Cofounder · Startups

At what point do you know it is time to let a cofounder go?

Anonymous

November 29th, 2016

I am thinking of starting a company with my childhood friend. I am afraid that doing business with him could damage our friendship and/or our business. I heard a lot of stories where friends started companies together and it didn’t end so well. I would like to know what are your experiences about this and if things at some point go south what would be the right time to make the decision to split?

Brent Laminack Principal at OpenFace Systems, Inc.

November 29th, 2016

I'd suggest making up a job description for the position of co-founder. Now consider your friend. If they were to be an applicant for the job, would you hire them? Are they the best qualified for the job? if not, DON'T. If you're already thinking about how to split, then clearly you already have misgivings. You'll need a friend to help you through the startup process, and you'll need co-workers. Don't screw up both in one fell swoop.

Austin Johnson Free Agent - AustinJohnson.me

November 29th, 2016

I agree with Richard's point of defining clear expectations, and Brent's point of treating the potential partner as a hire.  

I started a company shortly after college which has experienced a decent level of success.  My first two hires were college friends whom I hired for their character strengths, rather than a specific skill set or role contribution.  I eventually gave them equity stakes and treated them as partners.  This has worked well with one, and not well with the other.  

I think the individual you are considering needs to have an entrepreneurial or leadership track record, and bring a clear skill set or role to the table which he/she can perform better than you.  For example, if you are business development oriented, he/she is the financial mind.  If you are just bringing on a friend for general help, it is going to strain the relationship and you may still be on your own for the primary entrepreneurial roles in your business. 

Ian Shearer Executive Chairman at Parakeetplay

November 29th, 2016

Brents comments are sound. I would add one thought, if you do decide to set up with your friend make sure there is a clear exit path agreed in advance. I have set up a number of companies as the "junior partner" of two Founders. My view was that the second me and my fellow founder had a serious row I would just leave by triggering the agreed exit path. I have triggered it twice both times to my partner's surprise but it meant I retained their friendship.

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

November 29th, 2016

The other comments are good. But I recommend you have a frank "pre-nup" discussion.  Actually sit down and say: 

"Neither of us knows how this will go, or how our lives may change in other ways. One of us may want to leave at some time, or we both may find it is not working for us to continue together, and we may each may want to continue separately.  Let's talk about how we each want to be treated if we want to leave, if the other wants to leave, or if either of us feels it isn't working together and we want to separate or divide up what we built. Hopefully, it will never come to that, but if it does and we have already agreed how to treat each other with respect, it will be much easier to for us to remain good friends if it does come to pass."

Write down the principles you come up with. Resolve to meet periodically (Annually? Quarterly?) to check in with each other about how you each are feeling, and to discuss if there are changes we think we need to make to ensure ongoing good relations.


Richard Navarrete Global Director of IT at frog

November 29th, 2016

Agreed... further, I'd say that it would be a good idea to clearly define the expectations of each of you working together. What are you responsible for as opposed to your partner? Are you in charge of Finance, while he is responsible for Sales? If you agree to decide things together, have an unbiased third party help decide the tie-breaker. You will also want to agree on other assumptions you might each be making. How much of the company you each have, even what hours you keep. One of the benefits to having your own company is you can be flexible with things like hours, but for a company to run smoothly, you always need to have clear expectations and the discipline to follow them. It keeps business as "business" and personal friendships separate as much as they can be. Good luck!

Michael Hartzell Entrepreneur, Addicted to "Yes" - When Everyone Wins

November 29th, 2016

.... and it changes the relationship. The old relationship morphs into one of commitment. There will be disappointments. Make a deal in advance as to what you will do.  Even if it is simple as what Dharma did on Dharma & Greg sitcom.
"Put it in a bubble and blow it away."  :)

I make a deal to say "Friends first. If it appears money/business becomes a friendship bomb, we dissolve."  As to when you know?  There is no line in the sand. Because of the long term relationship, you will both believe you know what each other is thinking and feeling.... beliefs and attitudes change. Don't take anything for granted. 

If you have a go-to mentor/coach for the both of you right up front, as your business (And the both of you) evolve, the mentor/coach can stay objective and resolve (or avoid) conflicts.



Dave Williams Founder at Cypress Hollow

November 30th, 2016

I've started businesses with friends and it's gone both ways. Some are now closer friends from our experience working together and in another case, I've lost an important friendship over business disagreements. Regardless of your relationship with your co-founder(s), you should write up a founders agreement that summarizes your expectations of one another, the business, and addresses what happens if things don't work out. It forces you to have the hard conversations up front and while it may not save the friendship if things go wrong, it can make the parting much less bitter. Just don't kid yourself that you'll be able to put the friendship first once the business is up and running. Once you have investors who have bet on you, employees who count on you for a paycheck, and customer's whose own businesses may depend on you delivering on your promises, the idea of "friends first" is going to slip far down the list if you think your founder is jeopardizing the business. If you absolutely cannot bear the thought of losing the friendship under any circumstances, find a different co-founder.

Tom DiClemente Management Consulting | Interim CEO/COO | Coach

December 1st, 2016

Establish a pre-nup agreement between the two of you. In it, have expectations for each of you but with some flexibility on changing expectations as you face different conditions in the market and both agree on the change.

Then have the condition for one person leaving the company, either because of not meeting the expectations or due to other personal reasons.

It is essential to have the conditions for divorce in any partnership but even more so when you start with a prior friendship.

Thanks,
Tom

Dane Madsen Organizational and Operational Strategy Consultant

November 30th, 2016

You need to decide what is more important to you in the long run, the friendship or the business.  If it is the friendship, I would not do the business together unless you have worked together in prior businesses so both of you know how the other person operates.  Doing a startup and testing a friendship should never happen at the same time. You could blow both up.