Do I have the right cofounder?


October 19th, 2015

I left my high paying job, and took the leap to develop our product. Although our business was supposed to go live in January, we missed that deadline and made it for June (6 mos late but didn't get support and funding required).

I have been the primary developer putting in over 60 hours a week while cashing out retirement funds to allow my family to survive. I've started taking draws from the company but it's literally just draining the company now at this point.

I want to get him and I on the same page but he requires a salary more than I. What should I do? The only business we have received was because of him, but i'm starting to feel I should look elsewhere for less equity and more time. I signed up for a partner and I don't have that experience anymore. All I dream and think about my company and I don't think I have the same with my partner.

Shobhit Verma Ed Tech Test Prep

October 19th, 2015

Sorry to hear Doug. You are personally in a bad situation because of cofounder issues and your company seems to be solving a problem where there is not enough money unless you are able to build a cheap distribution network (building which takes a good team and a lot of effort) . I was in a similar situation once and although it was heartbreaking, I had to take up a job again, wiping out years worth of work. I do not regret it. Sometimes you have to cut your losses and move on. If you want to talk, please ping me on academics at gmail dot com

Michael Brill Technology startup exec focused on AI-driven products

October 19th, 2015

When you're digging into your retirement, you've crossed a line that you probably told yourself and your spouse you'd never cross. Remember that financial ruin comes slowly, then all at once. Stop it.

Assuming you're living as frugally as you can, take every penny out of the company you can. Without you, there is no company and the worse your personal financial state is, the worse your decisions and execution will be. I'd give zero shits about what your partner or anyone else with a paycheck thinks of that.

But to Neil's point... do you really understand your market? Do you understand how you can get to self-supporting revenue? I don't know what the investment scene is for non-profit SaaS in Hartford, CT... but I've got to imagine it's not easy and generating revenue from the company is critical to your capability to continue with it.

If you can't see a way to do that, then stop working on it for a week. It'll still be there. Go think about what you'd do if you weren't working on this... just don't work on it.

After a week you should have some new ideas how to make it work. If you still can't realistically see a way to sufficient revenue generation and you don't have immediate investor interest, then read Shobhit's response again.

Neil HereWeAre Want To find-close Business Online without competition Before They Google Search? We solve this problem 1(508)-481-8567

October 19th, 2015

I'm going to be a bit hard and straight.

What said to you "start this? Did you vet it, know the market, study what problem you solve, clearly define a need, know who would be a logical target audience,  know how to reach them,know if your "price" actually would be paid v other alternatives and why, know how to clearly set what you have up as better but more important, needed v competition and current way of doing things, know how to get to and connect with the actual market you identified so you could go out and make sales?

Do you actually know how big your market is and I don't mean a gazalion people "need"-use what our thing is or does so all we need is to het 5% and we made it big, i mean actually knowing how many potential customers you can have and why.

Thats not a partner thing, its the basis around which startups either fail or succeed. its the real indicators of is this even worth it or not. Did you do all of that before you jumped in and pumped in all the cash you have???

Gopi Mattel General Partner. Lifeboat Ventures

October 19th, 2015

The subject line that you used indicates a loss of common purpose and trust. You may need to pull back your level of commitment to a place where you feel that it is in balance with the other founder. Also running off retirement funds must be adding to the stress, so taking up a consulting job as the primary income stream maybe important.  It maybe possible to still stay involved, but give a drop-dead date to start the company or get out of it.

Patrick Muggler

October 19th, 2015

I have been in a similar situation myself. When my partner and I started we got into an understanding of how many hours each of us would put in each week and what we should accomplish. However, half the way through the project he changed jobs and stopped contributing. At that stage I told him that he should leave the company. 
After he left, I brought another person on board to partner up. It is important to understand each other's personal cash flow requirements and how long they can sustain boot strap mode. The set the milestones to survive.

If your partner does not have his heart in the company and is not contributing, it is time to boot him out and find another person to replace him (fast). 

I imagine that you have done all the due diligence into your particular space before jumping into it full time.

Joe Albano, PhD Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.

October 19th, 2015

I see a lot of advice about removing / separating from your current partner and it certainly may be time to do that. The big challenge is HOW to separate? What is the value of the contributions (financial and other) that your partner has made to date? How will those contributions be recognized? Who has rights to any work done to date and other IP? What about physical assets?

As others have pointed out, it's great to have agreements, milestones, etc. It's also a good idea to have a plan / process for dealing with changes to priorities and situations.

Patrick Muggler

October 19th, 2015

@Joe Albano: You are correct. The way of separating is always very hard to determine on who did what and the value created, given personal biases.

Here are my recommendations:
1) Estimate the hours each partner contributed and assign a value on an hourly base. Divide up the shares based first on hours of contribution and maybe on milestones value reached.
2) Moving forward the remaining partner will get more shares while the exiting partner will not. This will dilute the exiting partner. This requires a quick valuation of the company which can be based on hours of work and any revenue minus expenses (keep it simple) or IP value.
3) All the IP and work created belongs to the company. Both partners should sign documents regarding this.

Hopefully when the company was formed, the bylaws and vesting agreement would have covered this type of situation. If not, then the above should be a starting point. However, each situation is unique and needs more details.

Joe Albano, PhD Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.

October 19th, 2015

Referring to the question in the title of your query: you have the "rights" that you negotiated with your partner (and your team). If you don't have a clear understanding about what those rights are, there is no time like the present to either get clarity or to figure out the most amicable way to part. 

Christopher Wilson Tech product manager, Infusionsoft expert, process automation fanatic, veteran startup exec, & seasoned pitch man.

October 20th, 2015

After forming three companies and running into the same thing each time, they will probably not change. It's sad but true, normally one or two founders has much more passion and drive than others. Hopefully you have an operating agreement with vesting in your ownership of the company so you can get the equity back.

Roger Smith

October 19th, 2015

When starting your company the #1 thing in my book is your team. There will be ups and downs and you will argue but you need to have complete trust in each other. With that said, in terms of salary you should each be drawing the minimum amount you need to survive, it might not be equal given each of your situations. But again it should be the min you need to survive, if your partner is taking more for "extra" and you are drawing on your savings, that is a problem. It is also a problem you are drawing on your savings. Do you have a fundraising plan to get out of that situation?