Co-Founder Challenges & Near Death Experiences

February 05, 2016 By Dave Chase

Whether you believe near-death-experiences are just the realm of made-for-TV movies or not, the reality is that companies frequently have near death experiences too. Sometimes a company finds itself in death-like convulsions and suddenly a light is seen and begins to come back from the edge. And like the causes of death in the TV movies, causes of death for businesses vary. Often they are systemic issues in a business that simply isn’t viable. These are understandable deaths or failures. The ones that pain me most are viable businesses that die because of unaddressed owner / co-founder differences. And there are as many businesses that fail or don’t maximize value because people can’t work tougher than because the business wasn’t a good idea.

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Direct Communications

Some co-founder relationships, and ultimately their businesses, fail because of different perspectives on strategy or direction that can’t or aren’t reconciled. The real underlying reasons for failure here are all around poor or a lack of communication. Co-founders that either don’t openly communicate their deeply held views or who are afraid to work through difficult challenges openly are destined for frustration or failure. Much can and has been said about “New York values” recently in the political sphere, but I was well taught in my time there about open communication. Most were not afraid to address the elephant cowering in the corner. New Yorkers are a very direct bunch. The benefit of open and direct communication is that it strips away any of the guessing about how your co-founder feels about an issue. Then recognizing that you don’t have to agree on everything but that you need to be aligned externally, you can begin the real work of architecting options.

Control Ego

Even open and direct communication can fail when egos get in the way. We all have an ego, we just differ in the degree to which we have it under control and express it. Those who let their ego influence their decision-making excessively are bound to make decisions in their own self interest, rather than in the interest of the company…a behavior that certainly doesn’t maximize company valuation. It is ego that prevents a co-founder from listening to others perspectives. It is ego that lets emotion drive a decision rather than rationality. And it is ego that often damages relationships beyond repair because of the behaviors that so frequently attend it. One solution I’ve used to tame my own ego is to go on walkabout. Twice a year I grab my mountain-bike, backpack and a notebook and get away from all distractions…far outside of internet connectivity…for at least two days. There I rapidly get focused on what really matters as the noise begins to fade. It is on walkabout when emotion and ego begin to fade and I’m more able to focus on what the “right” decision is. Regardless of location, find your walkabout place to free you from the noise, then come back together to address your differences.

Getting Out of the Way

Gaining control over ego will then open your mind to the possibility that sometimes there is a need to change your co-founding roles. And not because you can’t get along, but with ego out of the way, you finally may realize that others might take your company to a far better place than you can with your skills. Frequently that means bringing in additional help, rather than simply exiting. But outside of a few rare co-founding CEOs, CTOs, etc, most of us are not the ideal leader to take the company from idea, through startup and growth, to enterprise level company. Recognizing the need to supplement talent is one way to improve the value-adding longevity of co-founding relationships. Be open about your skill gaps and bring in additional support as needed.

In the end, most founders and co-founders are looking for a thrilling value-creation ride with a great exit. The partners that will potentially provide that ‘great exit’ are assessing the value of your business at the first moment they meet your team. For co-founders that haven’t paid proper attention to working through their own issues with co-founders, this is what your potential partner might be thinking:

“Darn, this entrepreneur is terrific and I want to believe in the product, but the other founder is a bit of a bonehead and doesn’t quite fit. I suppose I could talk to the lead founder, but that has backfired on me in the past because of unknown personal relationships that existed. And the last thing I need is a reputation of busting up founding teams which would keep other deals away from me. Truth be told, it is the CEO’s fault for still having them as part of the team. There is too much team change to work through so I’ll back off and give them a polite non-reason.”

Avoiding co-founder challenges, thinking they’re too hard to address or that they’ll eventually work themselves out, is the worst thing you can do. Be proactive and lead. Tackle them early so that you can avoid business failure or a lesser valuation than you deserve.

David Chase, Managing Partner at Advanced CFO, has experience in small to medium private companies and large public companies as a senior operational and financial leader.  With 17 years in finance, a CFO of multiple entities and divisional EVP experience, Dave has a breadth of experience.  Dave has led or been instrumental in raising multiple rounds of equity and debt in excess of $450 million.

www.advancedcfo.com

 

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