April 7th, 2021 | By: Wil Schroter | Tags: Strategy
Imagine getting married to someone you hardly knew just because you "really needed to get this marriage thing going, and they seem qualified enough at the time." Does that sound like the recipe for a healthy long-term relationship? Probably not. But that's pretty much how most of us select our future spouse for our startups (aka "The Cofounder").
At some point, we inevitably step back and ask "Is this really the right person to be my long-term co-founder or did I just do a shotgun wedding with this weirdo?" Which invariably leads to "How can I tell if this is the 'right' co-Founder, and if it isn't — how do I unwind this thing?
To be fair, these are questions most Founders will end up asking, and if we're not, it doesn't mean our co-founders aren't. The answers, however, have a ton of nuance to them.
The first and most telling sign is when we have to ask the question at all. Generally speaking, we don't start asking these types of questions until something feels off. It's also hard to tell whether we're reacting too early, or our expectations for how things should be going are just miscalibrated. Both are probably true. We can narrow our concerns down to two factors — personality fit and competency.
It's possible to find a really competent co-founder that we just don't get along with, as easily as it is to find someone we enjoy working with that just isn't up to snuff. Both are problems, but neither are uncommon. We don't have to love the person we're working with, but we definitely have to respect them. At which point the respect is lost, either in their personality or in their work, the decision to stick around becomes pretty obvious.
The reason most relationships start so easily is that they aren't tested early enough. Imagine if before we ever chose to partner up, we had to complete a successful funding round, ship a product, and deal with a major HR issue together. Those are all tests of how we really work in crisis mode. Those test how well we see the world in a similar fashion and where we tend to disagree.
Until we've had some of those tests, we really can't say for sure that this is the right person. And if we've just failed some of those tests, it's right about now that we're thinking "OK I need to hit the eject button..."
We should try to hold our judgment until we feel like we've gone through some trying times together. A great co-Founder can march through adversity with us shoulder-to-shoulder. A shitty co-founder avoids that march by making excuses and looking for "a way out." Also, it's worth noting, sometimes we are the shitty co-founder in that scenario!
When it's clear that it's time to eject, the only way to do this well is to rip the band-aid off — fast. There's never been a Founder that's said "You know what worked really well? I knew it was time to part company but instead I waited for a few years of agony to slowly beat the situation to a pulp while losing all of my hair in the process!"
The two stages of the eject are these: the "Conversation" and the "Terms.” The Conversation is what we need to have ASAP. "Hey, I don't feel comfortable keeping this partnership going..." and the Terms are what we need to have planned in advance "So, here's my proposal for how we break amicably."
The key to a successful split is to break quickly and be generous with the exit terms. The way to make it awful is to drag it out and be a miser with the terms.
Co-founders break up all the time — that's not the issue. The issue is, when it comes to co-founders, we need to be 100% all-in, or 100% all out. Any space in between is a recipe for disaster.
How do I fire a Co-Founder? Let's talk a little bit about what a "co-founder divorce" looks like, and what we can do to prepare if and when that time comes.
Treat Departing Employees Like Future Employees (podcast) Have you thought about the inevitability of an employee leaving your Startup? Listen in and learn how to encourage a happy send-off culture!
Does a 50/50 Co-Founder Split Make Sense? There are other ways to split stock in a "fair manner" that isn't down the middle. The most common split amongst startup Founders is the ol' "fair split." Who can argue with a fair split? You'd have to be a real jerk, right?
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.