Techstars Entrepreneur's Toolkit: Cofounder Relationships

Navigating cofounder dynamics can be difficult: nearly two-thirds of startups fail because of problems in the relationship. It can be even more challenging for student-led startups, where young cofounders lack deep relationship experience and have less patience for, or ability to, deal with these issues. So how do you advise students around these challenges? Trust is paramount.

Whether it is hiring the wrong people, giving the wrong amount of control to the team, engaging in too much (or too little) conflict, sooner or later your student entrepreneurs are going to come to you for help in dealing with issues with their cofounder. These problems can even arise when the business is achieving success, though they’re most common when the company is struggling.

Cofounder relationship problems often fall into one of three buckets: (1) relationship problems; (2) role and decision-making problems; and (3) reward problems.

While going solo may be the right solution in some situations, this often is not the best advice. (Research from the Startup Genome project shows that solo founder startups are significantly less successful and achieve success at a significantly slower pace.)

“If you want to go quickly, go alone. If you want to go far, go together.”

In this month’s Entrepreneur’s Toolkit Module, Nicole Glaros, Partner and Chief Investment Officer at Techstars, shares seven strategies for avoiding and dealing with fatal cofounder relationship issues. 

This topic is so important that there are two full pages of exercises in the Module Worksheets section. Check these out and see what is most helpful for you and your students as situations arise.

1. Understand the Odds. Students often begin pursuing a business idea with close classmates and friends. As a result, they don’t anticipate relationship issues. The simple step of helping your students understand that these will almost certainly arise at some point in the future can eliminate some of the shame and embarrassment that prevents issues from being addressed when they do come up.
2. Get Their Documents in Order. Ask your students whether all discussions any of them have ever had about equity have been documented. If they cannot quickly and confidently answer in the affirmative, it is time to stop the train and address this important subject. The best Campus Directors have a list of local, cost-effective (or free) legal and financial resources available that can help students with this. In addition to equity claims, other important documents include founder agreements and vesting schedules. With a typical exit timeframe of 7-10 years, Nicole suggests entrepreneurs reconsider the traditional four-year timeframe.
3. Cofounder Understanding. Again, while students typically start businesses with their friends, these people are usually their friends because they are similar. While that’s not necessarily a bad thing, it does set them up for overlapping — and missing — skillsets. The Toolkit Module Worksheets provide excellent exercises to help them identify strengths and weaknesses (and discuss how to manage those), share personal goals as they relate to the business, and talk about personal needs regarding pacing, work schedule, commitment, salary, etc. Most importantly, students should discuss the culture they want for their business upfront.
   
   Brad Feld’s book, “Startup Life: Surviving and Thriving in a Relationship with an Entrepreneur,” covers many of these topics and should be required reading for all of your students. 

4. Set Clear Roles. One of the most dramatic life changes can be when someone approaches graduation and enters “the real world.” As this happens, student cofounders need to set clear roles related to responsibility, decision-making, etc., and communicate about how and when those need to change. As students become graduates, and businesses grow, decisions must transition from egalitarian to more hierarchical.

   
5. Discuss the Elephant in the Room. Some topics are simply hard to navigate. The “Reality Check” section of the first Toolkit Module worksheet provides a brief list. Encourage your students to take a “player” versus a “victim” stance in a disagreement: Responsibility is seldom 100% on one party. Being conscientious, intellectually honest, and recognizing that personal experiences affect a worldview are critical approaches you must help your students take. Finally, remind them to state facts, not judgments. “Your marketing campaign stinks,” is a judgment. “Your marketing campaign did not reach the audience we wanted and we haven’t received any good leads as a result,” is a fact.
   
   The book “Difficult Conversations: How To Discuss What Matters Most” does an excellent job helping people positively enter into challenging discussions and also productively find a way out of them.
6. Build Trust Between Cofounders. Trust is built through vulnerability, honesty, communication, and shared experiences (especially when people follow through on what they say they will do). Whether that means taking student teams rock climbing, traveling, or through some other trust-building exercise, these experiences can have long-lasting impacts on the success of a student startup.
7. Get Help. One of the most important things students should hear is that their LaunchPad campus director is available to help. You can facilitate conversations that address cofounder issues. Often, campus director-led conversations can help keep everyone honest, say what isn’t being said, and ultimately provide the scaffolding of communication they will use to be successful countless times in their professional — and personal — lives.