Startup Therapy Podcast

Episode #96

Ryan Rutan: Welcome back to the episode of the startup therapy podcast. This is Ryan Rutan from startups dot com joined by my partner and founder and ceo of startups dot com Wil schroder. Well today we're going to dig into something that I think a lot of founders will go through. Certainly if you're a multiple time founder, you've, you've probably had at least one co founder and I know I get hit with this a lot and I'm sure you probably get hit with this even more. And that's that people start to wonder like something happened somewhere along the journey. People start to wonder like is my co founder, really the right person, right? You know, they, they start off engaged. Like we're both really, really excited about this and you're passionate and ready to throw it all in. Um, and, and just go whole hog. And now I'm not sure if this is still the right person and what questions should we be asking ourselves at the point when we were, you know, either as we're making the selection in the first place, that would be a great place to start when, before you jump into this here is something you should think about. But let's just assume for a minute, somebody's already got that co founder and, and there's, there's some signs that maybe the ship needs some writing, What are the questions that you ask yourself to kind of clarify that and you know, validated, there is an issue and then what to do about it.

Wil Schroter: Part of the issue is that by the time you're asking those questions, it's often too late,

Ryan Rutan: right?

Wil Schroter: I mean, we all pretty much do these shotgun weddings more often than not. I'm not saying it always happens, but if you kind of dial back and you think about how many startups get together just because there's this center of gravity around the excitement for the idea without an equal amount of kind of time and effort put into, Okay, but who are the people? It often looks something like this. I've got this cool idea and I'm really excited about it and a bunch of people have validated my idea. So I think it's worth pursuing. I find this one person who's a developer who's willing to work on it for free right now, you know, for equity, what have you and now we're partners and this happens all the time

Ryan Rutan: all the time.

Wil Schroter: And so it's essentially me saying I need to get married, I just need to get this marriage thing done. Oh, cool. You're sitting next to me. So I'm going to get married to you because you're willing to get married to me, were willing to get married together. And that's the end of my criteria. And I don't need a ton of dating, You seem human. You seem, you know, functional good enough, right?

Ryan Rutan: Yeah. I had this conversation all the time by the way. This is, it's, it's constant. And you know, sometimes there is no more justification for it than that. I'm talking to somebody after the fact they're usually like, well, you know, they were, they were in the same room at the same time or, you know, we met at the startup weekend and nothing, you can start up weekend, but like that's not exactly great crucible for figuring out whether somebody is really in it for the long haul, right? You're like, well, they were super into it for 54 hours. The monday problem comes around. Um, but yeah, so the, the other side of it is though, that then you'll have people coming all the time saying like, look, we really, we really need a technical co founder, like, oh yeah, cool. Why you're building something like really, you know, really innovative and technical, something never been done before. Like, no, we're launching an e commerce store and we just don't know how to code anything. And I'm always like, maybe not the right reason to get married. That's like saying like I'm going to marry a dentist because I want to have straight teeth. Like there are easier ways to solve that, right?

Wil Schroter: Because at the time we're in this really kind of vulnerable state as a founder whereby we have the idea, no one else gives a shit about her

Ryan Rutan: idea. And so anybody

Wil Schroter: that steps forward,

Ryan Rutan: right

Wil Schroter: has just cleared all the hurdles.

Ryan Rutan: It's the, it's the kindergarten friendship thing, right? I was like, you're wearing a blue shirt, I have a blue shirt, let's be best friends and start a company together, right? Like it doesn't take anything more than that

Wil Schroter: if you were a couple of therapy folks, so to speak and you were to sit across from them, you know, a month in two months in and you were to say, okay, how well do you actually know each other? And you start asking, you know, the simple, stupid dating game type questions and you realize that that we barely know each other. All we know is we're both willing to go forward on this thing. And at the time that was enough, right? We

Ryan Rutan: both like spaghetti

Wil Schroter: exactly got a blue shirt. Right? And so I think what happens is that everyone gets so hyped up about the idea that initially they just overlook everything else, right? It's, it's not for lack of intelligence or anything else like that. It's just, I was distracted bar none. And again, I'm giving it from the sense of the entrepreneur that's taking on a technical co founder, but I'm going to flip it for a second and say that technical co founder, you know, the person that's the developer that went to go work with the person with the idea and you kind of zoom out and say, wait a minute. Lots of people have ideas what makes you good at this idea and here's where I think that this gets masked a little bit and it's worth mentioning when people have a good idea. We often assume that they are also capable of pulling it off.

Ryan Rutan: Statistics will tell us

Wil Schroter: otherwise. And it's so easily masked, Right? I mean, investors look for this all the time. You know, they say, Hey, yeah, I dig the idea. But who are these people? Right. Right. You know, are you the right people to pull it off

Ryan Rutan: the old jockey and the horse analogy, Right.

Wil Schroter: That's exactly it. And, and you know, there's, there's popular lure that says among investors, uh, they bet on the jockey, not the horse, the horse being the idea because there are lots of ideas out there. Anybody can have an idea. They're, they're fairly free but be able to pull it off as another thing. So if you're, if you're on the technical side and look, if you're on the technical side or if you know, web design, you're getting hit up by everybody and their brother to come and join their company because they want you to work for free. That's essentially what it comes down to. You're looking at that going, I love this idea. But then you may not be thinking at the time, well, wait a minute. This person has no idea how to start a company,

Ryan Rutan: which most people don't write to be fair,

Wil Schroter: but on top of that, what do I even know about this person? And then the answer is usually nothing. And then by the time it's time to start asking these questions post marriage were kind of in a bowl of ship.

Ryan Rutan: Yeah, for sure, for sure. Just before, before we we go on, I'd like to go back and I'm just, it's, this has brought up some feelings for me. Um and I'm remembering that the time which because in my, in my first, my first company, I did not have a co founder, I was a solo founder and once that ran its course and then the sale was complete and all of that was done and I was ready to start something new. I remember thinking how lonely parts of that were, how difficult parts of that were, how unprepared I felt for so much of that. And I decided that when I started the second company that I would have a co founder, it was for those reasons, right? It wasn't that there was some specific gap that I was trying to fill, which would have been a much better. And not that, not that we don't need emotional support again, but it's like, it's like, you know, marrying the dentist to have straight teeth technically, I guess you need to marry an orthodontist. I'll correct myself or the carpenter to get the dream house in order to have that level of support, right? And there are a lot of other ways to skin that cat, right? Having founder friends, joining, founder groups, participating in things like that where you get that level of support, but that was really what I was after, It wasn't that I looked at and said I'm uncaged bubble of some part of this next business wasn't the case at all. I felt totally capable, I just wanted somebody to be along for the ride. Part of it was to enjoy the highest together because and that we've talked about this in another episode, but like, even that can be lonely, which sounds really odd, but like when something really great happens, but you're the only one who really benefits from it at a high, high high level, like you feel it the most you can't run around shouting about

Wil Schroter: It, yeah, you reach over to high five and there's nobody there,

Ryan Rutan: there's nobody there, it's just like, it's the saddest thing ever, just high five yourself behind your back. So that was really what drove me to having a co founder now being the second time around, you know, I had some sense for for what I wanted out of that, this, this other individual, but certainly did not give it the right amount of thought we can I think we can talk about, like circle back to this experience later in the episode, but I just, as we were here at this early stage, I wanted to go back to like what I was feeling and like the trepidation of going through all of this again and just thinking it would be nice if there was somebody else who could act as a bit of a shield from some of the stuff for me, it turned out that didn't really work, but we can talk about that later.

Wil Schroter: You know what's interesting though. I think there's two really different components here that we often kind of smashed together with the wrong result. One is, I don't wanna be lonely and so I want a co founder perfectly understandable, right. People kind of feel the same way about getting married,

Ryan Rutan: but the

Wil Schroter: 2nd order of that is, and this is the right person to serve that role. What we're saying is I want to solve this problem, ergo anybody that steps into the role solves the problem. And what we're missing is that's not the case at all, plenty of people can step into that role, but who they are is determinant of whether or not that was a good idea,

Ryan Rutan: right? Yeah. Like the Mets are starting pitcher, injured his arm, we're gonna need somebody and I just stand up from the crowd. I'm like, hey, I put me in right, that's not how they're going to make that selection. They're gonna look at me and go, yeah, probably not you.

Wil Schroter: Yeah. And so part of it is we've never done this before. So we don't have a good sense for why this person fits certain criteria. And at the time, the criteria is, I don't have this person and that's it. We just haven't for most of us, we haven't been around the block enough times to understand how painful that bad decision can be, or once we're in it, you know, once we're committed with each other, whether or not the fallacies of that person are typical of anybody that we would have had in that role, or are there more specific to that person and say the same thing? And I'll keep using the marriage analogy, is the person that I married bad at their job, ergo as a spouse, or is this typical of anybody that, you know, there's just typical friction that happens in a relationship.

Ryan Rutan: Sure. We also have to consider ourselves in the equation to and I will I will definitely do that when we get to some of my battle stories later in the episode, but I mean, I remember being told as a, as a very little kid, um if you want to have good friends, you've got to be a good friend, right? And so we can't leave ourselves out of the equation either.

Wil Schroter: Well, let's let's talk about, you know, the equation kind of how it plays out, and maybe what we'll do is we'll lay it out sequentially, and I would open it up with, you know, how do I know whether or not I this is the right person and let's open it up with, if you have to ask the question, that's usually a good starting point now, to be fair, everyone asks the question in some way, you know, hey, you know, could brian have done a better job at this or could Jill have done a better job at this. Sure, But it's a bit different when you come home and you're having more of a what the f kind of question and it's happening day after day after day when you start scratching your head going, this is a, this is a disaster,

Ryan Rutan: you

Wil Schroter: know, I got to get out of this thing. And so Ryan, when you think of like, you know, what are some of the most telling signs going into this? You know, early on, You know, if you have to ask the question, what's been prominent to you or you know what sparked it for you or what do you see in other founders where you're kind of like, yeah, it's probably time to ask that question.

Ryan Rutan: So a couple of things. So I'll start with my own examples, avoidance was a big one when I realized that either I was intentionally trying to avoid contact and not serially right, but like there were periods in time, it was like, I just really didn't want to be in the same room, I really didn't want to have the discussion again and I was avoiding or I felt like I was being avoided. That was, it was a really, really telltale sign for me at the point at which you see very, very different patterns in communication in general avoidance being one of those, I think it's a good sign right if all of a sudden at one point everything went to writing right, It was just email communication, right? Chat wasn't as much of a thing back then, we're going back a long time now. There were like, I guess I could have a ol mess injured, but it just basically all of our communication turned into email for like a three week period and I realized like that was really odd and it wasn't obvious if you were to read the communications, you wouldn't necessarily pick up and say, ah there's an issue here, right? The way these guys are talking to each other indicate that there's a problem, it wasn't like that, it was just the fact that it went from and then we were in an environment where it was quite easy to talk to each other, right? We would pass each other to go send each other emails. So, so, you know, changes in communication patterns and communication habit avoidance is a big one. I mean, just outright arguing or disagreements is another something that I see with co founders that maybe I'm dealing with as, you know, as an advisor people coming to me when, when there's a bit of an event and particularly if I end up talking to more than one of them, I did this last year, I guess that would be the year before, not the year, that didn't happen. The one that did 2019 as I was talking to this group of three founders. They were really struggling to see eye to eye on a lot of things. And so they kind of came in with this. But had they not even would have been obvious because essentially each one of them I talked to, I spent most of our conversation, I spent an hour with each of them. Each one of them spent more than half the time just venting about the other two. Right? And so I'd say like, you know, if you find yourself when given the opportunity to talk about anything and that was really what this is about. We were just talking about their company in general, what they could do to right size and fix a few issues, most of which were just operational stuff. But it all stemmed from the fact that the co founders were not getting along and there was, there was some real deep baggage involved in this one, but that's a telltale sign. If you find yourself just like any chance you get like any open here, you're just going to fill it with vitriol about your co founder, probably a good sign, right? Or if that starts to come back to you, hey, you know, someone has been uh, you know, kind of fill in my ear about you. But these are, these are some of them, but honestly man, there's so many, there's so many signs that I'm not sure that we can cover them in a single episode.

Wil Schroter: Well there's so many signs, but I would probably split this into two categories, right? I would say one category is personality fit,

Ryan Rutan: right? Just

Wil Schroter: get along. Yeah, when it goes wrong. Like what does that look like? Right. And the second is competency. Now, here's the problem. I don't think when people make these assessments that they separate them like that, in other words, if you're a jerk, you can actually be pretty confident in what you're doing, but your personality is so abrasive that you're looking at this co founder, like, oh, you know, you're kind of amplifying everything that they may be off on because you just don't like them. Right? Right. Conversely if you really love them your best of friends, but they're kind of

Ryan Rutan: slacking

Wil Schroter: could often overlook that because like aw man, we get along so well and you're not really being that objective around whether or not they're actually good at their job.

Ryan Rutan: I want to circle back to something that you said right right at the beginning of the of the episode, which was that by the time we started to have this conversation it's often too late. And I think that that is very, very frequently in my case. Absolutely was and a lot of startups that I've helped navigate this, this sort of co founder breakups or recovery process. This is where it starts to go wrong because of the personality fit in the cases where there's a good personality fit, they've essentially said, I'm just going to let that go. I know he is well intended. I know she doesn't really want to be behaving this way. I know that they want to achieve what you're supposed to achieve. They're just not doing it now and so they don't have the honest conversation that they showed and they lean on the friendship in the wrong way instead of saying, hey, because we're friends, we can have this honest conversation they're saying because we're friends and because I like this human, I trust them enough to eventually course correct and get it right. And I think that's like that's where it really starts to go wrong fast.

Wil Schroter: Well, you know, I can give you an example of where it kind of went off the rails in exactly me not separating these so early on I to co founder, our personality fit was at 10, right? We just absolutely, you know, got along so well. He was like a brother to me, like I absolutely loved him because we got along so well and we agree on so many things. I just felt like such a natural fit, but then something weird started to happen over time that I don't, I didn't entirely see as it was happening. It took me a while to catch on and frankly it wasn't me that caught on, other people caught on kind of informed after a while every time I would hand something off, it would get half done or not done properly and so I would jump in and I would actually finish the work for them, like do their homework for

Ryan Rutan: them and

Wil Schroter: then present it together, so to speak and like, oh we nailed it right, move on. But after a while, I mean like a couple of years, I didn't realize that I was actually doing all the work right, and there was no hand off, it was just me doing the work and because we got along so well there was never any friction to that and I just kept taking it and it wasn't till some other people got involved team got bigger that they were like, dude, do you realize you're literally doing all his work and I was like, actually

Ryan Rutan: looks

Wil Schroter: like I am actually didn't and then I started to like have this entire, you know, highlight real moment of the past two years and I tried

Ryan Rutan: to pinpoint

Wil Schroter: when was it that he actually did something without my help? I'm

Ryan Rutan: picturing like this montage of like going into the office and then like the early and like you kind of like smiling your way out seeing his laptop on the desk and like just going over and like cheerfully picking it up, putting it in your bag, taking home and then working on both the computers at night, this is the picture in my mind right now and

Wil Schroter: you know what's funny, I felt great about it is it's like, I wasn't upset, I wasn't like, oh man, I felt like, man, I'm just being a good partner and you know, and that's working great. Again, it wasn't until it kind of got brought to light that I was like, damn, okay, well that, that wasn't at all what I expected and I gotta be honest, had it not been brought to light, I don't know that I would have ever solved it. I would have gone years at that pace, right? Because I was so happy with the relationship, you know, so happy seeing him every day, wow. Didn't see that one coming. The key point. There is, it didn't even occur to me to ask the question Sure. Which it wasn't until someone, some other people started to ask the question of me and I was like, oh ship,

Ryan Rutan: okay. Damn,

Wil Schroter: wow. How did I miss that?

Ryan Rutan: Well, it's like, it's like most things we missed as founders, we've never been through it before and there was no manual and we didn't think to look for it and we were also busy looking at a lot of other things. Right? This is this is why this is why having perspective from, from someone else, having that founders group to lean on having, you know, an advisory group is so important because there's just so many things and not not just I don't pick it on. First time founders like 2nd, 3rd, 4th time you can still make, there are plenty of mistakes, right? Like the idea that you can make all the mistakes in your first startup. Oh no, there are plenty that you can make well into your career and, and new new ones get invented all the time as technology changes the environment changes the workforce changes and all sorts of new challenges. So yeah, you know, it's um, I went through something similar where again, like the personality fits were great. You know, we were friends before we were friends during outside of work hours. We still hung out a lot. In fact, it came down to, I don't even want to see a competency thing. Um, and, and he certainly wasn't not working, he was doing a lot of work. We were both working a lot where it started to, to kind of grate on me a little bit was, I felt like the value of the work that we were doing had completely lost parody and that I had to focus on the really high value stuff and he was sort of allowed to hide behind some of the, I'm going to use a relatively easy operational stuff. It was things that we, we knew right. It was things that we knew it was just sort of rinse and repeat. It was work that needed to be done. But at some point I looked at and I went, I could hire any reasonably competent person and have them doing what he's doing and have somebody else to help me chase down these higher value targets, things that I was, I was struggling to accomplish by myself, or there was just more of them to chase down than than one person could reasonably do so in trying to fix that and trying to remedy them. That's exactly what we ended up doing. We did have the honest conversation, we said, look, let's let's bring somebody in to to do this. Like, you know, I didn't say this work is beneath you, I didn't want to be patronizing, but like that was literally how it felt. And so he said, you know, like, you know, would you like to focus on some of these other initiatives that we've got these three or four other things that you're sitting here collecting dust that need to happen, that we want to see happen. We agreed in our annual planning, this is what we wanted to see happen this year and it's not going to happen right, because you're spending a lot of time on low level operational tests. So we brought somebody in and then it sort of shifted to the scenario that you talked about all of a sudden there was all this free time for this individual and they didn't fill it right, There's initiatives still didn't get done. Things didn't get moved forward and that was really when, when things came to a head, it was like, okay, I understand you couldn't do this before, but like there's no reason you can't now. And I was in a position where I can pick up and, and, and do his homework to write. I was already struggling with my own and that that was a pretty painful lesson

Wil Schroter: when you look at it, you also have to imagine that there's no shangri la where everybody you work with, you love working with them and they're just infinitely competent. I mean, it does happen, but generally speaking, what I think a lot of folks particularly, you know, the founders don't understand is there is compromise to be had here,

Ryan Rutan: are you saying there's no path to transcendental startup is, um,

Wil Schroter: well, there was, we'd be doing a different

Ryan Rutan: show, but

Wil Schroter: look, here's where it's a bit of a slippery slope. Let's say again, you've got these two components that, that you're comparing, one is their personality and whether you like working with them or other people like working with them and the other is their competency. The reality is We're not looking for perfect parody where we just absolutely adore working with them and their competency is 1-1

Ryan Rutan: with us off the charts,

Wil Schroter: right? And again, that would be ideal. It's just not terribly likely. I think people getting the same kind of challenge when they're dating and they're, they're saying, well, I want the person with, with all of these, you know, perfect stats, so to speak and until I find them, you know, I'm not going to settle for anything else overlooking. Of course that they're the person that's missing. Half the stats typically

Ryan Rutan: said, well, picking nose and scratch

Wil Schroter: right, Right, Exactly. And so this is the same thing. We have to be hyper aware of what our shortcomings are because that contributes to this challenge. Right. In other words, if we're saying, hey, this person kind of gets upset too quickly, et cetera, what about us? Right? You know, how much of this challenge is being driven by us, which would imply that even if we slot somebody else in after them, we're really just going to replicate the problem different because, you know, because we're looking at it the wrong way. The second thing is the likelihood that their competency in kind of in that bucket, we're going to add things like commitment, you know, be able to see things through whether they're willing to, to work through the hard stuff, everyone's going to have a different version of what that is, right? There's not like the, I'm fully competent all in committed etcetera or not, there's just different versions of it. So if you're looking at the co founder, your co founder or maybe a couple of them in saying they should be as committed as I am, as confident as I am, they should exceed all of my stats, not really the way to look at it, because chances are you're not going to find somebody else that will to maybe you will and it's and it's a worthy exercise, but I'm just trying to point out that it's not a given that if you slot someone else in there, gonna magically fix all of those problems

Ryan Rutan: correct. And I didn't think, you know, you have to be objective about it. And and certainly once, you know, kind of, once you're in the mix, these things will start to become clear. And I think once you've gone through it a couple of times you you become a little more flexible, you become a little more understanding, you can become a little more realistic about what you you you can and and should expect. I also remember being told as a fairly young man, um that expectations, having expectations is the is the fastest path to disappointment.

Wil Schroter: Right?

Ryan Rutan: And and there there is some truth to that, not to say that you shouldn't expect anything of anyone. Um but I think you do need to temper those, this is sort of in the context of having a co founder, how well can you assess this up front? Right. And I have my own thoughts on it, but I want to hear what what what your your thinking here, well, is as we're entering into, you know, should is this the right person before we've even kicked things off, right? As you're going through co founder identification, whether you're deciding to to, you know, to bring on this this technical co founder. So you can build your app, what is the calculus there?

Wil Schroter: The most important part of the calculus, you actually can't find out up front, Right, Because you haven't been through some sh it yet, you haven't been tested and that's when you find out who you're actually partnered with, right? I'll give you two counter examples of, of how I saw this through and I think everybody eventually whether they like it or not has to see it through. The first one was when I was running this company Blue Diesel, the agency would grow to become a very large agency and we hired a really killer team, the folks on the management team that I had brought in actually, you know, this is a good point now that I think about it, these weren't schlubs, All of these people went on to become ceo of nine and 10 figure companies after that, right? So this was a very legit team. However, really funny, interesting, kind of get to know you moment, everyone was rara the whole time when things were going up into the right, right? Everyone's high five fest, right? And so at that point it's kind of hard to assess people when everything's going well. Again, I'm gonna keep using this analogy because it's so apt, it's kind of hard to, to know who you're really, you know, getting married to when you've only got on the first dates and you've had great times, right? You haven't actually found out who the person is, you don't find out who people are until she was sure

Ryan Rutan: look. Which is like, I'm thinking back to just even watching professional soccer, thinking through my my, oh, my own soccer career, the coach isn't doing a whole lot when everything's going well right, there's very little management or instruction from the sidelines when everything's going great, right? It's the moment when sh it starts to go sideways that the manager comes out, or like in the case that you're talking about. They just don't they just they just hid, they ran away the wall of fire appeared. And rather than running through an arm and arm, they ducked and ran the other direction.

Wil Schroter: Well, that's what happened, because everything is going great. It's the 90s, you know, you can't do anything wrong. And then at the end, it obviously culminated with the bus in the bus, hit all

Ryan Rutan: of a sudden our

Wil Schroter: business that just couldn't grow fast enough. I mean, just everything was going the way it would stopped and at that moment, I started getting these weird calls that I've never gotten before as a young professional hi, will this is such and such client, By the way, we can't pay you anymore. I don't understand. I would come to understand very well in short order by way of that clients dry up this professional services business. So there's, there's not, it's not very complicated and by way of that we have to let a bunch of people go. A funny thing happens now all of a sudden, all the people that are in high five mode because we're growing so much are all hidden in their offices. All of a sudden, all the people that were in it to the end because they only expected the end to be positive. We're ghost. They were gone. Oh

Ryan Rutan: my God, is this, is do you think this is, was this the birth of the open office plan? Do you think this is what drove all that? Like all of this, this, this trauma at the end of the 90s? Um, is that what led to the open office? Like you will never be able to hide again.

Wil Schroter: There was a lot of hiding going on. And at that point I remember walking around the office looking around like what the hell is going on right now. Again. I'd never seen this before. So I didn't know this behavior even existed. I only seen good times behavior and now I got to see bad times behavior and I got to see that you don't really see who your teammates are, your co founders or what have you until they're tested until you actually have to get pushed on this kind of stuff. That was an example of finding out who people were when they got tested and guess what? I've never worked with any of those people since they're all great people. So I'm not knocking them, but it kind of made me realize what I was signing up. I was signing up for the equivalent of fair with their friends. They can go be great

Ryan Rutan: people somewhere else. You bet

Wil Schroter: on the other end, write a short version of that story is me and Elliot are C. 00 going through afford it, which was was one of our last company together where we raised some money and at first again, high fives all around and you know, everything was awesome. And then all of a sudden we essentially ran out of money, but you know, we told this story before we run out of money for a long time, we were like broke for like damn near two years and it was, it was the longest and most painful death of all time. And we tried to soldier through it and it just didn't work. But here's what did work during that time when everything went sideways. Our relationship was solid, right? So I got to see what it was like in that moment where last time everybody ran, you know, and hid in their offices and he didn't write he and I just went shoulder to shoulder like you suggested and motored through the wall and didn't work by the way, but kind of proves the point. So when we were starting startups dot com first thing, top of mind for me was how do I get to work with that guy again because we got a chance to get tested that could have gone very differently like it did at the last company. But the point is you don't know who's really around you right now until you have some some moment to test them. And I think there's some early points where you can test them. But I'd be curious to kind of think how you picture folks being tested or what that crucible might look like. Yeah.

Ryan Rutan: I I think it depends of course like with with anything I'm not trying to avoid a straight answer here. But the it's like in in my first go round I think it depends a lot on why you're deciding to do this. Like I said I just didn't I didn't want to go through all of it by myself. So therefore my decision criteria and how to test them was really will they show up? Well they say yes to this insanity and and just join me. Right? Are they wearing a blue shirt? That was that was enough, right? Not not a good method, right? But that was that was enough. So I think it's a lot of it has to do with your motivation and that will to some degree define what you're willing to ask right? I think I was willing to put on blinders and say this person may not have the competency or the experience required to do this also. I may not either. Right. So that was okay. I mean these are startups after all. So I think that right because at the very early stage neither of you may have ever done anything before and so not going to be a whole lot to lean on, but as you move further forward and and you know, the things that I would I would say I would look at now would be, what sort of a track record does this human have? Right? Have they started a company before if not? What did they achieve within the companies that they worked for? Right. Did they, are there some accolades we can look at, You know, are are are they well liked by the people they worked with? Right. Is their personality? Was that a fit for where they were? It doesn't mean that they're going to have a personality fit in your company, new company, but at least you know, you can you can do a little bit of diligence and say, okay. Pete was generally well liked. She was loved um or they were despised. Right? Good to know. Did they achieve things while they were there? How much control did they have over what they achieved? How much of that was sort of de facto the kind of result that would happen because of the type of team you were leading. So I think there's a lot of things that you can, you can look at. But the first place you actually really need to look, is it yourself and try to understand like, what is it I'm trying to fill here, right? Is it a technical deficit? Is it a an area that I'm super uncomfortable in? Right? Like if you're the technical founder and you're just really uncomfortable being in front of people, then having another one of your, you know, kind of, uh, shy tech buddies. I'm not saying everybody in tech is shy. Please don't, don't, don't take it that way, join you and then, and then both of you be scared to go out and do sales. Not a great idea, right? You need somebody who's gregarious, you need somebody who's willing to kind of push that envelope and be out there and, and, and maybe, uh, stretch the truth a little bit and then force you to make it true. Um, so I think a lot of it starts with some introspection and saying, what is it that I actually need and what will I tolerate? What, what is it that's going to work for me? What personality don't you do after what skills you need to go after. But to your point, a lot of that's really, really hard to assess until there's been some test. And so this is where, you know, you can, you can, again, you can lean on some some third party research, talk to them, ask them, you know what they've been through, right? Like look for adverse situations and see how they dealt with them, right? Just listen to how they talk about their their their their colleagues and their coworkers, their three previous co founders. You'll you'll learn a lot from that.

Wil Schroter: The the advice that I give to founders is if you haven't picked your co founder yet or you're in the process of kind of, you know, courting each other etcetera, go into it thinking this is going to be a total disaster, Right? Right. In in statistical you're probably right. But what I want in the foxhole, there's a couple of things that you can avoid if you have that mentality that they're gonna blow up on you later. And the second thing we'll talk about is what when you didn't avoid him and that's when things are about to blow up. The first thing is assume that this person probably won't work out. So what are some of the things that I can do to protect myself going in knowing that there's no way for me to really know whether I've made a good decision or not. One thing is to make vesting a thing so that each of you are vesting your stock at the same rate. Could be 24 months doesn't have to be a super long time. But the implication is that if you get to two X juncture and one of you needs to go. You also have invested all the stock in the company. That's a simple one. A lot of people don't think about it and even fewer people do it. But but but it's a key one. The second one is create some milestones that are, hey let's form the whole company hard code and operating agreement and tie both of our bank accounts together. Create some milestones that say okay when we get to this point it could be six months out. Could be a time milestone. We get to this point when we start to generate some revenue, it could be a revenue milestone. We're going to start to take these next steps, you know again we'll both sign for some documents together. We'll both go beyond incorporating companies, things like that. And I think if people recognize that they just need to be able to live with that person for a while before they get committed. They'll start to understand that there is a little bit of a way out of this thing Which brings me to the 2nd point. Once we've already committed, once we've already gotten married and it's time for the eject button, what the hell do we actually do right hide in your office. Right. And usually by the time we're thinking of this like we're even thinking this there's very little chance that the person or persons on the other side of this don't have some inclination the same way. It's it's kind of rare that one person thinks the marriage is a total disaster and the other person thinks things have never been better, right? You know, usually there's there's there's a little bit of parents. I've

Ryan Rutan: encountered a few of those and and they are always the exception to the rule, right? Generally there's there's there's sort of a known issue, but boy, is it painful to watch the those, those outlier cases? Um and talked to the one who was like, I thought I was

Wil Schroter: going great

Ryan Rutan: and now I've got all my stuff in a suitcase on the sidewalk, right? Like it's it's bad. But again, it's the exception of the role,

Wil Schroter: right? And when that time comes, most people don't know what to do. So here's generally what this the order of events are when it's time to kind of break up if you will. One side of it is called. What I say is the conversation like how do you even bring this up and we'll talk about that? And the other the terms like what terms like functionally how does this work? The conversation is really around saying we've got to address this, right? We've got to put a pin in this because what happens is most of us are so anxious about the conversation that we never even get to. You know, we we used the term putting the skunk on the table, which is just saying things are fucked up, right. Like we have to do something about this. What happens though is because we don't have the conversation. These things fester and just become worse and worse and worse to a point where it becomes so adversarial that getting to terms later becomes even harder. Let's assume even that's happened. The conversation is as simple as saying this, Hey, here's a couple of things that I'm noticing that are kind of making it challenging for us to work together. Here's what you can't do and here's what you did wrong and here's what you did wrong and here's what you did wrong the moment you accused the other person, you broke the conversation and so many people don't get that. It's

Ryan Rutan: no longer conversation. It's just an argument if that,

Wil Schroter: yeah. And if you're doing it right, it's got to be more around, Hey, here are things that just aren't working very well. I'm not here to say it's this person's fault or that person's kind of doesn't matter either way. The problem exists, right? Your thing where you're saying you're walking by your coworker and you guys weren't even exchanging pleasantries. You could just say, look, man, there was a point where we would have a conversation, you know, in the hallway and we don't right. I'm not saying it's your fault or my fault. It's just not happening. Yeah, Yeah. It's indicative of a bigger problem.

Ryan Rutan: That's exactly how it went down actually. So it was, man, we used to get beers like every third night and we haven't had

Wil Schroter: a beer together in a month,

Ryan Rutan: probably time we sit down and have a beer, right? And we both knew what the, what the undertone of that was, right. We both knew that there was that. It was more than just like, gosh, it's been a while since we've had a beer buddy, Let's go get a beer there. There was, there was definitely some writing between the lines, but that's how we got back to the table to have the conversation

Wil Schroter: and a beer. And sometimes the conversation is, as far as it goes, sometimes the conversation is, man, you know, we really just needed to air some stuff out and, and ideally that's the case and we kind of worked through some resolution and we move on. Sometimes though it doesn't work like that, right? You know, he bought us another

Ryan Rutan: year, That was,

Wil Schroter: that conversation ends with, you know, I hate you and I hate you. And what are we gonna do about it? Couple things to note because now we get into the terms terms are different for a million different companies, but here are the things that are very consistent. The first is if you're the one initiating, hey, I think we should part, you always have to initiate it with and this is why it's a good opportunity for you, right? He, here's, here's what people here's the typical order events and this is just always ends well, Oh, terrible rather. Um, here's the order events. Hey, you messed this up this, up this up. I'm piste off. I think you should be out. And here's what, you know, here's what you get right, which just triggers all the wrong responses, right? It triggers them being defensive of them being angry in them saying these terms are bad. I just want to stick it back to you, right? It is not the way to do it. The terms should be, here's, here's what I think are wonderful terms, right? And I want to make sure you feel good about them too. And now that doesn't mean they're going to agree to them. But what you have

Ryan Rutan: always dealing with a rational human on the other side of the table,

Wil Schroter: 100% right. You know, they could say, Hey, I'm just pissed about how this is going. So any terms you throw at me, you're going to be terrible, right? But you still have to get through this conversation. The terms always have to be. And here's why I think this is a great opportunity for you and you're not just sugarcoating it. You have to come up with terms that anybody would be like, damn, I'd be an idiot to pass on those, right? Which means you probably have to give up a little bit more skin than you're typically comfortable with, right? This isn't the time to be a hard pass. Now some people that's not their personality, some people are a hard pass, right? Every lawyer ever and, and, and they're like, no, you know, this is what's fair, this is what's right and that person can go f themselves and so I'm driving it through and look, sometimes that works. It's not what I recommend, but typically what I look for is how can we create a breakup whereby how we're going to split actually benefits. You were getting a better deal than you thought you'd ever get right and put it in those terms and try to look through things through their eyes and say, man, I'd be surprised if someone was that generous with the deal. Again. Not everybody is willing to do it, but that's how to coax the terms into a direction where you want that outcome. Yeah, yeah.

Ryan Rutan: The, the other, the other, I'm not sure. I want to call it a technique, Another angle there is to look at what else that person would like to be doing and get them to focus on that for a bit because especially in the entrepreneurial world, right? Very rarely do we not have some other thing in our mind maybe from some days past or, or current times there's always another shiny ball to chase, right? We, we know this is actually a problem for, for a lot of founders and, and that's somewhere you can also lean on a bit, is, is trying to understand, like, especially if you're in that case where they've checked out a little bit, there's probably a reason for that, right? And it may not be as simple as there's something else that they want to be doing. Maybe burnout could be a lot of things, but in a lot of cases that I've dealt with, it does end up being that the other founder who's now checked out a bit, there's something else that they wanted to be pursuing, right, and they're spending more of their time, they should be thinking about that. Um, and that can be an interesting lever in terms of kind of getting them to focus on that and be honest about the fact that they want to work on that and then, you know, giving them good terms and saying, and now this is gonna allow you to go do that thing that you actually really want to be doing. And I've seen that play out pretty well more than once.

Wil Schroter: There's a few typical ways people set up these terms. One way people typically set up these terms is they do a divesting schedule, you've got 33% of the company, I get it. That doesn't need to change today, but understood this is the last day you'd be working at the company, so for some period of time, you know, you're not going to have the same contribution anymore and therefore the rest of us who are gonna be working here full time need to have some incentive to keep doing it. Obviously if I have 33% and you have 33% and you don't work here at all and I spend 80 hours a week we don't have the same contribution right, getting the 33%. Was was with the assumption that we'd all be working with this you know to the end. So by way of that we'll create a divesting schedule that every you know say every year you give us a couple of points back to the company. Look if we sell next year you obviously had a lot to do with it going into it. But if we sell five years from now you don't you don't even remember who the people are that worked here. Right? So it doesn't necessarily always have to go to zero but it could go to a lower amount that reflects you know less participation and less contribution, yep

Ryan Rutan: that's exactly what I did with one of the seas overseas companies that I started when I came back to the U. S. Um I still owned a significant portion of that company and we set up a divesting schedule at my at my suggestion this is another company I started with a friend and I knew I was no longer going to be operational and we were operating on on a a profit share basis because it wasn't really a company that was built to sell, nor was it in a market where a sale was really possible, but a large amount of the revenue and it was flowing into the company at that time was directly related to my efforts. And, and we knew it would continue to be like the lTv on these clients was, was, was measured in in like a decade. We said, Okay, let's over 36 months, um, will wind me down to just a marginal ownership percentage down to 5%. Um, and, and that would no longer include a profit share after the three years either. It was just sort of a, a way to keep me nominally in the cap table in case something happened at some point. Um, and to kind of keep me around as a bit of an advisor. So

Wil Schroter: you know, I think people always overlook time as a factor in doing deals right? It's like, hey, this person is at 33% I think they should be at 3%. So I want to take it all today. And it's like, why, how would that change anything? Right? Unless you're going to sell tomorrow, in which case that, you know, they're not going to give it to you anyway, It's still going to take 35, 10 years for us to get anything done to make that equity meaningful. So why not just take that over a longer period of time, make it sting less for them and give us essentially what will be the same outcome.

Ryan Rutan: Exactly. Yeah. Go back to your, you know the way that you split this? Which is, there's the conversation, there's the terms the conversation definitely a Band Aid, you should rip off as fast as possible because it's less painful that way. The terms definitely not right. That that's where you can you can definitely use use time as a factor to to make that a a less painful um kind of less pointed move.

Wil Schroter: Yeah. And it doesn't benefit you. What's whatsoever right? You know, to to blow up on somebody. And again, a lot of people are emotional. They can't, they can't help it. But if you were to step back and say, you know, what's the most logical Vulcan way I can approach this. It would be saying, look, I understand there's gonna be a lot of emotions. So my job, my job is to temper the emotions as part of this discussion, right? I don't just get to go in guns blazing and wonder why it's not working. Look, I mean, co founders break up all the time. That's not really the issue here. Like, oh my God, we're breaking up. Look happens all the time. The issue is when it comes to co founders and this thing is not working. We need to either be 100% all in Or 100% all out. Any space in between is a total total recipe for disaster.

Ryan Rutan: That's a wrap for this episode of the startup therapy podcast. This is Ryan Rutan on behalf of my partner Wil Schroder and all the startups dot com family thanking you for joining us and we hope you'll continue to join us. Be sure to subscribe, rate and comment on itunes or wherever you love to listen to startup therapy, you can find all of our episodes at startups dot com slash podcast.

Wil Schroter: If you're looking

Ryan Rutan: for more amazing resources to launch or grow your startup, be sure to head to startups dot com and check out startups unlimited. It's everything we have to offer from our online university to our amazing community of experts and founders and even all the tools we've built like biz plan, fungible and launch rock. It's everything a founder needs visit startups dot com slash begin that startups dot com slash B E G I N. You'll thank me later.

Copyright © 2024 LLC. All rights reserved.