Resolving Major Co-Founder Disputes

Photo by cloudvisual on Unsplash

In the first year or two of a company’s formation, it’s not unusual to have co-founders hit a wall in their relationship and have it become a point of division that if dragged out, ultimately leads to the company’s demise. Co-founders hitting a wall isn’t an uncommon occurrence; however, I believe many of these situations are not only preventable if addressed early enough, but also reversible if handled with grace and patience by everyone involved.

Going through the process of resolving a founder dispute isn’t as simple as reading a blog post — however, hopefully the below points will help you in thinking through what you could do, and help steer you in the right direction.

Diagnosis:

In my experience, the root of many co-founder disputes comes from the intersection of the required speed of execution that a startup demands, and its negative effect of displacing the pockets of time necessary to properly align expectations with colleagues. Early days it’s not unusual for people to pitch in and help across various functions, add to this a founder’s natural drive to achieve (you wouldn’t start a company if you didn’t have this), and you have the recipe for a decline in co-founder communication. This decline blurs what everyone is working on, to what tempo, and to what level of desirable quality/outcome.

Lastly, and as a point I want to address separately (because it tends to be most present in teams that were formed as part of an event), sometimes within this mix of issues, resides a mis-alignment of vision and risk tolerance (financially and reputationally) from the start. This kind of co-founder dispute is the hardest to resolve, and many times does lead to separation, because in effect, it isn’t due to a decline of an operating relationship, rather a misalignment of co-founders from the start.

Treatment:

For the sake of simplicity I will use two co-founders as an example, but this scales up to three and possibly four, beyond that, you likely need to rethink who is a co-founder and who isn’t as co-founding teams of four or more are inherently unstable due to the complexity of expectations from all involved.

Agree to Proceed: To resolve a co-founder dispute of any sort, regardless of the eventual outcome, you first have to agree you have a problem. That’s easier said than done. One of you will have to be persistent in raising this red-flag to be able to initiate any sort of serious conversation on the matter. In the words of a founder friend who recently went through this, “People need to be really fearless about driving for clarity, even if this can feel pushy at times, without it, you’re just adding more uncertainty to something that’s already uncertain.

Have a Resolution Mindset from the Start: Following the agreement of ‘we need to talk’’, both of you will need to reflect on (prior to engaging in any sort of conversation with anyone) whether you are willing to engage in the conversations with a positive attitude and willing to find a constructive outcome. This might seem like a trivial thing, but it isn’t. Make sure you don’t polarize the nature of the conversation early-on by throwing accusations at each other; this will be very tempting to do. There can be so many pent-up negative emotions and resentments leading up to this point that you have to actively remind yourself that not finding a solution to this outcome will negatively impact you as much as them and that the whole point of you working with them in the first place, was to solve a problem that was meaningful to you both.

To help yourself with this task, ask yourself the following questions:

  • “Am I sure we are in agreement on the larger context that led to the disagreement, or could it be that we aren’t clear?”
  • “Do I fully understand why they chose to take the actions they’ve taken?”
  • “Do I sense that it is super clear to them why the actions that led to this disagreement were taken?”
  • “What part have I played in getting us to this place in our relationship?”
  • “Is this really a trust violation or more a disappointment in my expectations of them?”
  • “Is it clear to both of us who is expecting to have the final say in the matter we are arguing about?”

If the source of the co-founder dispute is one that can be rectified, usually the above questions will start indicating to you that there is some ambiguity in the source and prioritization of the dispute rather than a categorical failure of trust.

For the removal of doubt however, if the reason why you are reading this is because your co-founder did something unethical, clearly no level of conflict resolution advice will overcome that. Seek professional legal counsel at that point to begin a proper bad-leaver process.

Delay Involving Others: Assuming you’ve made it this far, the next thing to keep in mind is that you should try and resolve co-founder disputes internally as much as possible. As well intended as external advisors and shareholders can be, it’s hard to find one that can truly not ‘take sides’, and baggage from this process can sometimes haunt you later. If you do get stuck in trying to resolve this, however, reach out to some’one’ you trust, because it is 100% better than going around in circles and making things worse. In an ideal world, you have one investor or shareholder you both trust who can help you, but choose carefully, because this person has to be able to balance everyone’s interests from that point onwards, and that’s not easy!

Remove Ambiguity: The source of many conflicts comes from not knowing who should be doing what, to what level of quality/outcome, and who has the final say on a matter. To help you both, have a conversation around this, and as a start, set aside at least two hours to go through your organization in parts (eg. product, fundraising, engineering, sales, etc). The more parts you each can outline, the better, because usually hidden within these identified (or unidentified) parts, is where the ambiguity stems from.

Once you’ve done that, apply the RASCI model to each of the organizational parts (if you are not familiar with RASCI, read about it here). In effect, what you will discuss by using the RASCI framework for each part, is who is the ‘boss’ for that part and who gets a say in that part. I suspect you will have many ‘aha’ moments as you go through this and realize hidden points of friction. Hopefully this will also give you the right clarity and direction to start addressing the issues by agreeing who should take what role for which organizational part and who should merely be consulted or provide support, for example.

Re-Establish Consistent Communications: With your roles and responsibilities clearly outlined, you’ll have to get into a constructive cadence of communication to make sure you are aligned in the way you agreed to align. If you skip this, you’ll simply find yourself back in this same situation, but with a whole new set of issues to deal with. Communication can take any format you want, whether it be a daily stand up, weekly progress report, or impromptu chats. Just make sure they happen, and it can also include communication with relevant external parties who might have been wondering what is going on or have a vested interest in your success.

Set a Time-line: Lastly, set a time-line for when you want to revisit the agreements on division of roles you came up with. Don’t think of it as a report-card moment, just think of it as a hygiene check. When you come up with a mutually-beneficial solution as per the “Remove Ambiguity” section above, the temptation will be to check-in everyday to see if the person is doing what they said they would do, but in life, change isn’t always easy to measure on a daily basis. It is best, therefore, to agree to a timeline that makes sense relative to the severity of the issue, then hold each other to account on that timeline.

Outcomes:

It will take time to really assess if the newly agreed plan will work. Make sure to keep to the interval of check-ins and take the review of desired outcome seriously, this is not the time to be ‘nice’ by caving-in/chickening-out if it’s not what you both expected, that will just lead to more resentment. If it goes well and resolves itself, this tribulation will cement your relationship even more deeply and become a pillar of strength in the future tests that will inevitably come your way.

However, if there is a failed outcome where it’s clear that you will have to ‘break up’ as a team, there are solutions, they’re just not ideal. All outcomes from a co-founder fallout are shit, and they don’t always play out the way they are outlined even on legal docs. Even the best case scenario involves the loss of a friend or relationship, and at the worst, a drawn out dispute over equity ownership with other shareholders getting involved.

That said, you have two mechanisms (depending on where you are in your company’s formation) to protect yourself from a departing co-founder:

Prior to company formation, rely on an agreed Founders Collaboration Agreement, so that there is clarity on what to do in case of something going wrong.

Post company formation or post financing events, rely on a reverse vesting schedule as a mechanism to deal with the unwinding of a co-founder’s equity position.

Keep in mind that even after a co-founder leaves, if they have a form of vesting, then they will continue to be a shareholder in your company. As such, it would be short-sighted to polarize the relationship so much that you permanently damage the relationship going forward.

In conclusion, it’s not uncommon for co-founders to get into arguments that can escalate into full-blown points of division. Usually these are rooted in a mismatch of expectations and a deterioration of communication links due to the pressure of having to ‘move fast’ in the early stages of a company’s life. The solution is therefore unsurprisingly rooted in the problem. Employing patience and grace to go through an analysis of perceived breaches of trust due to a lack of role and responsibility clarity, and then coming up with a solution and timeline to judge its effective resolution will help. Should things fail after an attempted intervention, then yes, ideally you will have adequate measures in place to unwind your relationship.

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The Fundraising Field Guide Book v2

📚 Get The Book — eBooks and Paperback

Here are the links to get the book:

🎉 Attend the Q&A Launch Event on Jun 1st

Join us on June 1st at 2:00pm BST for a free questions and answers session as we unpack the new ideas and strategies included in this second edition of the book. 👉🏽 Book your tickets here! 👈🏽

Alongside me, our guests will include:

Note on the Second Edition: The first version of The Fundraising Field Guide was written and published via Reedsy in 2015 and has been used by many to help navigate their fund raise. However, a lot has evolved since then, so this updated version 2.0 has been written with new content, ideas, and strategies to help early-stage tech startup founders decipher and navigate the fundraising process.

As a founder, it’s easy to get lost while trekking through the fundraising process. The dynamics of speaking to someone who has the capital you need, while discussing terms you’ve never heard of, can all be quite daunting. This book deciphers the secrets to raising capital from investors for early-stage, high-growth startups. Learn about communicating with investors, shareholders and lawyers. We will go over the materials you will need to prepare, the basics of how to understand your deal, and the mindset you will need to approach this journey successfully. The aim is to provide you, the ambitious early-stage founder, with the right information to take your company to the next level.

This new and updated version provides an overview of the soft and not-so-soft challenges you will need to prepare for as part of your fundraising journey, including things like reaching out to investors, dealing with rejections constructively, preparing materials and financials, understanding valuations and deal terms, how to manage the legal process and a crowdfunding chapter with statistics from crowdfunding platform Seedrs(who kindly helped in providing advice on how to best navigate). I sincerely hope you enjoy the book and get lots of use from it.

Lastly, as part of this second edition, I’d like to shine a light on the work of Resurgo’s Spear Programme (more on that below). If you’d like to support them directly, please consider doing a donation via Donate & Download below.

📚 Get The Book — eBooks and Paperback

Here are the links to get the book:

❤️ Donate & Download — Resurgo Spear

Whilst the focus of the Fundraising Field Guide Book is to help clarify the fundraising challenges and process for high growth early-stage tech startups, there are many other forms of praise-worthy entrepreneurship. Some non-tech startups are doing very amazing things, particularly in the realm of social entrepreneurship and social development. In particular, I’d like to highlight the work of Resurgo’s Spear Programme in empowering youth.

The Resurgo Trust is the creator of the Spear Programme. The Spear Programme helps young people facing barriers getting into work or education. The Resurgo coaching team equip young people with confidence, motivation and the vital skills they need to succeed in long-term employment.

I’ve witnessed, first-hand, the transformative nature of the programme and the empowerment it gives its graduates. I’ve been super impressed by how talented and driven the graduates are and even their ambition to continue on, post-programme, with their development. One particularly exciting case for me was when we partnered with CodeFirstGirls and Silicon Valley Bank for the Founders For Opportunity Initiative in 2018. Check out the video of that experience here.

In an effort to make as much of the proceeds from the book go to Resurgo directly as possible, feel free to donate directly to them (suggested donation of £9.99 or as much more as you’d like) via this JustGiving page. After your donation, you will receive a link from which you will be able to download the book.

💪🏽 Sponsors

The kind sponsors and supporters for versions 1 & 2 of the book are:

Silicon Valley Bank — We are the only bank in the UK focused solely on
the innovation economy.

Seedrs — We are equity crowdfunding done properly.

✍🏽 Version 1.0 — Where it Started

The original version of the book was published by Reedsy (the best online publishing platform)in 2015 thanks to the help of Emmanuel Nataf, Matt Cobb, Ricardo Fayet, and Rebecca Heyman.

The first version was published on a free-but-donate, effectively on the basis that you made a donation to Resurgo Spear if you enjoyed it. In that spirit, it will continue to be freely available (although some of the examples are now dated). Click here to access version 1.0 via slideshare/PDF, and the launch video of the 2015 book event can be found here. If you enjoy it, please do consider making a donation to Resurgo’s Spear Programme.

📚 Get the latest version of the book

If you enjoyed the first version, but want a more updated version with resources, below are the links to get the latest version of the book (just in case you missed them earlier):

Continue Reading

The Fundraising Field Guide (v2.0)

Get The Book — eBooks and Paperback

Here are the links to get the book:

Attend the Free Q&A Launch Event — Jun 1, 2:00PM BST

Join us as we unpack the new ideas and strategies included in this second edition of the book. Alongside me, our guests include:

Grab your copy of the book and come armed with your questions!

Note on the Second Edition: The first version of The Fundraising Field Guide was written and published via Reedsy in 2015 and has been used by many to help navigate their fund raise. However, a lot has evolved since then, so this updated version 2.0 has been written with new content, ideas, and strategies to help early-stage tech startup founders decipher and navigate the fundraising process.

As a founder, It’s easy to get lost while trekking through the fundraising process. The dynamics of speaking to someone who has the capital you need, while discussing terms you’ve never heard of, can all be quite daunting. This book deciphers the secrets to raising capital from investors for early-stage, high-growth startups. Learn about communicating with investors, shareholders and lawyers. We will go over the materials you will need to prepare, the basics of how to understand your deal, and the mindset you will need to approach this journey successfully. The aim is to provide you, the ambitious early-stage founder with the right information to take your company to the next level.

This new and updated version provides an overview of the soft and not-so-soft challenges you will need to prepare for as part of your fundraising journey, including things like reaching out to investors, dealing with rejections constructively, preparing materials and financials, understanding valuations and deal terms, how to manage the legal process and a crowdfunding chapter with statistics from crowdfunding platform Seedrs (who kindly helped in providing advice on how to best navigate). I sincerely hope you enjoy the book and get lots of use from it.

Lastly, as part of this second edition, I’d like to shine a light on the work of Resurgo’s Spear Programme (more on that below). If you’d like to support them directly, please consider doing a donation via Donate & Download below.

Get The Book — eBooks and Paperback

Here are the links to get the book:

Donate & Download — Resurgo Spear

Whilst the focus of the Fundraising Field Guide Book is to help clarify the fundraising challenges and process for high growth early-stage tech startups, there are many other forms of praise-worthy entrepreneurship. Some non-tech startups are doing very amazing things, particularly in the realm of social entrepreneurship and social development. In particular, I’d like to highlight the work of Resurgo’s Spear Programme in empowering youth.

The Resurgo Trust is the creator of the Spear Programme. The Spear Programme helps young people facing barriers getting into work or education. The Resurgo coaching team equip young people with confidence, motivation and the vital skills they need to succeed in long-term employment.

I’ve witnessed, first-hand, the transformative nature of the programme and the empowerment it gives its graduates. I’ve been super impressed by how talented and driven the graduates are and even their ambition to continue on, post-programme, with their development. One particularly exciting case for me was when we partnered with CodeFirstGirls and Silicon Valley Bank for the Founders For Opportunity Initiative in 2018. Check out the video of that experience here.

In an effort to make as much of the proceeds from the book go to Resurgo directly as possible, feel free to donate directly to them (suggested donation of £9.99 or as much more as you’d like) via this JustGiving page. After your donation, you will receive a link from which you will be able to download the book.

Donate via JustGiving

Sponsors

The kind sponsors and supporters for versions 1 & 2 of the book are:

Silicon Valley Bank — We are the only bank in the UK focused solely on
the innovation economy.

Seedrs —We are equity crowdfunding done properly.

Version 1.0 — Where it Started

The original version of the book was published by Reedsy (the best online publishing platform) in 2015 thanks to the help of Emmanuel Nataf, Matt Cobb, Ricardo Fayet, and Rebecca Heyman.

The first version was published on a free-but-donate, effectively on the basis that you made a donation to Resurgo Spear if you enjoyed it. In that spirit, it will continue to be freely available (although some of the examples are now dated). Click here to access version 1.0 via slideshare/PDF, and the launch video of the 2015 book event can be found here. If you enjoy it, please do consider making a donation to Resurgo’s Spear Programme.

Get the latest version of the book

If you enjoyed the first version, but want a more updated version with resources, below are the links to get the latest version of the book (just in case you missed them earlier):

Donate via JustGiving
Continue Reading

From PPP to (p)PPP

Photo by Markus Winkler on Unsplash

Internal (and external) communication are likely the most critical aspects that a startup leader has to develop to both get alignment and clarity on next steps from their team, as well as assistance from those around them.

To help with that communication process, the Skype team came up with a weekly reporting structure called the PPP, which stands for Plans, Problems, and Progress. In it, team leaders, using this skeleton structure, share updates with those above and below them in the organization for more clear communication. At Seedcamp, we further pioneered it as a way to help us and our founders communicate, and many startups currently use it for both internal and external purposes.

Whilst there is no hard and fast rule on how to format a PPP, or even message/transmit one (some prefer simple emails, whilst others use tools like Google Docs or Notion) to receiving parties.. over the years, I’ve seen one trend that spurred me to write this post.. the lack of prioritization in PPPs. This lack of prioritization sometimes leads to PPPs that are too long, read like train-of-consciousness writings, or read more like an activity log, rather than an actionable set of concrete thoughts. The negative impact of this is that for the reader, be it an investor or a fellow team-member, it can be distracting at best, or overwhelming and confusing at worst. Therefore, the new first ‘p’ I’d like to suggest stand for ‘Prioritized’ PPPs.

A friend of mine, Jase Miller, Product Manager at G2, wrote a post about a modified OODA loop (based on Eric Davis’ work) that can be used for product management, called IAPE. From Jase’s post (reduced), IAPE stands for:

IDENTIFY. What do we know about the situation we’re facing? What are the unknowns? Map them out.

ASSESS. Looking at each part of our “map”, begin turning open questions about the unknown into assumptions or hypotheses we can test.

PRIORITIZE. There are a lot of methods for prioritization. When it comes to ambiguity, and most other things, I agree with Eric Davis that we should “prioritize by power, not importance”. Sometimes I also call this prioritizing for impact. Looking at our “map” and the assessments we’ve made, ask which of these areas of ambiguity would provide the most power/impact when it comes to handling the situation.

EXECUTE. Test your prioritized hypothesis. Write and publish the article. Build a prototype. Talk with a customer. etc.

The key to take away from the above is that through marrying an IAPE approach with the PPP format, you’ll have a more effective use of everyone’s time (and likely feel more clear about your thinking as well). Rather than simply stating a list of actions done or to be done, you take things deeper by assessing them for impact. Let me elaborate with example questions to ask yourself for each part:

Progress:

*What have you identified from last week’s plan that you had perhaps not realized might impact things in the future? Is it a problem or is it a benefit to your stated goals?
*What have you assessed that might need revamping, changing, re-prioritizing?
*What of the progress that’s happened since the last pPPP is ‘worth’ highlighting, in that it had a more material impact on KPIs/OKRs/Goals you’ve previously stated? How will this affect things going forward?

Problems:

*Which of the problems you encountered this week (or interval of pPPP) are worth sharing because they impact the prioritized plan? (every day there are little problems we all encounter, but they don’t all materially impact the bigger picture).
*What is the timeliness of action required for this problem? Is it a problem that will negatively impact you if not actioned this week, this month, this year?
*Is this a problem that is worth sharing with the readers? (will it generate anxiety or lack of clarity with the readers without any tangible action they can take)?
*Is this a problem you are sharing to showcase you have problems or are good at solving them (be careful to not let your ego get involved with what you share to showcase you are ‘busy’).
*Is there clarity in purpose for the problem and its resolution?
*Is there something you can pose as an ‘ask’? Once you have a level of prioritization in the PPPs it is helpful to also ask help from those receiving the PPP. By making sure the ‘ask’ is of maximum prioritized impact, it also increases the likelihood of someone wanting to do it!

Plans:

*After having assessed and reflected on your progress and problems above, what will you prioritize to execute during this interval?
*Of the prioritized problems you will now tackle, how do they alter any previous plans you might have had?
*What are the actionable plans from today’s pPPP, and until the next one, that will materially impact your stated goals (delays, advances, changes in budget)?

There are likely many more questions you could ask yourself to complete each of these sections, and of course, you can divide each section by the functional areas of your company (eg. team, product, finance, etc) but you get the idea…

The key concept is to really think more through what you share. It’s not about over-sharing, it’s not about simply journaling what’s happened in a time-interval, but rather the (p)PPP is a useful tool to help you organize what you’ve identified and assessed as important, and prioritized for maximal impact, and lastly, to keep you (and those around you) honest, on a weekly (or other time interval) basis, on how it’s really coming along.

Additional Resources:

https://weekdone.com/resources/plans-progress-problems
https://en.wikipedia.org/wiki/Progress,_plans,_problems
https://jasemiller.medium.com/how-to-lead-teams-and-yourself-through-ambiguity-36e707b12c10

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The Legal Hour Series — All Episodes

The Legal Hour Series — All Episodes

All good box-sets have a start and an end.. and “Legal Hour with Tom and Carlos” was one of the fun series Tom Wilson & I set out to do in 2020.

The idea was simple.. if we could capture all the key questions and points we get asked in a mini-series… what would that look like? … and out came Legal Hour.

For your viewing convenience, I’ve put all the episodes below in order of how we published them (you can also go to Soundcloud to listen to the series in audio). We cover deal terms, deal structures, valuations, round sizes, dilution, and employee option schemes and their impacts. In effect, a mini-MBA on this subject if you’re a founder and want a quick dive onto all the points we typically see at the early stage.

Enjoy!

Legal terms to be aware of when bringing in new investors

Legal structures to be aware of when setting up your next round

What to be aware of when signing ‘standard terms’

The 6 make or break legal issues to consider when starting a company

Incentivising your team through Employee Share Schemes (Part 1)

Incentivising your team through Employee Share Schemes (Part 2)

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