Shareholder agreements

How to distribute decision making with a 50/50 partnership?

Matias O'Keefe

June 27th, 2015

Si I finally found the right project and I believe, the right Partner. 
I run a dev house in Argentina and when I heard the idea, fell in love with it so I decided to co found it. 

Our initial agreement is that I will finance 100% of the product building in the first stages while my partner will take care of marketing and sales. 

While I provide the Lean approach and technical skills to the mixture, I also have a trong business and Marketing background that should help in the project. 

After two months of work together we managed to launch and MVP and have 20 paying subscribers who are paying between $25 to $100, We got the media attention and already appeared once on TV with a forthcoming new interview from a different channel. 

Things look good, and we take decisions together. We never actually met yet as he lives in the US but we work as a real team!

With all this being said, now I feel it´s a good moment to define the partnership a bit better without disrupting the actual rapport in the team. 
It´s weird to have to define who makes what decisions, who will take care of marketing, finances, or administration, quen e have been doing this by mutual agreement all the time. 

I have the experience on a previous startup where after the initial faces, this kind of things, where not well defined, expectations weren't met by the different parties and it all led to a complete stop in decision making. 

Does anyone have successful experience managing the shareholder´s agreement in a 50/50 situation? how did you manage the process?
Thanks in advance for your help here. 
Matías

Samie Syed

June 27th, 2015

Don't do it. It will cause you a lot of problems,

Rather, do a 49/49 split, giving 2% to a 3rd party for resolving deadlocks with your partner.

Larry Shiller

June 27th, 2015

Hi Matias, I love a success story :). Which brings me to my question: Why fix what isn't broken? You didn't communicate any bad outcomes with your current situation. And it's a jump to think that defining those things will address the root cause of previous failures. Have you discussed this with your partner before posting here? To reach your goals, do what's best for the two of you, which may or may not be what's worked (or not worked) for others.

Matias O'Keefe

June 28th, 2015

Thanks for your replies! 
Larry, as I want to make sure things go in the right direction, I wanted to share the problem with the community, come up with options so the minute I address this issue I have more elements to propose. 

Samie, Diane, thanks for your insight here, so far, we've been on the same page when it comes to decisions, but it´s good to plan ahead. When we get to the point of a disagreement I want to make sure we have a planned way to tackle the problem. 

Diane Stokes Executive Consultant at Spartan Race, Inc.

June 28th, 2015

Although I have a success story with a 50/50 partnership I would not do it again. I completely agree with Samie. If you haven't found the right person to give the 2% to, wait until you do but have the agreement with your co-founder to set that amount aside. It is a good idea to define rolls. It becomes critical especially as you grow. You can set them so "big" decisions (say over 20k or some set amount- or hiring decisions need to be mutually agreed to). And get  a legal contract dream up. Better to do it now when all is good. Good luck and congrats on your current successesto)

Neil Gordon Board Member, Corporate Finance Advisor and Strategy Consultant

June 29th, 2015

Where there are three owners, at 49%, 49%, and 2%, each one gets one vote for all practical purposes. I've seen more in the way of politics with that arrangement than I've seen rational tie-breaking. A third independent director, with a limited term, might be a better option, although I've seen that one fail, too.