‘All Business Relationships End, Whether It’s An Exit, Illness Or A Falling Out. What’s Your Plan?‘

Cillian Balfe – Lawyer

‘Everyone has a plan till you get a punch in the face’. Losing your co-founder feels like that. Over the past decade, I’ve started a good few businesses, some more serious than others.

Starting a business can be quite impulsive and tends to draw optimistic people together, which maybe isn’t a great recipe for pre-planning. But, over that time I built a simple pattern for spotting types of co-founders.

In this post, we’ll learn about my experiences with 3 types of co-founders, the good, the bad and the ugly. How you can avoid the ugly, and find the good.

Ultimately all relationships end, whether that’s an exit or a fallout. I’ll show you what I did with each real-world situation, and how you can be smarter about it.

We’ll hear from my solicitor who advised on some of the exits. He’ll give his experience dealing with a lot of company breakups.

Also an interview with my co-founder of Bullet and how we managed our split to remain friends and work buddies.

I’ve put together a simple founder’s workbook I think every team should fill out, it starts a good framework before the high fives stop.

Take Away:

– Founders can be grouped into the good, the bad, the ugly. Avoid the latter.

– A little pre-planning will help you find the right partner and save a lot of heart-ache.

Over the past 10 years, I’ve got into business with a good few co-founders. They can be loosely grouped into three.

The ‘Good’, these are people who want the same things as you out of the business.
The ‘Bad’, these aren’t bad people they’re just not looking for the same things out of the business that you are.

The ‘Ugly’, these were bad people you don’t ever want to get into business with.

The most common fall out is the ‘Bad’, where people just want different things. Let’s dig deeper.

– Our Mail To Our Lawyer –

That mistake would mean to get it fixed we’d have to go to the high court (the highest court in Ireland) and the costs start around €50-€70,000.

Our legal advice was that the judge would just tell the two barristers (lawyers) to work it out amongst themselves.

The biggest learning curve I got from the Courtside of Law is unless a law has been broken it’s very hard to prove anything. It’s a lot of he said, she said. Pointless.

How even if we had had a contract and myself and John deemed that contract was broken we could remove him and it would be up to him to pay €70,000 to take us to court. So the €1,500 we saved on a shareholders agreement could have cost us €70,000

* Note I’ve heard few stories of people using the high cost of a legal system to force young bootstrapped founders hands do be careful.

In the end, our solicitor Cillian suggest just sitting on it. He felt over time the guy would get bored and want an out. That’s exactly what happened, he offered his share for about €4,000 and we bought them from him.

Company:

If we hadn’t have been able to shake him off it would have affected our ability to raise money. Usually, founders are connected to a company in 3 ways, employee, director and shareholder. The later, shareholder, is the hardest to shift. Shares are seen as private property. It could have killed our company.

You want to manage this situation well but also don’t let it consume the company. Nothing happens fast, get good advise and be clever. You might be all angry and ready to take them to court but is that a wise way to spend your money.

Regarding his skill set – we simply hired a new accountant. There was no need for him in the end after all. To save some money we hired a graduate and paid in cash.

Mental Health:

If startup life isn’t a struggle already having a Frank wandering around your company can really bring you down. It’s like you’re working your ass off so they can just turn up for the party and their slice of the cake.

Manage it well and stay focused on the company. BTW Getting a lawyer who wants to go to town on them, isn’t always the best solution. Your solicitor should give you a good rationale soundboard, even if at the time you want them to empathise with your anger at the unjustness of it all.

Take Away:

– Absolutely keep away from ‘Ugly Founders’, at all costs.

– If any of the flags I’ve highlighted above happen, start to document situations and look for a 3rd party to give you objective feedback.

– Don’t rush to court. Everyone loses.