Doing your own startup is often a heady experience. The optimism, hope and euphoria of doing something on your own is often overwhelming. Once a few months go by, though, the harsh realities of entrepreneurship set in. They usually come with the first set of significant challenges – Lack of money, inability to build or sell the product etc… Your relationship with your co-founders will seriously get tested at this point, and many relationships do not survive. In fact, the # 2 reason startups go bust is because their founders have a falling out.
To protect yourself and your startup from this major reason of failure, it is advisable to discuss some uncomfortable questions with your co-founders before hand, so that you have a better chance of working out things when they inevitably will get ugly.
1. What happens if one of you leaves?
There are many, many reasons why a co-founder may want to leave. Maybe they just lose passion for the product or maybe they don’t feel that it is going to work out. They may have a medical or financial emergency, which may force them out. These things happen, and you need to have a honest talk about what will happen if one of you walks out. How much equity will they take with when they leave? Can your other co-founders buy you out? At what valuation? What happens if they leave after just one month?
This situation happens to startups often, and its best to talk about it. You don’t want to end up in a situation where a founder with an important skill set leaves with a bunch of equity, and you’re left poorer and without a valuable skillset.
2. What happens if you can’t agree on a decision? How do you resolve disputes?
When co-founders are previous friends, they usually forget to think about what will happen when they disagree. Just because you could agree on which movies to watch and what bars to hang out in doesn’t mean that you will agree with your co-founders on big business decisions. Should you invest in that trip to a conference that one of you really wants to attend? Or maybe you can’t agree on whether to hire that very expensive employee with an exorbitant salary. Or worse, you can’t agree on the future direction of your product.
It is best to have a framework for decision making. It could be as simple as everyone having a vote. Or maybe you decide to make decisions purely on data, and that the onus of proving that a decision makes sense is on the person that proposes it. You also need to think about what kinds of decisions will be mutually agreed upon and what decisions can be unilaterally taken by one of you. For example, whether to take VC money is a decision that everyone has to agree on, but deciding whether to delay the product for 6 weeks to fix bugs is a purely engineering decision.
3. What happens if your performance significantly drops? How will you evaluate each others performance?
This is probably the most uncomfortable question to discuss, but potentially the most important. What happens if one of your co-founder’s performance drops significantly. Large companies have HR processes do deal with these issues, but how will you handle it internally? How will you even measure performance?
A co-founder that’s not carrying their weight can be a deadly situation for a startup. Hopefully it won’t come to this, but it might, and you should have previously discussed this topic. Important questions like “Can the team force a co-founder out?” need to be addressed. The most important goal should be to preserve the startup, especially if it has received some traction. The startup should be able to survive the departure of one of its co-founders.
4. What are you in it for? Control? Money? Fame? Want to build something?
This is a conversation best had with complete honesty and beer. People have different reasons for why they want to do startups, and you shouldn’t assume your other co-founders are in it for the same reasons you are. If it later turns out that one of you just wants to cash out and the other wants to build a big company, it could create sufficient friction to wreck your startup.
There’s no “good” reasons for wanting to do a startup, but its important that you be honest and upfront with your other co-founders about the reasons that you’re doing it. Having a clear sense of what your co-founders priorities are also helps with decision making and helps resolve disputes - Since you’ve been upfront about the reasons you are doing the startup, people won’t suspect you have a “hidden agenda” that you are pushing.
5) How will you deal with failures?
Startup teams need to perfect this skill more than any other. Failures will be a regular feature at startups, and you should not get disheartened by them, because you will likely face several failures in the course of your journey. The thing to be cognizant about here, is that different people deal with failure differently. Some people just shake it off and move on, while others need to spend a couple of days mourning and sulking to get over it. It is probably a good idea for all of you do discuss what failure means to each of you and how you plan on handling it and supporting each other as you encounter them through your journey.
Discussing these issues with your co-founders may sound very uncomfortable, but it is a very healthy thing to do before you jump in. While many of these scenarios may sound hypothetical at the beginning, several of them will probably happen to you. If you are prepared for these, then you, your startup and your co-founders have a much better chance of making it through and building a successful company.