Even the best of friends who start a business together may come to find out that they just don’t work well together as business partners. How should cofounders handle a situation where their relationship (or lack thereof) is detrimental to the business?
Ideally, founders will, in the very beginning while the business relationship is still pleasant, decide on a procedure for having one or more founders leave the company (while other founders remain to continue operating it), and have the procedure codified in a shareholder or operating agreement. Utilizing “shotgun” and other buy-sell provisions ensures that founders cannot simply force each other out or offer less than fair price, and non-compete agreements eliminates the temptation to start a competing business out of spite.
The first step in handling a toxic relationship between or among founders is to face the problem head-on. The founders should conclusively decide that their business relationship is unsalvageable or that their mix of personalities and business styles just won’t work together. Having everyone agree that there is an unfixable problem makes the separation process easier.
The harder part is deciding who should stay and who should go. The decision may be a little easier if, for example, assuming the business is already successful, one founder is better at running companies while the other is better at launching them, or one founder is the “business guy” while the other is the “idea guy” — in those scenarios, the “business guy”, better at running established businesses, may be the partner who should stay while the other moves on to do what he or she does best and start-up a new business.
In any event, and particularly when founders can’t agree who should leave or one partner refuses to acknowledge that there is a problem, it is best to get investors, advisors, and key managers and employees on board with any plan to have founders leave or be asked to leave. Keeping these groups of people in the loop not only prevents disappointment or disillusionment with the company, but also provides a more neutral view on the matter that can help founders come to the best outcome for the company. And, in a drastic step, if a founder is going to be forced out — assuming that the company’s operating documents have a procedure for a founder being forced out — it is obviously necessary to get all the parties who need to decide on the matter to agree to force a founder or founders out. The worst thing to happen with forcing a founder out is to create factions behind each side of the dispute.
Finally, the most important maxim to observe is to “never burn a bridge”. A breakup of founders should be a cordial process. If the breakup is simply the result of personalities or styles that don’t mesh, it should be emphasized that the departing founder or founders are *not* poor managers, but that this group of founders is a poor collection of managers. If a founder is being asked to leave due to some deficiency in his or her managerial skill, tread carefully if you choose to point out those deficiencies, and always do so in a constructive manner. The company should considering accelerating vesting of the departing founder’s stock options or restricted stock units, or allowing him or her to keep those options or units until they vest if legally possible. And if the departing founder is moving on to start a new venture, the other founders can try to help out wherever they can with recommendations or introductions.