Can't Agree with Your Co-Founder?



By now, you should know that the optimal number of founders for a startup is two, possibly three (Johnstun Law, 2018). With more than one founder, there is room and contest for differing perspectives between founders. But having too many founders isn't a good thing either - in the eyes of external investors, a startup with too many founders typically suggests weak leadership at the CEO level.


That said, your relationship with your co-founder could be the determining factor as to whether your startup fails or succeeds.


Many academics and entrepreneurs often describe your co-founder as your "spouse". And the reason for that is simply because there are several essential qualities that need to be present in your co-founder relationship as if it were a marriage - trust, commitment, clear communication, respect and perseverance (For Working Ladies, 2018).


So today, I'm going to cover some three common topics that co-founders would usually disagree upon and how you can go about resolving them (or at least try to).

  1. Equity Split

  2. Commitment

  3. Roles & Responsibilities


1. Equity Split

This is probably the most difficult conversation you'd have with your co-founder because it is such a personal topic. With everyone's interests are at stake, the conversation becomes uncomfortable as it questions the competency, quality of work, priorities and commitment of each founder. While there is no right or wrong way to split equity, splitting 50/50 is often discouraged due to the lack of a majority shareholder. Thus, even having a 51/49 equity split is more useful. Whilst this is the fastest and least offensive way to deal with this issue, you and your co-founder should really sit down and think about why the equity should be split this way. This process takes time and understanding, so plan as early as possible.


Here is a free tool that will "help you ask the right questions to determine how much value each founder will contribute, and give you a sensible, objective recommendation for a fair equity split."


Here is also a free and simple Founders Agreement which lays out all terms between founders.


For those who are new to this process, the most important thing you need to know is the vesting period. This is a period of time before shares owned by a co-founder or employee are unconditionally owned by them. If that person's employment terminates before the end of the vesting period, the company can buy back the shares at the original price.


Equity Split amongst Founders

2. Commitment

Startups rarely earn money from the start. With so much ground work to do and so little financial resources to execute and expedite processes, most co-founders find themselves juggling part-time and full-time jobs while running a venture. This is completely understandable and reasonable - ultimately, everyone needs money to survive. While this is entirely up to you and your ability to manage different responsibilities, it is also important to be clear and accountable to your co-founder about your commitment.

  • How many hours are you going to work on the startup every week?

  • What work will you be in charge of?

  • How will you manage your time properly?

  • What happens if you can't complete your tasks?

  • What should you do if you feel overwhelmed?

  • At which point would you give up your PT/FT job/startup?

These are just some questions to talk through with your co-founder. It's all about being accountable and giving your partner a peace of mind that you know exactly what you are doing. It also helps them empathesize with your situation. It is key to realise that working numerous hours do not necessarily reflect commitment; getting the work done well and on time is the end goal you want to reach.


Some desk tips to stay organised during your work days?


Here is also a list of the best to-do-list mobile applications to prioritise and keep track of personal and work tasks. Personally, I really enjoy using Wunderlist so far!


3. Roles & Responsibility

Unlike large companies, co-founders usually find themselves doing everything in the startup - sales, marketing, finance, HR... You name it. Since this is such an inevitable scenario, the boundaries of roles and responsibilities often get blurred between co-founders and you may find each other working on the same tasks. This becomes more difficult when you and your co-founder do not have complementary skills.


This is also typically a bad sign for investors. Most investors want to know how co-founders are involved and why they are absolutely paramount for the success of the startup. The problem of having co-founders will similar skills is the risk of investors requesting for one co-founder to accept a dormant shareholder role, if he believes there is excess redundancy for such skills.


Thus, it is really important to know what you are good at (skills and expertise) and what you really enjoy doing in the company. This also justifies why you get to keep such a large chunk of equity and how you are indispensable for your startup's success.

Make sure you and your co-founder make it absolutely clear on your roles and responsibilities at the start, so you save time, effort and confusion from possibly working on the same tasks. Furthermore, this always helps external parties to understand everyone's roles in the company.



Written by Wendi Lai


References

For Working Ladies. (2018). Why having a co-founder is like a marriage. [online] Available at: https://forworkingladies.com/co-founder-is-like-a-marriage/ [Accessed 29 Jan. 2019]. Johnstun Law. (2018). How Many Founders Should A Startup Have. [online] Available at: https://johnstunlaw.com/startups/how-many-founders-should-a-startup-have/ [Accessed 29 Jan. 2019].



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