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How She Did It: Co-Founder Issues

March 14, 2016


Just last week, we had another How She Did It panel. This time, the topic was dealing with co-founder problems. It can be difficult letting someone else in on your business - after all, your business is your baby. These 3 women with varying backgrounds fielded questions and gave insights into working with someone else. What makes a partnership work? When is it time to call quits?


Key Takeaways

  • Communication, communication, communication

  • People change, don't be afraid to call it quits if it's in the best interest of the business

  • A third party can see fatal cracks in a partnership better than the people in the partnership.

The Speakers



Choosing the Right Co-Founder


How to choose the right co-founder? Personally, I'd say it's a little bit like finding a boy/girlfriend. This person has to complete you - they have to have skills that you don't, and you have to have skills that they don't. If you're constantly stepping on each other's toes, it's a relationship that's not going to work out, sadly.


But what about starting a business with your actual boy/girlfriend? Well, that's where things get a little interesting. The research suggests that going into business with your significant other is actually kind of a bad thing. Like any good rule, however, there are exceptions. There are couples who are able to set up a business together and make it work, but they're rather far and in between. One of the panelists brought up a good point - if you're in business with your best friend, you're going to have overlapping social circles. So if you're having an issue with the business and you tell a friend and they tell another friend who tells your co-founder...well, let's just say that confrontation could get a little ugly. After all, starting a company is exhilarating and exciting, but you need to be able to have a balance between your work life and social life.


So how do you know you've picked the right person to raise your baby with? They have to have the same goals and ideas for the company as you do. They have to want the same thing and have the same values and the same vision. If your ideas and your values and your goals start to diverge, then it might be an ill-fated partnership.


Show Me the Money


So you've picked your co-founder. The two of you are excited and ready to start this journey into the unknown, full of investors who want to throw money at you and help you grow this baby from an idea into an actual product, with actual people using it and actual stores selling it. But now you've reached your next road block - how to split the money and how to make the decisions.


There are many options available, such as splitting equity. How should it be split you ask? 50/50 seems like the obvious answer, but the truth is, there's no such thing as 50/50. The recommendation is actually splitting it 51/49 or something equal. Chances are, there's one of you that is leading the charge more than the other. And what about the rest of your potential employees?


Shefaly recommended creating a pool of money to use as incentive to hire the people you need in order to grow your business. And she recommended doing this up front and first. Don't be afraid to roll up your sleeves and openly talk about it. This pool of money could be very important.


What are the best ways to go about making this agreement? Communication, communication, communication. Many companies fail because their founders are too scared to talk to each other, or they just assume the other knows what one of them is thinking. Someone could be thinking "I worked 10 more hours than they did last week, so this week I should be 10% more of the profits." But the other person could be thinking the exact same thing. Nobody is a mindreader, so make sure to be open and talk out loud with your co-founder.


When to Call It Quits


Sometimes things don't work out the way you want it to.


People change, ideas change, things happen, things go wrong, things go right. Life is unpredictable. One day, you and your co-founder could be agreeing on everything, but the next day, the two of you have different directions you want to take the company. If you're starting to feel tensions and disagreements with your cofounder is starting to damage your confidence and belief in the business, you might want to take a step back and ask whether or not this is the road you want to go down.


The team, the investors and the customers all run off of the founders' energies. If the energy is all wrong, people will pick up on that. A third party may be a good objective opinion to see if the partnership has fatal cracks in it.


But breaking off the partnership isn't the end of the world. You or your cofounder can step back from the day-to-day operations of the company, but still own equity in it. You can be an advisor to the company, and be involved in only huge, key decisions.


Nothing is perfect, but communication is key in all aspects of running a business, especially when it comes to choosing and working with a cofounder.


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