Entrepreneurship is hard, part 2: the breakup

Sometimes companies fail because they run out of money. That’s bad. You kinda need money if you’re running a business. It’s sorta important.

Just as often, maybe more often, they fail because of the people. This can happen in any business, but it’s a pretty common start-up story – especially for tech start-ups.

That’s not to say the people are bad – it’s just hard. Start-ups are pretty intense even when they’re going well. You have a product that nobody might want, a market that doesn’t exist yet, and for some reason five other start-ups, with better products and more money than you, have just popped up.

Then you have your team of founders (or a very lonely founder – see part 1), and you have to decide how much of the company everyone owns. If you’re lazy, crazy or stupid, everyone owns the company equally.* If you try to split it up properly instead, you’re in a long and emotional debate trying to value everyone’s skills, time and money. Yikes.

So you manage to get through this and actually start doing something, because you’re going to do this, dammit. If you and your co-founders aren’t a good match, things are likely to fall apart.

  • Purpose – one of you might want to build the coolest product, brand, company in the world. Another might want to sell early.

  • Enthusiasm – one of you might be all-in with no ‘Plan B’, quit their job, mortgaged their house and poured their heart and soul into the business. The other might treat it as a hobby or a side hustle and never really expect it to take off.

  • Skills – one of you might be a whiz-kid software engineer with a PhD in Bio-Mechanics from Stanford. The other the ‘ideas man’ who doesn’t really have much to do in the company anymore.

  • Respect – similar to skills but can be on a more personal level. If one of you is CEO, will the others listen to her/him? Do you respect the quality of work each other are doing? Do you feel each other are taking this seriously? Hard when you’re working with friends.

  • Work Style – working with someone who fluctuates between 0% and 150% can get pretty tense. It can also be pretty hard to keep up with someone who’s going at 110% 18 hours a day. That said, if they are and you’re not keeping up then you’re probably the problem.

Things might tick along ok most of the time, despite not being fully aligned. Nobody’s perfect, so you can cut each other some slack or learn to compromise. But if you’re finding that conflict is popping up more often, that things are getting a bit intense whenever a big (or small) decision needs to be made, or that you’re bickering more and more as time goes on, you have to do something.

Prevention is better than the cure

  1. Talk a lot about what the big goal is. If you’re not 100% aligned, then you’re running in different directions. You might be moving quickly now, but eventually it will tear you apart.
  2. Talk about what success looks like in broader terms. Is it reaching the BHAG (Big Hairy Audacious Goal)? Is it having the coolest product? Culture? Brand? Selling? Being a Fortune 500 company? For a lot of teams, success is reaching the goal, but not everyone. If you’re a little different, that’s ok. But if you have seriously unaligned goals, you have to find other founders.

  3. Set a tie-breaker. Usually teams will try and get to a consensus around big decisions, but always striving for consensus is impossible. Not having a tie-breaker can be pretty destructive. You can just set a rule, or change your share allocations, or appoint someone as CEO.

  4. Communicate. A lot. Just do it well – not everyone communicates the same way, and communication takes two people. Don’t assume. Don’t be passive aggressive. Don’t vent at them (vent to someone else). Don’t assume they have bad intentions.

  5. When starting a business with someone you don’t know very well – get to know them better. See #6.

  6. When starting a business with a friend – remember that you might not have a friend at the end of it.

When things fall apart

Get out early, or get your co-founder(s) to leave early. You might still save the company and, more importantly, your motivation. Have an honest conversation, and if their heart isn’t in it or they can’t keep up, they’ll probably be more relieved than anything else.

Break up on good terms. It’s never good to burn bridges – you might be a reference for each other, or do business on different terms again in the future.

You don’t have to be best friends or anything, just don’t be an asshole.

If things are irreparable, don’t throw the business away. If you have revenue or IP, you might be able to sell it, especially low-tech businesses. Get some advice, talk to a broker, or just put it on TradeMe.

*Sometimes this is ok – just don’t do it by default.

Humphrey’s just been through a low-tech co-founder breakup with his most recent company. While they’re not all exactly on talking terms just yet, it’s not as bad as it could have been and they managed to sell the business and get on with life.

Do you have a messy co-founder break up story or need some help to work with your co-founders better? We’re always happy to chat, so get in touch.

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