Posted by: Leila Chreiteh
Posted on 06/29/2023
Founders are the captains of a startup, steering the ship and crew toward their vision of the future. Your relationship with fellow co-captains and the rest of your team will dramatically impact how efficiently and effectively the ship can progress. The stakes are even higher between co-founders, where soured relationships can turn into dissolved cap tables, hefty legal expenses in untangling, or even the company’s failure.
So, we asked the founders of the Outlander Community about their hard-learned lessons in failed co-founder relationships and advice for productively handling co-founder conflicts. Though all agreed conflict is inevitable, keeping the resolution process productive requires the same ingredients as any other relationship: clear expectations, proactive touchpoints, data-driven communication, and support from neutral third parties.
After messily parting ways with co-founders, many surveyed founders’ biggest regret was not catching misaligned expectations until it was too late. These founders were adamant about co-founders delineating their shared vision, values, and expectations before signing any contracts. United by more than money or clout, co-founders who rally around a shared vision, values, and expectations are less likely to implode from infighting.
For example, consider how aligned your answers are to the following questions:
Next, it’s time to codify your agreed-upon responsibilities and conflict resolution process. When conflicts arise, the legal agreements governing your startup will dictate what options are available. From your articles of incorporation to operating and shareholder agreements, these documents outline the rights and responsibilities of each co-founder, ownership stakes, decision-making processes, and dispute-resolution mechanisms. Safeguarding your legal rights and obligations in an operating co-founder agreement is a vital first step for equitable, productive conflict resolution down the line.
While a shared vision can help anchor difficult conversations, it’s just as easy for such aspirations to get lost in day-to-day operations. With so much to juggle, surveyed founders recommend scheduling a routine co-founder meeting specifically to get issues out in the open regularly and addressed as quickly as possible. With frequent opportunities for direct dialogue, co-founders can address issues incrementally instead of letting them sour the working relationship.
For the co-founders of Heartbeat, establishing a standing co-founder dinner ritual has been paramount to preserving their working relationship. Every Thursday, they grab dinner and air out every annoyance, frustration, or problem that needs addressing from the past week. “Knowing we had this time each week ensured there were never any pent-up emotions,” explains Murtaza Bambot. “We got better and better at voicing problems and dealing with them together,” and ultimately, this ritual “created the best working relationship I’ve ever had with anyone.”
A good co-founder dynamic boils down to good communication. By addressing conflicts routinely and directly, you and your co-founder can focus on building your company, not fighting.
With your expectations outlined and routine touchpoints set, resolving conflict productively will boil what you say and how you say it. In difficult conversations, things can quickly become emotionally charged, so it helps to stay anchored in a shared value (i.e., your company’s mission) and lead with the facts.
Using a data-driven approach to solve problems was the most frequent advice from surveyed founders, but with an important caveat: Don’t dismiss emotional responses in pursuing this approach. A co-founder’s emotional response offers valuable insights into their motivations, values, and more. Instead, name the emotions for what they are: a reaction to your interpretation of a situation. And, in the words of Michael Saloio of Huddle, “Conflicts don’t lie inside facts. Conflicts only lie inside our interpretations of those facts. It’s tough to create real solutions when the facts aren’t clear.”
Here’s his fact vs. interpretation framework and how he taught his co founder and team to use it:
Other founders added that as you work to create a new narrative, focus on trying to understand your co-founder’s perspective, not winning the argument. If you hit a wall, pause and take a break from the conversation. When you reconvene, stay solution-oriented by anchoring your difficult conversations in your shared vision and values. Remind each other about what you’re striving toward. Dive back into the problem at hand.
Often, co-founders get so deep in the weeds of a conflict that they can’t see the forest for the trees. That’s why you have mentors, executive teams, and board members: to support your business through issues like a complex co-founder conflict. So, if direct communication proves unproductive, it’s time to bring in a third party.
For example, Renato Villanueva from Parallel suggests role-playing a difficult conversation with a neutral third party. With the unbiased person pretending to be your co-founder, practice delivering your feedback or approaching a conflict, seeing how your pretend co-founder reacts. Try a few different tactics to see which delivery avoids unnecessary escalation. Similarly, bringing a facilitator to help you and your co-founder find a mutually satisfactory resolution. Mediation can be a cost-effective and less adversarial alternative to litigation, preserving the working relationship and potentially avoiding legal battles.
In some cases, co-founder conflicts may reach a point where an amicable resolution seems impossible. At this stage, it is crucial to consult an experienced business attorney before considering any legally binding decisions. A skilled attorney can provide valuable legal advice tailored to your specific situation, such as understanding your legal rights, obligations, and potential remedies, including co-founder exits. However, litigation can be costly, time-consuming, and may harm your startup’s reputation, so it should be your last resort to resolving conflict.
Co-founder conflicts can be challenging and emotionally charged, threatening the very foundation of your business. Though conflict is inevitable, the Outlander Community is full of founders who have been exactly where you are now. So, learn from their mistakes and get explicit about expectations, be proactive about co-founder conflict resolution, and don’t wait until conflict impacts the business’s operations to seek third-party support and legal advice to protect your rights and find a resolution.
Leila is a community and communications strategist who believes in investing in a better, more progressive future.
As we explore the unknown of each new investment, our Field Guides are where we document all that we learn along the way.
So, whether you’re actively raising, trying to break into VC, or interested in our game-changing portfolio, our Field Guide's got you covered.
Sign up now for exclusive access to funding opportunities, events/resources from our network of experts, updates from our portfolio, and more!