Aug 31, 2020
How To Minimise Co-Founder Conflict
Two heads (or more) are often better than one, especially in work environments. Entrepreneurs all over the world prefer to team up with someone rather than to ride solo — especially before they decide to take their startup to the next level and scale up. A 2015 study on venture capital consulting conducted by The Rotman School of Management demonstrated that a new venture is more likely to succeed if its founder builds a bigger and more experienced team.
Similarly, entrepreneurs who are looking to invest in Indian startups are eager to understand a team’s ability to use their combined strengths and execute business ideas. Two of India’s most successful investors, K Ganesh and Sunil Kalra, spoke with Economic Times about what they look for in startups. Where Ganesh believes that a venture must have at least two co-founders who will support each other throughout the process, Kalra always seeks strong teams of motivated entrepreneurs who are passionate about the impact of their work. Moreover, according to Kris Gopalakrishnan, chairman of Axilor Ventures and one of the seven founders of Infosys, entrepreneurs should start a company with co-founders if they want to hit the right chord with the best investment firms.
Beyond the prospect of funding, co-founding also presents a vast number of learning opportunities. Co-owners bring shared passions along with diverse skill sets, experiences, and perspectives to the table. Even then, the acumen of multiple entrepreneurs is not enough — a team must be on the same page if they want their ideas to take off.
People say that teamwork makes the dream work, but what happens when collaboration doesn’t make for smooth sailing? Statistics show that team conflicts are the third most common reason for startup failure (with a lack of market need and financial problems being the first and second respectively). Five primary causes of internal conflicts are misalignment of goals, values, and ethics, lack of communication, personality disputes, unclear expectations around roles, and lastly, power struggles around ownership, remuneration, and investment of resources.
Keeping these in mind, here are three essential strategies towards minimising the aforementioned reasons for co-founder conflict:-
- Build a solid and communicative team
“Coming together is a beginning; keeping together is progress; working together is a success.” — Henry Ford, founder of the Ford Motor Company.
At the heart of a cohesive team is clear and consistent communication. To find compatible teammates, spend time together to understand one another. This will mitigate conflicts related to personality clashes, miscommunications, and unclear expectations.
Adapted from Harvard Business Review, Inc., and Embroker, the following are key considerations you must keep in mind while looking for the right co-founder/s:
- Do you get along?
Co-starting a business requires you to spend a great deal of quality time together, so first and foremost, you need to have a healthy and complementary rapport. Make sure that you and your teammates trust one another and are ready to learn together.
When thinking about personalities, it is vital to consider whether you have compatible temperaments. How do you manage daily stresses? How do you cope with change? How do you handle conflict or crises? - Do you share values?
A company’s work culture, goals, decisions, and services are predicated on the values of those who run it. Right from the get-go, create a unified vision by discussing your passions, principles, and priorities. It is also important to discuss your ethics and the potential tradeoffs you are ready to make in order to meet said values. - Do you work well together?
Talk about boundaries around work styles, communication, responsibilities, and decision making. Define what kind of relationship you want to have, i.e. will you be friends or colleagues or both? If you’re already friends, how will you keep things professional?
While it is understandable to be intimidated about working with friends, there are plenty of successful cases entrepreneurs can draw inspiration from, such as: Noom (software company), Paperweight Entertainment (production house), and Retas Enviro Solutions (‘waterpreneurs’). - Can you assess each other’s strengths?
Determine your unique skill sets and areas of expertise in order to demarcate each founder’s responsibilities. If there is a need for overlapping responsibilities, discuss how you will make that work. - Can you acknowledge your own weaknesses?
Be transparent about the areas that each of you struggle with so that you are prepared to provide support accordingly.
2. Create and revisit your co-founders’ agreement
Once your team has established common ground, create a written legal agreement in order to solidify goals, responsibilities, expectations, and dispute management strategies. Address the fundamentals: equity ownership, vesting, decision-making, intellectual property, and exits. Use this document to comprehensively outline the following areas:-
- Goals and incentives
Lay out your individual incentives and ensure that these align well with those of your co-founders. Use this MoU to define your collective vision, goals, market need, products and services, growth strategies, and measures of success. - Equity ownership
Divide equity ownership and profits based on the following: areas of expertise, monetary investment and capital, responsibilities, time, and intellectual property rights. - Vesting
Create a vesting schedule to determine how co-founders will earn shares periodically. In the case of exits, this will serve as a mechanism to re-divide shares appropriately. Consider attending venture capital consulting sessions that communicate and discuss the advantages of building a vesting program. Seekwiser says that the vesting of shares can be time-based (the amount of time spent by each member,) and milestone-based (when the business reaches certain milestones.) - Decision-making
Be crystal clear about how you will discuss company decisions, who is allowed to vote on these, and who makes the final calls. - Intellectual property
Firstly, identify what the intellectual property is and what makes it unique. Secondly, protect it through patents, trademarks, copyrights, and trade secrets. - Evaluation opportunities
Curtail miscommunication by creating a path for regular dialogue and feedback strategies. Set aside time without interruptions to touch base on projects, ideas, and goals. - Resolution roadmap
Create a predetermined plan of action for reaching solutions that prioritize the business and its objectives, not personal agendas. Define avenues for professional third-party help i.e. from lawyers, conflict resolution experts, execution coaches, and training groups. If you are eyeing a venture capital fund, consider attending professional consulting sessions led by experienced investors. - Departure clauses
Set clauses for voluntary exits and for circumstances that require the removal of a co-founder.
If things aren’t working out, be ready to embrace change and strategize. Working together requires you to acknowledge the fact that priorities and bandwidths evolve, and mistakes are natural. Keep the lines of communication open and revisit the discussed factors to decide how to proceed during tough moments.
3. Normalize conflict
The healthiest and most practical approach to minimising conflict is accepting it as a manageable possibility. While it is natural for us to avoid conflict, allowing issues to fester will only increase the likelihood of conflict. Disagreements do not have to mean that a company is falling apart, and instead can be a sign of opportunities to build a stronger team.
Here are a few things to keep in mind during difficult times:
- Set the tone
Avoid starting a conversation when you’re feeling distressed. Take a couple of days to think and avoid acting rashly. - Speak privately
Discussing issues among employees is unprofessional and a sure-fire way to hinder morale. - Don’t make it personal
Don’t make judgments based on character. Although feeling an emotional attachment to one’s own work is normal, try to take emotion out of these conversations in order to consider different perspectives and come to a solution. - Think about your teammates’ fortes
Pay attention to the efforts of your co-founders. First Round Review suggests noting what your teammates are doing well on a daily basis. Appreciate and capitalize on each other’s strengths!
To quote Robert Ferguson, co-author of Making Conflict Work: Harnessing the Power of Disagreement:
“The clash of ideas, the claims, interests and preferences can be used as a positive force. It [conflict] can lead to creative and innovative problem-solving. Instead of me against you, it becomes us against a problem.”
Behind many successful ventures are co-founders that leverage their skills and passions to work together, grow their companies, and become market leaders. As with any relationship, such teams are likely to face disagreements. Combining forces may lead to conflict, but the effort fosters dialogue, creativity, learning, improvement and ensures a better chance at success when it comes to building your company. In short, teamwork is worth the while.
Written by Aakanksha Gupta
Eximius Ventures is a pre-seed stage investment firm investing in young and dynamic Indian Entrepreneurs with a precedence for female founders. You can reach out to us at pitches@eximiusvc.com.
