Learnings from the “How to Lose Co-Founders and Alienate Startups” panel at SXSW.
By Dana Rosenberg (Startup Enthusiast, Self)
There are any number of failure points for startups – lacking focus, scaling your product too quickly, draining capital, pursuing a derivative idea, hiring the wrong people, execution.. the list goes on.
No matter how many things you can think of that would bring down a startup, few mention the real Achilles Heel – founder breakups.
It’s one of the most common issues startups face, but also one of the most under-discussed. Just look at the top reasons startups fail and you’ll be hard pressed to find someone that cites the dissolution of the founding team. Founders who’ve fallen victim to breakups often shove it under the rug like it’s something to be ashamed of rather than publicly acknowledging it as one of the many learning points in your startup experience.
The biggest and most tragic consequence of this trend? That other entrepreneurs never get the chance to benefit from the learnings of their peers who’ve been through it and persevered.
At SXSW, a group of entrepreneurs (Seth Blank of YourTrove; Orian Marx of Siftee; Kathryn Minshew of The Daily Muse) made a bold statement by airing their dirty laundry all out in the open! That’s right – they talked about their experiences on how to lose a co-founder in a panel to about 100 eager entrepreneurs and investors.
Just as I’d hope more entrepreneurs would do, I’m passing off my learnings to you. Take this as a pseudo “pay it forward” and when you or other founders you know have a co-founder breakup, encourage them to walk proud and be open to talking about it. You’ll benefit the entire startup ecosystem and perhaps even increase the likelihood that other startups succeed.
Lesson #1: Make sure neither founder is wed to the idea
Many people start companies because they are completely and utterly passionate about the product or the idea. If you’re joining with a co-founder, make sure that neither one of you fall into that bucket. Startups need to be flexible to succeed – maybe your customers don’t respond to your initial product or maybe you’ll bring investors on board that expect you to implement their advice.
Start discussions early with your co-founder about the possibility for things to go wrong and even think about a number of directions you could take the business that would make you both happy. Then, be prepared that even those don’t pan out.
Lesson #2: Clearly define your roles in MECE (“mutually exclusive and collectively exhaustive”) as possible
Scrappy startups are nimble – you wear a lot of hats and you do what you need to do to get everything done. In those situations, roles between founders can often blur. Who takes this meeting? Who’ll be featured in this interview? Who codes? Who’s making the final decisions about design, hiring, strategy?
At one point, there’s going to be one of the two founders that’s actually better suited than the other to take each on. It’s easy when you’re small and can get very complicated very fast as you grow, so set boundaries early on and then respect those boundaries moving forward.
Lesson #3: Get a prenuptual agreement written by a professional, in writing
Would you ever draw up and sign your marriage contract on the back of a bar napkin? Probably not…yet many founders seem to depend on informal agreements as contracts as long as there are 2 signatures at the bottom. Go get a lawyer. These contracts will be some of the most important reference points for you and your founder, so make them official and build a strong foundation for your company.
In choosing your lawyers, don’t go for your dad’s dentist’s brother in law who does real estate law – go for some of the big names who’ve seen startup after startup. Some will even defer payment until you raise money, so financing great expertise is no longer an issue.
Lesson #4: Bring in a close advisor/mentor to help create consensus
Two people from two different backgrounds and two different entrepreneurial heads on your shoulders are bound to disagree at some point. Before you get to the point of no return and damage your relationship based on a small decision where you couldn’t come to a consensus, get a third party perspective.
By choosing someone both you and your co-founder trust as a mentor/advisor (formal or informal) you’ll have unbiased advice you can use to make a joint decision you both support. This can extend from a trusted advisor that can help you draw up the original papers (choose a successful or serial entrepreneur) or help guide your companies progress (an expert in your industry, related fields or critical skills).
Now, these tips and lessons learned will not do magic. You’ll still need to work hard on nurturing and maintaining your co-founder relationship. But, if the pair should go sour and you find yourself soothing a co-founder breakup and heartache, remember to share your learnings and pay it forward.
Editor’s note: Got a question for our guest blogger? Leave a message in the comments below.
Photo credit: David Goehring on Flickr.
About the guest interviewer: Dana Rosenberg is the Community Development Lead at HealthTap, where she is in charge of user acquisition and engagement, marketing, PR, and branding. Dana is also the Lead for Women 2.0 Founder Friday Silicon Valley. Prior to moving out west, Dana was a consultant at a boutique healthcare strategy consulting firm in New York, where she advised clients on target screening, acquisition and product commercialization opportunities. Follow her on Twitter at @DanaRosenberg.