6 Steps to Respectfully Firing Your Co-founder
The first months of running a startup are exciting--almost intoxicating.
You and your co-founders have been working nights and weekends to craft your product and company vision. Maybe you've quit your jobs and are working feverishly to get something to show. Perhaps you have a prototype and started showing it around to a few friends and friends-of-friends to great applause. You might have even gone public with a website or app and acquired a few customers or users.
Things are looking pretty good. But once your company sheds its side-project status and morphs into a this-is-serious company, you have entered the startup pressure cooker and everything changes.
The official kickoff typically entails making tough decisions--quitting your job, raising some capital, or taking on obligations (space, new hires, etc.). This stage is also when you may need to jettison your company's deadwood--that is, a co-founder who isn't pulling her weight.
It's a bitter pill to swallow, no doubt. After all, this person was with you from the beginning, and you probably have a long history together. But cutting loose a free-riding co-founder is potentially business-saving medicine that can help move your company forward.
If you're ever in this unenviable position, here are six steps:
1. Heed the warning signs.
The members of a good team like one another. Great teams consistently communicate and ask the tough questions. Great teams consistently test the business assumptions and review the role everyone is playing to meet the company goals. In this process, great teams and great team members know when something is amiss.
Missed deadlines, tasks completed that are low priorities, discussions about tasks continually morphing into a discussion about vision are just a few areas that tip you that someone is out of sync. If you are seeing examples of this, you must sit down with the founding team and get it out in the open. Now. Every day of delay is a waste and burns valuable fuel (time and capital).
2. Ask your advisers and mentors for council.
I have talked about the need to find advisers you can trust. If you raised capital, these can be your investors or board members. These are the people to whom you reach out to raise this serious concern. Believe me, this is not the first time they have seen this. If you have built a foundation of trust and transparency with your advisers, your anecdotes regarding your co-founder should easily resonate with them. They know your collective vision, priorities, and tasks. Share the founder-disconnect concerns with them and use them as a second set of eyes.
3. Talk out options with your legal council.
There are certainly legal bases to cover to make sure that you execute this change the right way. In most cases, we are referring to things such as salary, equity vesting or distribution, and equipment. These are easily handled with your legal council. Do it.
4. Check in with advisers again (this is not an easy decision).
There are softer, more informal issues that are many times more important than not breaking the law. These are important, as they set the tone and represent your culture to employees, customers, partners, and supporters of the company. Think through the message you want to leave with all of these constituents. Consult your advisers again and test the message.
5. Bite the bullet.
Your first task, when you have your ducks in a row, is to sit down with your co-founder and lay out the plan. Be honest. Be direct. Tell her that this decision has been made, and move on to the outcome. Be respectful. Minimize your words.
6. Be open with your company's stakeholders.
Execute the soft plan with employees, customers, and partners. Again, minimize the explanation, message with confidence, and then move on. Too much conversation shows weakness. Ignoring that there was an issue is naive. Remember, it’s all about the business.
CHRIS HEIVLY | Managing Director
Chris Heivly was a co-founder of MapQuest (which sold to AOL for $1.2 billion), sole managing director of 77 Capital (a $25 million venture fund), and an executive at five software companies. Currently, he is one of two managing directors of The Startup Factory, a seed investment fund making 10 to 14 new investments per year. A national writer and speaker about startups and startup communities, Heivly is also the founder of the Big Top Job Fair.