Co-Founder Conflict is the #1 Startup Killer. How Can You Protect Your Startup
Conflict Resolution Management is a skill that many trained project managers learn, when working with stakeholders, but something that young entrepreneurs never learn, until it really happens. In fact 62% of startups fail because of co-founder conflicts, and it’s something that really scares venture capitalists. In fact, there’s a saying in Silicon Valley that it’s better to have an A team with a B idea, than a B team with an A idea.
The composition of co-founders vary, from two best friends who decide to work on an idea together, to ex-college classmates who decide to form a company, to colleagues at work who decide to co-found a company. Picking a co-founder is critical to the success of a project, and in most cases, you pick someone you really know and can work with, with a proven track record of collaborating together, but still, conflicts inevitably happen sooner or later, so what can you do about? Firstly, let’s identify the types of conflicts that co-founders commonly get suckered into, and the common conflict resolutions to solve those.
Delegation of decisions
Say one co-founder may like an idea, but the other doesn’t, we suddenly have conflict. This usually occors when you don’t divvy up the duties and responsibilities clearly enough, to have boundaries that you can each respect. Usually a good composition of co-founders is one where each of their skills are complementary, say one is more tech-savvy whereas the other is more business-savvy.
By setting clear deliniation of responsibilities, you should trust in the other’s capabilities to make decisions. You should of course provide a diplomatic mentality to set out your reasons why you may disagree, but ultimately, once you’ve done your best to convince, show your faith and trust in the other co-founder by letting him have ownership over his decisions. The worst that can happen is, you try the decision and if it doesn’t work out, pivot, because one thing startups have over larger companies, is that they can pivot more rapidly because they are far more in-tune with their markets.
A Co-founder works harder than the other
So, we aren’t really going to envisige a modern startup with punch-cards right? I don’t think in any scenario you will find each co-founder working the exact amount of hours, all the time, consistently. So get that expectation out of your heads right away!
Comparing a technical co-founder and her programming efforts, up against a marketing co-founder that is working on cultivating a user-base, is like comparing apples and oranges. There may be quiet times for business co-founders, or designers, whereas the coding effort is still going at full-steam, but the next week things may change, and they may end up doing crazy hours trying to reel in new deals.
This goes back to the first point above, where co-founders need to trust each other, and delegate responsibilities appropriately, and if it seems like there is a continual uneaveness in workload, discuss that and see if you can offload anything to even out the work.
Equality in Equity
Related to the previous point, discussing who gets how many shares in the company. This is a very contentious issue and something that really riles up co-founders. Does the co-founder that came up with the idea get more than the rest? Does the CTO get more than the CFO?
Well, I can tell you, if you all started out at the same time, divide it up equally, it’s that simple! It won’t matter in the end if you distrust each other, or let greed give one person more equity, because you won’t even have a product, and venture capitalists won’t even want to touch your toxic environment.
When Diplomacy Fails
When all things fail, seek outside counsel. I always recommend companies have at least 5 mentors, as well as board directors outside of the company, because it adds an outsider’s perspective, balance and wisdom that you definitely don’t have.
Getting an outsider to broker your disagreement will allow you to move on, so think of it as couples therapy for co-founders. You hate to be in this situation, but you have to agree to the outcomes, and going through the tough times with respect and civility will make you greater negotiators.
Nothing venture capitalists hate more is co-founders who cannot get along, and if they sense anything like that, they will pull-out as soon as they can. Maturity and conflict resolution are not attributes that young co-founders have instilled in themselves, but something that needs to be learned quickly. Being civil, open-minded and remembering that you don’t convince with authority but rather by selling your points makes for a healther debate, than being abrasive.
Everyone co-founders options should matter, but you should also have a structure in place where responsibilities are delegated clearly, and co-founders lean on each other for consel. Ideas will change, and companies pivot many times, but if you turn your relationship with your other co-founders into a toxic one, it will eventually break your company, and will be part of your resume when you work on another startup.