How not to have a conflict with your co-founder?

Planning to give up that cushy, well-paying job since it is not exciting enough?

Think again since launching a startup after any number of years of experience and in any part of the world is quite an arduous task with a very low probability of succeeding.

It is often said that your chances of winning in a casino are higher than you succeeding in your first startup.

However, the returns, both financial and professional satisfaction, makes up for all the uncertainty and hard work that goes into it.

Once you have decided to quit your job, a standard question which pops into your head is that, should a startup be done in partnership with another person(s) i.e. Co-founder(s). After speaking with more than 50 entrepreneurs, an overwhelming number of these founders mentioned that even if they could do all the work by themselves, they believe that co-founder(s) play an extremely important part in the startup journey so that they could brainstorm on a critical item, to complement each other with different skill-sets and temperaments, to encourage each other when things go wrong, and most importantly be the drinking buddy and cuss the world when the world came crashing at their feet (which happens more often than not).

When your chips are down i.e. you are not getting the required traction/revenues or funding to survive/scale, you can expect very little help from outsiders. Sometimes even your most ardent supporters start telling you to reconsider the decision to be an entrepreneur and the negative chatter around you makes you weak. In such moments, only one person understands you completely and that is the person who is in the same boat with you.

Even if the business is not registering month-on-month growth of customers, or your bank account is dwindling fast and furious, you and your co-founder(s) can feel that they are the kings of the world because they have each other. The irony is that not even your parents or your significant other can replace this person as they are not completely unbiased and are not in that exact situation.

However having a co-founder has its own challenges; when the business grows multi fold within a short span of time, possibilities of co-founder conflicts and ego clashes always exist. Success, fame, and power can make it even more difficult and you are at risk of shifting your attention from your goal and get caught up in inane things such as power struggle among other things. While belief and trust in each other are really important, in my experience, a strong structure amongst founders is needed so that your dynamic is bulletproof.

Today, I will attempt to provide you with some principles that can substantially lessen the chances of co-founder conflict and in the process will break some myths:

1) Unequal partnerships are better than equal partnerships

Most startups have a 50%-50% split or a 33.33% split (in the case of three co-founders) in the shareholding of the Company. While this structure sounds fair and democratic, it is one of the main reasons for arguments later in the journey. What I am going to suggest may sound counterintuitive, but is one of the simplest ways of avoiding conflicts. Practice the rule of 51%-49% in all forms of partnerships which needs to be established almost at the start of the journey. Here I want to clarify, that I am not necessarily referring to only 1% delta but to an unequal structure which could be 55%-45%, 70%-30%, or 40%-30%-30%, as the case may be. Let’s call the difference, “Delta Equity”. If everything is equal between the founders, then 49%-51% is a good structure.

Whenever there is a deadlock between founders, the delta equity grants that veto power to one of the founders to take the final decision. In all honesty, high growth startups run at a pace where consensus building (for small issues) cannot be given a lot of time. You need to define the metric for granting that extra 1% to one individual after a healthy discussion and be comfortable why that has been done. Also, that extra 1% comes with lots of responsibility and accountability on daily basis. It’s not permanent and can be rotated.

You may automatically believe that this 1% extra will always be given to the CEO of the company but that’s not true. A CEO is just a temporary top executive of the Company, who can be replaced by another founder at a later date or an outside professional. We have already seen that trend in case of Flipkart. However, more often than not, that delta equity will also go hand-in-hand with the title of CEO.

When other founders give that ultimate decision-making power to one founder in moments of deadlock, it is the trust that they are placing in him/her. “I trust you because you have more experience, you come from relevant industry, you have put much more money than the others, and above all, you guarantee that there will be money in the bank ALWAYS”.

However, the biggest belief here is that he/she wishes well for all other co-founders and above all the Company, and his/her personal whim and fancy will not dictate those decisions. It is like the captain of any sports team who is given that mantle by the other players, their Board, the coach, and above all the citizens of the country. Even if his/her decision does not lead to the desired result, nobody should blame the captain because there was no question mark on his/her intent.

2) Respect 

I can’t emphasize enough how important is this condition throughout your startup journey. Mutual respect amongst co-founders, once lost, can lead to the debacle of the company. Debates and difference of opinions are healthy and should always be encouraged but not respecting the other co-founder for the capability or intent is just a strict NO.

More often than not, in order to not bring those differences on the table, founders live with those conflicts on a daily basis, which can be draining at many levels. I call it “Running a racket against the other person in your own mind”. Therefore, to avoid such conflicts, in the long run, broad division of power should be done, and sooner the better. It will lead to mutual respect, a positive relationship, and mindset for the betterment of the company. Also, founders should agree that they will talk both good and bad things to each other the minute it arises in their head. A healthy practice could be to do breakfast or lunch together if they are physically in the same geography and talk about personal/emotional things rather than work. Room for miscommunication and pent up frustration with each other will minimize a lot.

3) Role clarity

Businesses will flourish, partnerships will thrive, and social associations will be fulfilling if there is role clarity clearly established. Co-founders come together on account of their expertise or passion for certain areas of the business. Based on that, they should be given complete ownership of those roles and they should have complete authority in those areas.

The decision-making process amongst co-founders is very critical and there shouldn’t be any room for “INDIVIDUAL EGO” since the whole motive is the general well-being of the company. However, since we are all humans, and such conflicts are bound to happen, respect, role clarity, and agreed-upon veto power is the three weapons which can conquer such clashes.

In the end, I will again say, trust and belief in your co-founders is a necessary condition but not sufficient. Relationships flounder and Company fail in the absence of appropriate founder arrangements. Integrity is when you see something wrong, and you say right on the face of your co-founder before anybody else tells him/her. Don’t let that racket run.

Now it’s your turn: Have you experienced a co-founder conflict? What other types of things should co-founders be discussing in the early days of a startup and getting clarity on? Is there anything missing from this post? Please share your comments and lessons learned below!

P.S. If you've experienced any co-founder conflict, or have any questions, please share them either in the comments or message me. This is a topic that is rarely written about or discussed, but it really should be.