By Barkha Kumari, Bangalore Mirror Bureau | Sep 16, 2018, 02
Relationships need work and sometimes even external help. Cofounder partnerships are no different. That’s why some entrepreneurs are visiting counsellors to fix disputes.
My idea is better’, ‘I work harder than you do you’, ‘Leave or I will’ – these are not arguments between classmates, but startup founders of Bengaluru who are often forced to dissolve their businesses simply because they wouldn’t get along.
Case in point: Naveen (name changed). Despite winning four entrepreneurial awards, he had to wind uphis logistics startup in 2015 because his cofounder – his childhood friend – “ditched” him. “We’d gone to Hyderabad to pitch to investors. Just before the session, he told me he’s found a corporate job. I never saw this coming. He did promise to support me when he was away but didn’t deliver much. Losing my employees, my customers and a cofounder who had a 49 per cent stake, it was too hard to handle emotionally. Two years later, I closed the startup,” shares the 33 year old Bengalurean. He then spent one year and seven months to find cofounders for his latest venture. f000
Does that come as a surprise? Maybe not, as Harvard Business School professor Noam Wasserman notes in his book The Founder’s Dilemma that 65 per cent of startups fail because of cofounder conflict. Similarly, in its infographic Startup Dirty Laundry: The Conflicts That Kill Partnerships, FundersandFounders.com put that figure to 62 per cent, and most of the reasons stated were interpersonal arguments. And yet, all we get to hear about why startups fail is either they build something nobody wants or they run out of funds.
However, increasingly, Bengaluru cofounders are opening up about the rift in their relationships to counsellors, coaches and mentors – to save their ‘next big idea’ from dying out. These experts each receive at least two such cases per quarter. A client has even asked rehabilitation psychologist Nithya J Rao to start ‘cofounder therapy’.
Lack of common vision for the company is indeed the deal-breaker, says Dreyvan Dayse, who does leadership consultancy and organisation development, and it happens mostly when companies get acquired or get new investors. “When new people come in, there is bound to be a lack of synergy. Some investors think they have got money, so they are driving the business but founders think their core idea is what is driving it. I often find their vision tangentially different from one another. They come across as open to each other but are usually not. Matters like these need to be discussed with brutal honesty.”
According to experts, the toxicity arises when the founders’ vision for the company do not match, their roles and equity stakes aren’t defined, their working styles differ, one hogs more limelight than the other(s), works harder, or grows out of ‘the startup dream’, but most of all they fail because they aren’t transparent about their differences. What they often forget is what is at stake – their potential million-dollar idea, career of their employees, reputation in the market and among families and friends, and the risk of losing a partner who is probably a childhood friend, an ex-colleague or even a spouse.
Act on time
Take the case of Rajeev and Mahesh (names changed). Last year, they had to consult a startup mentor to boot their third cofounder out of their broadcast technology enterprise. “Mahesh and I are communication engineers, so we decided to add a third partner to handle the managerial operations. I got my excolleague on board as the CEO and gave him 10 per cent stake. A few months passed, but he didn’t appear interested in understanding our product or doing any work. When we confronted him, he didn’t even acknowledge it. It took four rounds of talks, drama over stakes and intervention from our mentor to oust him. It was a big lesson: know the person you are hiring as a cofounder really well,” says the 43-year-old. So while it’s a no-brainer to look for cofounders with complementary skills, it’s as important to gauge their core values i.e. if they are open to feedback, compromising, and accountability, feels business coach Jeffrey Rakesh N. “It applies to every relationship,” he says. t.
Lack of common vision for the company is indeed the deal-breaker, says Dreyvan Dayse, who does leadership consultancy and organisation development, and it happens mostly when companies get acquired or get new investors. “When new people come in, there is bound to be a lack of synergy. Some investors think they have got money, so they are driving the business but founders think their core idea is what is driving it. I often find their vision tangentially different from one another. They come across as open to each other but are usually not. Matters like these need to be discussed with brutal honesty.”
Personal woes
Counsellor Ajanta De talks about a husband and wife who were co-running a startup: “Their parenting styles were different, they complained. However, I realised later the problem lay in the power dynamics they shared. At work, the wife felt undermined when it came to taking important company decisions but the roles would reverse at home. She used to take charge of their 12-year-old child and the husband would feel neglected in that department.”
In fact, cofounder conflict is most prevalent between couples with children, says these experts. To fix things, women leave their startup to focus on family or one partner goes back to a nine-to five job.
Sometimes, it even ends in divorce. Next in line are friends-turned cofounders. Startup lawyer Vidyut Bedekar has been insisting startups to have a Founder’s Agreement in place, which can outline the equity takeaway just in case their team dissolves or changes. Because whether their conflict arises due to money or not, it invariably ends up on ‘Who has how much stake in the company?’ or ‘Who gets how much money after a separation?’. In the absence of a written contract, she has seen friends turn foes who don’t even “see eye-to-eye”, and break-up.
Plan, play safe
There is no formula to predict how long these startup relationships would last. Amit Singh, cofounder and MD of Headstart Network, says cofounder splits are more common among people who’ve know each other only briefly, for instance, ex-colleagues. He’s even held five speed dating events for cofounders in Bengaluru, and on an average one startup got lucky. Nagaraja Prakasam, who is a mentor at the startup incubation centre at IIM-Bangalore, and a seasoned investor, has seen teams with more than two cofounders succeed better because in times of conflict, there’s always one party or more to act as the referee. He’s also seen the opposite, where three cofounders of a college level startup threw their CEO, the fourth member, out because he wasn’t on the same page as them.
However, a few pointers can slow down the trend. Singh lists them out: “Discuss exit clauses early on; get rid of non-performing founders; drop ego and talk openly; operate fairly; don’t be greedy.” Prakasam adds, “Always make a Founder’s Agreement, and spend at least three months with a strangercofounder to ascertain his or her work ethics, motivation level, and long-term goals.” Rao says, “Revisit your vision for the company and your personal life from time to time. If they don’t align, let your cofounder know in time.” It can happen that a cofounder is distracted at work because he/she has fallen in love, is going through a divorce or has an ailing family member at home, so De suggests cofounders to talk openly.
Talk it through
Cofounders are increasingly seeking help for mental and emotional conflicts. There’s another change that Rao would like to see: “Strain between cofounders has far reaching implications – unpaid employees; constant fear of failure; impact on company stock. If they can’t resolve their conflicts, they must address it, not brush it under the carpet.”