Business · Cofounder

My business partner stepped down. Now what?

Eric Sexton Game Desginer at Crate Entertainment

July 17th, 2014

My partner and I formed an LLC in Texas but unforeseen circumstances forced me to relocate to Seattle.  It was working well enough with him in Texas acting as CEO and business manager and me in Washington directing product development.  But just recently my partner had a new baby and some other life changes that have forced him to re-prioritize and so he has stepped down from the company.

This leaves me, the produce designer, to take over all the business aspects.  Things I am not knowledgeable of or well suited to do. My options appear to be:

1) Learn about the business side and divide my time between business and product development.
2) Find a new partner and relocate the company to Seattle.
3) Close the company and start over when the foundation is more solid.

Any thoughts or advice would be greatly appreciated.
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Mona Sabet

July 17th, 2014

Hi Eric

If you're getting traction and love the product, find a new business partner.  Sadly, changes in founding team do happen, and more often than the TechCrunches of the world talk about.  But if you're passionate about your business, you should be able to sell it to someone else to join.  And in my opinion, there are more business partners available out there than product partners.

Mona

Varun Mehta CEO of Disqovery

July 17th, 2014

Hey Eric,

I'm sorry to hear about what you're going through. A few weeks ago my business partner of the past year made a similar choice, and the first few days were tough while I figured out what to do.

First make sure you dot your i's and cross your t's: regardless of what you decide to do, the company should be stable without your partner. Are the issues of IP ownership, assignment, confidentiality, and equity taken care of? You may want to consult your attorney before proceeding.

Next, you have to think about what you want to do. Do you still believe in the mission of the company? Have you made progress towards making your startup successful? Is there momentum?

If you want to keep making the company work, then I think it's a good idea to look for a new cofounder. If you don't know much about business development, aren't comfortable doing it, and don't want to learn it, it makes sense to find a partner whose skills and interests complement your own. You had a partner before for a reason, right? That reason is as valid now as it was then.

Give it time. Although I'm bummed out that my cofounder had to leave, for me this is an opportunity to bring in someone who matches even better with the goals and mission of my company - someone whose skills are an even better complement to my own. You should start to feel the same way.

Sandy Naylor Product Management and Development

July 17th, 2014

I agree with Mona and Varun, but just want to add that this could be a great moment, too, for you to develop skills on the business side.

If you decide to keep going and search for a co-founder, there will be an in-between phase of needing to handle the business side of things yourself. (Even if you put business development on hold, there will still be work to dissolve / change your LLC, do user testing to support product development, etc.) 

I have a consulting / coaching business working with engineers as a sort of 'interim COO': helping them handle the business side and develop themselves into CEOs.  (Not saying this to sell my services, but to offer context.) 

I find that, when product people gain competence on the business side, they seem to gain velocity and confidence - even after expanding their team to include people with more skills in this area.  A lack of basic comfort with key business concepts can lead to unnecessarily dependent relationships with CEO types.

If you decide to keep going, I think you will look back on this phase as time well spent.  Even if we want to, there is really no option in a startup for product people not to have a decent amount of knowledge on the business side - and vice versa.

John Sechrest

July 17th, 2014

Let me know if you need help connecting with people in Seattle. There are lots of people who could help with doing the business. Yes, I think you are laying out the options. But you need to dig into them a little bit. Both the running it yourself and finding a partner are possible. Scary maybe... But possible.

Kate Hiscox

July 17th, 2014

Who owns the IP Eric?

Stephen Huson Leader in Internet lead generation, SEM / PPC / SEO and analytics

July 17th, 2014

Specifics matter, but my general recommendation is to find a new local business partner in Seattle that knows your business.  Seattle is a good community for that...if you aren't networked in Seattle, I can help you get connected to people...just ping me separately.

Before dealing with the business partner, I agree with others commenting above that the details of the business relationship between you and the former CEO need to be completed, in a very formal, legal way.  Otherwise, it will be difficult to find that business partner, because they will want to have that clarity and security.

Best of luck to you!

Eric Sexton Game Desginer at Crate Entertainment

July 17th, 2014

Thanks everyone.  

I have his formal letter of resignation.  He is not making any claims from the company and he wants the company to succeed so I am not worried about sketchy legal battled down the road.

@Kate: I own the IP.

Ramesh Barasia Certified Business Coach | Help Business Owners Get More Money, Time, & Freedom

July 17th, 2014

Eric: My advice will be option # 4: Find a business partner and let him/her relocate the company whereever he/she happens to be. You should focus on product development and not get sidetracked by other business issues. Glad to discuss more with you - give me a call. Ramesh *Ramesh Barasia* CEO, The Alternative Board North Atlanta 205 Bright Water CV, Suite 100 Johns Creek, GA 30022 Office: 678-812-1201 | FAX: 770-521-5307 Mobile: 770-309-3971 rbarasia@tabnorthatlanta.com http://www.linkedin.com/in/rameshbarasia www.TABNorthAtlanta.com

Yair Kler Director of R&D at VibeSec

July 17th, 2014

Hi Eric

I think you should 1st ask yourself what is your business level of maturity? Can grow it into a good business under these circumstances?

Here are some pointers regarding the options you've given:
1. Closing the company is an option that should be considered in my opinion if and only if 
(a) The information/assets/capital lost as a result of losing your partner can't be recovered within a reasonable amount of time.
(b) There are legal / financial obligations that you shared with your partner and once he leaves,  risks to you personally increase dramatically e.g. you'll need to invest in 500K$ to replace your partner's investment/lost capital.

2. Your 2nd option is composed of two requirements (a) finding a new partner, (b) relocating the company. Therefore I think each component should be addressed separately, (a)  locating a new partner is typically the best option for most cases as it allows you to continue focus on what you do best, share responsibilities and optimize work thus increasing your success chances. (b) Relocating the company is not always the optimal move in some cases you had some resources and connections that are location dependent e.g. banks, permits, workers, etc. Obviously if your business is location agnostic then as I've stated before in my humble opinion this is the best move for most cases.

1. Last but not least is the tendency of founders to try to handle loss of other founders/participants by 
taking these missing members roles and responsibilities to themselves. These type of a solution has a few flaws: they take more time, require more money and tend to increase chances to make mistakes due to having less experience. Our goals should always be focused on what we do best, get people (new partners, board advisors, technical advisors, etc) to help us handle what we don't know, so our time to market is quickest with lowest cost. Unless you can bridge the gaps left by your partner a few weeks while pushing forward on the product development side, I would strongly advise against such a move.

Hope this helps.

Lawrence Lerner Digitalization and Transformation Coach

July 17th, 2014

Find a business partner in Seattle and push on. We have a great gaming community here and I can make some introductions for you. Happy to meet for coffee and chat. I work with a lot of early stage companies.