Adding Your Co-Founders To Your Board Is A Bad Idea

Before I could ask him why, he continued yelling at me, “You put John on the board and not me! That’s why I’m pissed. I quit!”

 

There’s an implied prestige regarding your co-founders being on the board.

 

My heart rate shot up. I knew exactly what happened. The day before, I had asked John, our engineering VP, to be on the board.

I told John that I was selecting him because his engineering background augmented my business and marketing skills.

I told John that I would speak with Jim about this the next day (today). John, for reasons that weren’t clear to me yet, decided to tell Jim.

Now I was in damage control mode with Jim.

I tried to explain to Jim my reasoning (our skills overlap), but he was having none of it. He was seeing red.

Jim really wanted to be on the board, not for any other reason than he’d never been on the board of a company before. And I’d taken that away from him.

It had never occurred to me that it would be so important to Jim. I’d screwed up royally by missing the human element.

 

A great co-founder will understand if they’re not on the board.

 

I did the only thing I could do and say, “I apologize, Jim. I didn’t realize it was that important to you.”

“You should have!” Jim said to me.

The doorbell rang again. It was John.

My other co-founder walked in and sat down at the table. Jim kept yelling at me.

I looked over at John and he had a slight smile on his face as he watched Jim. Then, I realized it was a setup.

John wanted Jim to be pissed. Now, I knew I had bigger problems. I didn’t want Jim to quit, but he was replaceable.

We wouldn’t be able to raise money without John. “What was John up to?” I said to myself.

I started quickly going through the reasoning in my head.

John and I had been arguing about how much money we should raise. John wanted to raise less, and I wanted to raise more. Jim and John were friends. John knew Jim would react exactly the way he told Jim. Maybe John wanted to quit as well, so they could go on without me?

 

You should keep things simple and uncomplicated when you’re just starting out.

 

Sure enough, the next day Jim called me to tell me he was going to quit. I called John, and he told me he was quitting as well.

Now, I would have to start over and find new and better co-founders. I should have told Jim that he was not going to be on the board before I told John he was going to be on the board.

I also realized that I had dodged a bullet.

Marcia, our attorney, had suggested I set up the company with a one man board. “You’re not going to have any board meetings until you raise money, so keep it simple,” she said.

I didn’t realize it in the moment, but Marcia’s foresight saved me. If Jim and John had been on the board with me, they could have fired me.

 

More than half of all co-founder relationships end up in failure.

 

Sometimes it’s better to be lucky than good, and I got lucky.  You might not be so fortunate.

Over half the CEOs I've worked with have had significant problems with their co-founders.  The worst issues are where the co-founder is on the board.  Depending upon the language in your employment agreements, and the voting rights of your board, it can be really difficult to remove a problem co-founder from your board.

That's why you want to keep things simple and have a one-man board before you're forced to expand your board when you take on funding.

 

Epilogue.

 

Jim and John started their own company with the exact same idea as mine. They never were able to raise money, and instead tried to bootstrap their company by doing engineering consulting. The company folded after two years.

 

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