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SELLING A BUSINESS

Founder Resentment: How to Avoid It

Founders are one of the most begrudged players in start-up land. Here's why, and what you can do about it.
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One of the most challenging (and least discussed) aspects of business is the resentment that comes during negotations and dealmaking.  Whether you're entering a relationship as an employee, investor, or founder, the friction of aligning two divergent perspectives to do a deal impacts people emotionally.  Blood pressure rises, people can get angry, and, in the worst-case scenario, take that baggage with them.

A wise man once said: "If both parties don't feel cheated, you didn't do a fair deal."

While reaching an agreement often requires some work, simply reaching an agreement is typically easier than arriving at an outcome that makes everyone happy.  Without very thoughtful communication from both parties and a great deal of effort, achieving perceived "fairness" on both sides is rather uncommon.  Resentment can also emerge after time passes.  What is fair today might not seem fair tomorrow. 

Having known my fair share of employees, investors, and founders, I find founders are the parties that are most often the ones most resented in the start-up community.  There's good reason founders get caught in the crosshairs of negative feelings.  First, they often hold some of the largest individual stakes in a given company. Founders also have many different partners to negotiate with--employees, investors, as well as each other.

There are three types of resentment toward founders that seem somewhat common to me:

  • From investors who own part of the company's equity but aren't operating on it day-to-day.
  • From employees who own a smaller piece of the business but put in the same hours.
  • Co-founders who make different contributions to the business (in terms of hours or equity).

There is no perfect solution to the resentment issue simply because there is no truly fair arrangement.  For one thing, counter parties often define "fair" entirely differently. If you're a founder and sense employees, investors, or co-founders are feeling resentful, you're probably not alone. But it's often a waste of time.

I recommend founders abandon attempts at "fairness." The goal of negotiation--and business broadly--is not fairness. Instead, the objective is to advance the business in as reasonable a way as possible. Close the deal, move on to the next, and don't look back. 

Inevitably, in hindsight, your rearview mirror will frame a winding road of business decisions that seem insufficient.  We all wish we could have driven in a straight line.  But it's hard enough to make it to your destination, so don't bother beating yourself or others up over how you could have done it better.  If all your partners--employees, investors, and founders--can enjoy the fruits of your labor when you arrive, you'll all be happier.




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