What Are The Challenges Of Having More Than 2 Cofounders?
I think people that have never started a company have this perception that being a founder gives you some hidden decision making rights. “Ah, you’re a founder, you must be involved in every key decision? Right?”
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Wrong! Being a founder does not (or at least being a founder should not) give you special decision making rights. That’s why you have a CEO.
Interestingly enough, two of my four co-founders seemed to think they had special rights. And they told me so.
“Ken” and “Randy” struck right when our initial funding was about to close. They said they had to meet with me about something urgent before they signed the closing documents.
So I invited them to my house on a Sunday afternoon. We met downstairs.
Randy, who seemed to be the ringleader, spoke first. Randy explained how upset he and Ken were that they weren’t involved in negotiating the final terms of the term sheet.
Your co-founders will not likely understand fundraising as well as you do.
Randy went on to say that they felt we got a crappy deal, and they were worried they were going to be made fun of. I said, “Who’s going to make fun of you? We just raised $12 million in a really tough environment.”
“We should have only taken $6 million,” Randy said.
“I can go through the numbers and show you we’re better off with the $12 million.”
So, I sat down and worked through a simple spreadsheet showing them that our percentage ownership was higher taking $12 million now rather than $6 million.
“You have to be wrong,” Randy exclaimed.
“Okay. Why don’t we have a meeting with Marcia (our lawyer)? She’s seen a lot of deals, so she’ll know if we got screwed.”
Randy and Ken agreed that we should meet with Marcia. But they weren’t finished.
You have to say no to unreasonable demands your co-founders may make.
“Going forward,” Randy said, “We want an ‘Office of the President.’ Ken and I are senior people, and we need to be involved in the key decisions the company makes.”
Then Randy said, “And I don’t know if we are going to join the company if you don’t agree.”
I looked at them and I repeated what Randy said. “Just to be clear, you want me to have an ‘Office of the President’ where you will be involved in every key decision. Is that correct?”
“Yes. It’s in the company’s best interest.”
“I see. But that’s not something I can agree to do.
“It’s just not feasible (the office of the President). Can you give me an example of any startup that actually succeeded with this structure?”
Randy thought about it for a minute. Then he said, “No.”
And that was the end of that.
We met with Marcia the following week. We were in a big conference room at Marcia’s office.
Randy then explained his concerns about looking like fools.
Don't expect your co-founders to ever give you credit for being right.
Marcia looked at him, smiled, and said, “Are you kidding! You just raised $12M in this environment! You got a great deal!”
Ken looked at Randy and said, “This isn’t our first rodeo.”
Marcia answered a few more questions, and then said, “Brett and I have some other things to discuss.”
Randy and Ken left the conference room.
Three months later I fired Randy. Ken was gone within one year.
For more, read: What Are The Six Traits Of Great Co-Founders?
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