Comments on: When to fire your co-founders

By: Ulana

Ulana — Thu, 21 Oct 2010 22:52:13 +0000

Hi Sim,
You talk about weak founders that are chosen by the primary founder/entrepreneur. Have you ever seen a situation where weak additional founders are forced onto an entrepreneur by a VC in a very early stage startup? In this case the area of weakness may be different – they probably have great skills and experience in some areas, likely have had one or two successful exits, but might not really be in tune at all with the entrepreneur’s vision or goals, ultimately distracting the true founders from delivering on their first milestone.

Ulana

By: Sam

Sam — Wed, 29 Sep 2010 03:26:20 +0000

Ram, if it’s a tech-centric company, and if the techie co-founder plays a critical role, why can’t you change the share allocation percentages to make the techies more appreciated?

By: Ram

Ram — Fri, 20 Aug 2010 22:10:34 +0000

Hi- this is a great post, I just started a company and have been working with two really great techie’s ( I was a techie before and sold a company also, but that was with a different team). Both the tech guys have known each other for a long time and one out of them is a cofounder ( 30%) I own the rest 70%. As someone who does BD/Marketing and sales for the company am usually out of the town and travelling. Whenever I come back I just feel like I am completely not wanted in the company and anything I say with respect to discussing future growth and the lack of product release is looked down upon. We are at the brink of raising our first round of capital, but am not very happy with my role in the company and have a feeling that I will keep feeling the same as the company becomes larger because we are such a tech intensive company. I think our company has great potential and am really excited about what we do, but for me its also important that I am happy with the people I work with. I have talked to them about leaving the company but they panicked and forced me to stay. I just am not feeling it anymore. I really do want to just quit and let them run the company to the best of their abilities..Do you think I should wait to raise a round of capital so that they have some money to work with or will that create any issues with the investors. I dont care about stock because am 100% sure I can build a more successful company anytime, I just want to enjoy doing that. We are all in our early 20′s so am sure we have a long way to go.

By: ${username}

${username} — Wed, 02 Jun 2010 07:39:53 +0000

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By: Simeon Simeonov

Simeon Simeonov — Sat, 06 Feb 2010 13:27:13 +0000

Tom, founders usually get restricted stock and not stock options. What happens is that the company repurchases the unvested shares from the founder for a pre-agreed, usually insignificant amount per share. In other words, the founder who leaves loses the unvested shares.

By: tom

tom — Fri, 05 Feb 2010 07:50:54 +0000

What happens to a co-founder’s stock option when he gets fired?

By: Simeon Simeonov

Simeon Simeonov — Wed, 03 Feb 2010 16:13:39 +0000

Randy, it is a great time to bootstrap companies. At the same time, there are some anti-patterns of bootstrapping entrepreneurs should watch out for. As for one vs. more founders you don't know extremely well, I don't think there is a good answer.

By: Randy Shapiro

Randy Shapiro — Wed, 03 Feb 2010 06:58:54 +0000

Great post, Simeon, which is spot on. Some additional thoughts.

Unless a team of potential founders has previously worked together in one or more successful startups with a demonstrated ability to work well together and execute, the risks that they won’t gel will be higher for both the company and potential investors, especially with the demands and pressures of a startup. Assuming a founder can either self-fund or access sufficient seed capital, I contend they would be better off laser focusing on rapidly getting a beta version built, testing the product with potential users, and validating that real customers are willing to pay for the product/service.

Startup costs have never been lower and a founder can hire the necessary talent on a contract/temp basis until the company can demonstrate product and business model viability. With some initial validation versus just an unproven concept, they will have a more compelling, lower risk opportunity to help them attract top talent and investors. Plus, they can assess the contract talents’ abilities and fit without a co-founder level commitment. If they aren’t a good match, then the founder can pursue other talent with minimal cost & hassle.

If the company does plan to raise capital, a validated concept with interested customers is a lot more attractive to investors than an unproven idea with a full team of expensive founders. Keeping the burn rate to a minimum, running a lean operation, and delivering initial results with minimal capital will further increase their fundability. Yes, some investors will only invest if there is a proven team already in place, but if the business plan does morph into a new direction and the team doesn’t have the right skills, they have a much bigger problem.

They will have a better chance at success by adding management and staff when absolutely needed to meet company growth rather than building out a full team, then struggling to generate sufficient cash flow to cover the higher burn rate. Yes, it means more work and longer hours initially but unless the founders have a real passion and commitment to the business, they probably would be better off not pursuing it in the first place.

By: Simeon Simeonov

Simeon Simeonov — Wed, 03 Feb 2010 02:47:03 +0000

Yup, not all founder agreements need to look the same.

By: Simeon Simeonov

Simeon Simeonov — Wed, 03 Feb 2010 02:44:40 +0000

Basil, thanks for joining the conversation. I thought more about the notion of vesting schedules and your specific proposal and did a post on my blog. Where does the data that better vesting schedules increase probability of success by at least 50%? How is success defined?