Now you see me, Now you dont! — Absent Co-founder

Over time there are situations in the stage of the business where co-founders disagree on matters — future direction, priority of hiring, opinions being overruled etc. Disagreements are okay. But it needs to be addressed. One also sometimes gets to hear — “you manage your domain, and let me do mine just as we have been” and if not talked between the co-founders it can become a bigger problem later on. As with may situations, they get bottled inside and then it erupts.

One such silent killer is ‘Absent or missing co-founder’ — present on the cap-table, but MIA. You dont find the co-founder in meetings, sluggish in response, unavailable most times or engaged lesser and lesser, while the main founder then dons the hat as the Saviour and then goes about attempting to run the ship taking on what she/he has to do given the situation. Some succeed for a period, but at a cost which one does not know — for the company and also personally. Yes, salvaging the situation does involves other investors and the frantic discussions on how to get the founders aligned to then moving to how to get the founders share out. Each one on the team — including some business angels and if they have an institutional VC onboard tries to help in all aspects possible. All this while managing growing business, operations, trying to raise funds but in vain. The ‘absent co-founder’ is now a ‘dark hole’ in the cap table potentially also what ends up as a start of the end for the startup

Founding team and trust between them is key, but also the evolution of the founder as a CEO of her/his business with other stakeholder to keep all players engaged, included in that journey. Second-guessing is not debate. Yes personalities can and do clash and sometimes the core is not the business but how one manages (or does not) the interactions and decision making workflows. Private conversations rather than public display of loss of affection would certainly aide the process. Bringing clarity and evolution to the decision making process earlier is also the role of CEO or main founder and not to veto ideas of others.

Many reasons of disengagements. Situations and priorities in lives of founders change. Conflict about compensation and equity is also a source of acrimony among founders. Better to have clarity from start and not just english “we shall take care of you and there is huge upside”. There is no magic formula for the split. for say 50:50 — there will be equally number of views who agree or disagree with the ratio. But I also understand to save cash (which you dont have now) and to attract talent you offer equity to talent. Thats when the Founder has to look at — if talent with equity is an employee or a co-founder potential. One can also have an employee who in time as one matures in the risk taking and contribution to future growth of business evolves to a role of co-founder (not to be mixed with rewarding for employee performance alone). If you find a co-founder by all means make her/him one but do have conversations on scenarios — which may or may not happen — what if one of co-founders wants to quit, disagree on a future acquisition or operations and strategic decision making framework. Its important to have these co-founder discussions even if one does not want to “waste time” on these aspects. It can only help in speed of execution and institutionalizing matters.

Domain based skill sets normally tend to lead the initial period of decision making, which is fine as long as there is no gridlock. As teams add, stage matures, talent is being attracted — would be useful to reassess and evolve the agreements between co-founders and let go of certain decision making to talent hired or to the other co-founder(s). Someone eloquently put it — Transparency is not about sharing all decisions, but helping understand the context in which founders and organisations are taking those decisions. Situations will test all relationships and how you navigate them will also shape an aspect of your future self

While in most stats, lack of funding could be amongst the top 2 reasons for a failure, amongst other challenges a silent co-founder occupying a sizeable stake on the cap-table certainly advances the funding winter to a company. Less talked about but even more painful are the ones who continue to earn revenue and remain “also present” in the market, hoping one day the tide would turn. And this is not only for startups. Look around and you will find SMBs, families in a similar spot. Co-founder agreements are present and have been used by many. How often founders use and are being insisted by investors as they come on board could vary.

But as a founder — its your company and you and your co-founders need to not lose opportunities for dialogue on uncomfortable topics also. There are places where HI is better than AI.

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
Sameer Karulkar is the Founder and Partner at Coverpage Ventures Advisory LLP. If you wish to follow Sameer — https://www.linkedin.com/in/sameerkarulkar/ or https://twitter.com/KarulkarSameer