpha leader (more about this one in a future blog post), but a bunch of awesome heroes with super powers, nonetheless.

The Instant Unraveling of Founding Teams

I don’t buy into the together story because when the shit hits the fan -- when the CEO fails to raise the money, the product guy is off the mark, the MVP planned by the marketing team fails to attract the right users -- another concept surfaces in the jacuzzi amongst the rubber duckies and beach balls. (What? You don’t have one of those at your startup?)

It’s called drama. Remember the money people I mentioned earlier? Drama sets them on the run. You can’t let this happen. To an investor, what’s most valuable, what should at all times be protected, is the company. The company, especially when it has shareholders who have paid money so you could buy that jacuzzi, pay salaries and afford to go to cool tech conferences. Breaking news: Your company is not your possession, or your baby, but a precious enterprise that must fulfill its purpose with excellence.

So how do you prevent your startup from unraveling when the drama hits? Simply put, if someone isn’t holding their weight, it’s time to clean house. Easier said than done, yes. You’ll likely come up with the following objections to letting one of your key members go. And here’s why you need to ignore those objections:

  • “We all came up with the idea together” doesn’t cut it. Ideas, unless they’re executed with success, are worth nothing. A startup is a world of doers with an optimal sense of market timing.
  • “We can’t fire so-and-so because he gave up his job at super-company to found the company with us” doesn’t cut it. If so-and-so has the experience and left on good terms, having spent time in a startup is a valuable experience he can take with him to his next job. Don’t worry, good people always get employed. Believe me.
  • “If we let so-and-so go everyone will label us as a-holes and no one will want to work in our startup because we screw people over” doesn’t cut it. Trust me, if you don’t let them go, the few good ones you convinced to join will leave because you’re allowing people to coast along in the company.

Here’s what you need to do:

  • Work with your co-founders with joy and less pressure about the “what’s going to happen if we don’t get along/we need to leave for personal reasons/ it doesn’t work among us.”
  • Attract investors who will be glad you’ve dealt with these potential future scenarios from the beginning.
  • Run a fair and transparent company where employees and founders are motivated to give their best and choose how to behave.

All you have to do is draw up a founder’s agreement with reverse vesting and real, concrete exit scenarios for good and bad leavers. You decide together what the terms shall be. That’ll be the one “together” allowance that I will let you get away with.

Don’t miss Inmaculada Martinez tonight at our London City Meetup! Grab your tickets >


About the guest blogger: A pioneer in the mobile industry since the 1990s, Inma Martinez is a serial entrepreneur, an angel investor in startups and a spokesperson and ambassador for the UK Trade & Industry Business Catalyst programme in matters of digital economy, entrepreneurship and knowledge transfer. Having previously worked in the financial industries and the telecoms sector, she has been a corporate advisor to private and public companies and government institutions. As a digital media advisor Inma has created strategy for media, music, film and TV and fashion retail / luxury brands worldwide.