Ask HN: How to fire your co-founder?
So I just read this HN posted article (The 7 Habits of Highly Overrated People - https://news.ycombinator.com/item?id=6965295) and thought a lot about my co-founder who is doing jack shit in the company. I already talked to him about lowering his share options (which he currently holds about 40%, (same as me, after seed round dilution)), but with no avail. He actually threatens the company's success if I ever try to "sneak a move" on him when in reality his contributions are near 0 for product development as well as S&M.
If I talk with my boards on his misbehaviour it will get them stressed and stop believing on the company. Is there really no way to fire him and the only way is to actually quit ?
87 comments
[ 3.0 ms ] story [ 165 ms ] thread2. Talk to him. Offer him something in return for his shares (such as a large amount of debt which is only triggered if/when the company sees a liquidation event of suitable magnitude).
There hopefully will not be a step 3.
Sorry dude, looks like that is precisely what you are going to have to do. Don't worry about the board stressing; they can handle it. That's their job.
Focus on YOUR job: the success of the company. The board will stop believing you when you prolong this longer than you should have, actually making the situation much worse.
When you go to the board, GO PREPARED. Assume the board does not know anything. And treat it almost like a trial where you will get to present your side, and at some point, your co-founder will get to present his. In these cases, I like to open up a document and put down the facts in bullet points. When presenting, remain calm and stick to the facts, which when evaluated by a sensible party(your board), should have them arrive at the same conclusion as you.
It sucked, and I felt like I had wasted 3 years of my life, and while my co-founder definitely did his own damage by not holding up his end, my biggest personal mistake was to not immediately, and aggressively, deal with the problem when I saw it arise (and after initial cooperative attempts at resolution went nowhere).
If you are putting everything you have into your startup, then you have everything to lose if you let someone else fuck it up for you.
It's going to get real messy, especially since he holds all money, bank, passwords info (now I understand why he wanted to take control of those stuff in the beginning). Firing him will be so messy, and the 3 employees we have today respect him a lot especially since he's an expert following those rules in the article I stated in the original post (he's even deceived me lot's of times!)
shit.. Sometimes I think I need a new startup problem to solve to leave the company because this is not letting me sleep at night (and it's no longer the first thought when waking up in the morning).
You should also roleplay with this person as if he is your cofounder. Have him be a dick and make any argument you can see you cofounder make at any point. I've learned that winning arguments and being right are two different things. This way, if your cofounder is good with the former, you need to be prepared and roleplaying will give you a great edge!
Also, write down all possible scenarios. So if the board asks you "what will happen if the employees quit?" you need to have already thought through that use-case. They will probably be very impressed if you have a document that has these use-cases and possible plans.
It's hard to read between the lines to know if he's really not keeping up his end. Employees like him, he sounds like he's the field expert, he's got the money, he assembled the board, etc...
This will give you first line of objective feedback even about your own positions.
You're not kidding. I hope you just mean logistical access (as in, currently holds the details to), as opposed to actually having them in his name. If the latter, you're pretty much screwed. In any case, when you discuss this with the board, once you get them on board with this decision in the first place, you're going to need to make a clear plan for getting access to all of those resources transferred. Hopefully you can do so quickly and without legal action required. Fortunately, if they're in the company name, there are steps you can take to get that access.
You need to present your case to the board, there is no other good way to go. If they side with you, your co-founder will have no choice but to turn over control of the money, and in fact you should encourage the board to force the point on the money / passwords / etc controls anyway.
During this period of time you can hire a team (or someone) to secure your companies credentials. Hiring a team to review your assets both physical and virtual; code base and otherwise would be wise.
This is a big red flag. Who hired those people? Why did you agree to hire them if you don't respect their judgement? Or is your co-founder also doing all the hiring as well as taking care of everything else?
Starting to sound like you should be asking yourself what you contribute.
What does OP really want his cofounder to do, maybe its time he explains why is he an 'overrated' person.
it blows and there is never an easy way to dissolve such relationships. i had to threaten 'going nuclear', i.e. closing the business, to get him to leave.
At this point, he should just go directly to the Board and include his proposed improvement plan in his presentation. The co-founder has already indicated an unwillingness to change or leave; the Board should be able to force it.
God is my cofounder. God said 640x480 16 color way back in 2004. God said many things.
Without being God's temple, it fails. With being God's temple, it for sure, succeeds.
God says... now_you_tell_me Ghost I'll_get_right_on_it do_I_have_to You_fix_it what_do_you_want ghetto you_think_you_could_do_better caution youre_welcome guilty God ghetto incoming kludge no_news_is_good_news now_that_I_think_about_it go_ahead_make_my_day I_planned_that China ghetto quit money ingrate that's_no_fun
Your first and only duty is to the welfare of your company.
I recommend reading "The Founder's Dilemma's" to cover the other things you'll need to consider later as well prevent other, BIGGER, issues.
Is an employee agreement and vesting schedule in place?
Who reports to whom? You haven't mentioned formal titles/roles, but unless you're already final-say CEO, you'll probably need the board's support to oust him. You'll definitely want their support and advice, especially if adversarial steps to adjust equity or reorganize are necessary.
Talk to older mentors/lawyers who've seen similar situations.
Look up 'shotgun clause'; even if one doesn't already exist, a 'him-or-me' game of chicken might be resolvable with minimal damage/legal-risk using some sort of similar bidding/step-up-or-leave arrangement.
What, he won't even hold the whip? ;)
I'm pretty sure that "S&M" above actually refers to "Sales & Marketing", for anybody else who was... confused on a first read.
Elad Gil[1] has written about this in depth about 12 months ago: http://blog.eladgil.com/2013/01/how-to-fire-co-founder.html
[1] https://angel.co/eladgil
Could you quit and re-start? If you have employees, maybe they quit and follow you? Perhaps your investors would go with you too.
Then what resources would the remaining co-founder have to go through the US court system?
Lastly, leaving and re-starting doesn't have to mean the exact same product.
I know what you are saying, but Im pretty sure it could be side stepped with some creative thinking.
To bet on this would be to bet on the new company being a failure.
Because if it ever does become successful, plenty of lawyers would be willing to work on behalf of the ousted cofounder on contingency.
• Discuss it very frankly with at least one board member you trust. Depending on their involvement with the business they may already suspect that something is wrong. Outline to this board member your concerns that Co-Founder is going to take this the wrong way and derail the business.
• Discuss with Co-Founder the specific areas you feel Co-Founder isn't pulling his weight (it isn't okay, even if it's the truth, to say "he isn't doing anything"). Make an irreducible list: start with what are obviously his strengths, and then list the ways in which he is not playing to them. Make it inarguable and prevent it from turning into a personal matter.
• Keep the focus on company not him. For the company to succeed, you need to accomplish XYZ.
• Explain very clearly what his options are. You are not trying to screw him, but you are displeased with his input. You would like to amicably resolve this so that the board doesn't have to be involved, but failing that you will take it to the board and ask them to do their job by sorting it out. He can accept reduced equity and no day-to-day involvement, or he can kick up a fuss and you will move him on. Either way he should accept the reality that his involvement is coming to an end and that his decision now is how it ends.
Your board, if they have any kind of experience in running a business whatsoever, will know that this is one of a billion things which will go "wrong" over the four or five years it will take to make or break your biz. You can influence a lot in the way you communicate this event to them. It sounds to me like it's not truly a crisis but a significant opportunity for you to offload someone who is not contributing and reallocate capital to someone who will put in the hours.
My overriding advice is that you should not worry about this. Next time you start a company be sure to finalise your divorce before you finalise your marriage (i.e. very clearly delineate duties for founders and establish what success for your roles looks like), but other than running out of capital or not growing, very few things are disastrous for a startup.
Additionally, there is a reason successful solo founders are rare. It is hard to found a company, especially without somebody who is 100% aligned with you (at least economically) the whole journey. I'd imagine that a situation where you start with 2 founders and go down to 1* makes it even harder, because you are like a single founder but with all of this stress you are accumulating right now on things that aren't related to making a great product.
Now this isn't to say that founder strife is something that doesn't happen in successful companies. It does. It is just the magnitude and early-ness of your strife seems pretty large. Making a successful company is really really hard, and you really want to put yourself in the best position to succeed. If you aren't in a good situation, and getting to a good situation doesn't seem likely, then just leaving and starting something else might be your best available option.
Note: I have no idea how large your company is, so this post is assuming your company is 2 or 3 people and is very early stage. If your company is doing really well or is much larger, this advice basically doesn't apply at all, because then "sticking with it" starts to look like a good option.
*: I'm extrapolating that you had 2 founders based on your post. If for instance you had 4 founders and were going down to 3 I don't think it would be as big a deal.
Before you go to the board (you ethically should) let ascertain a few things.
Are you sure he's an overrate person or is it just that you don't see the value in his input?
Some where in the thread you mentioned:
> It's going to get real messy, especially since he holds all money, bank, passwords info
Some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful. If he has mismanaged finances, that's another story.
If he has not mismanaged the finances and has taken ownership/charge of these affairs you need to reflect on why you did not opt to share the burden.
Some people don't like managing finances, nothing wrong with that, but they do need people who'd do it for them, even better if there is a mutual need to succeed. Anyone can be the best money manager in hindsight.
> the 3 employees we have today respect him a lot especially since he's an expert
Respect is very important. Sure, the article says that the Overrated person can establish themselves as an expert, but believing this without a doubt also means that you don't trust the judgement of your first three employees.
Not saying you're wrong, but there is a possibility that you need to delve a little deeper on why they think your co-founder is an "expert".
> following those rules in the article
Not all rules apply all the time. Also these are not really rules but situational observations.
> The only problem I see here is that he has more rapport with them (the board).
Was he instrumental in helping you raise funds? Could you have raised the funds with a 100% surety without him if you were a single founder? Would this rapport help keep the faith of the stakeholders in the prospect of your success?
Maintaining and managing peoples belief in an idea or the people executing an idea is no easy task. Are you sure he has a zero percent contribution in any of these? And again are you sure you could have achieved a 100% of past results without him?
> He actually threatens the company's success if I ever try to "sneak a move" on him
Why would you try to sneak a move past anyone who has as much to loose as you, or even if it was a fraction thereof?
How does he threaten the company?
Does he threaten to leave? If you want him to leave, this solves your problem. But, if his leaving threatens the company, you should probably reconsider firing him.
If you want to (you should and must) get to the board and present your concerns, they are going to need those questions answered
It will only help your case
If your cofounder is as bad as I'm imagining, you should do your homework: get emails, recordings, etc which is strongly hinted by his threat (make sure you get him on that, record with your cell phone - hidden - or something)
But there's also a possibility things are merely like this: "some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful."
You need to work a very clear and ironed out case for the Board. And remember, to them everything is still ok, and they hold him (and you) in consideration, so you'll have to work the case real slowly, be tolerant of their questions, as dumb as they are (it's a dumb question to you, not to them)
And talk to your lawyer, of course. And make sure he doesn't know about this.
Be incredibly careful: this could be a violation of state privacy/wiretapping laws.
Not sure what's the laws on that, but yes, it's better to check
I see this problem clear in many situations these days. A lot of angel investors/fund raisers tend to think themselves as founders.
The problem with such a though is that, your job ends once you give the money. Though arranging for money is important once sales get going you tend to be looked up as some one who did an initial favor but is by and large not contributing anything to the company for months/years.
Mean while other people, even non founders who throw in insane efforts to keep the company going look at such people as dead baggage to carry whose only role was raising that initial investment and riding that accomplishment wave since then.
After some time it makes more sense to honorably give back the investment + profits to that initial investor than have them control you, while not contributing anything meaningful to the company.
If you want to talk, drop me a line here and we can hop on the phone. I have a strong opinion on this topic: http://mattmireles.com/contact/
1. Your co-founder has the same level of ownership as you.
2. He controls the company bank account, passwords, etc.
3. His relationship with the board is stronger than yours.
4. Your employees like him.
5. He is aware of your desires and has made it clear he is willing to fight your efforts, apparently even if it means sabotaging the company.
Given these facts, I think it would be wise for you to consider what you can realistically achieve even if you are successful in removing your co-founder. You may find that the question, "How do I fire my co-founder?" is not the first one you should be asking yourself.
if you're a co-founder and all you have is options and not a significant chunk of real equity, i'd say the problem is not that he isn't pulling his weight, but you (that's you, not him) got short-changed for the amount of work you are doing. and you are probably upset about that.
if he's a CFO/money type that's been charged with fund raising, money management, records, dealing with vendors and HR, etc, his compensation (no actual equity?) is probably correct, or even under-valued.
in which case, if you go to the board, you are going to be forced into a position of justifying why you want an increase in compensation for your work, instead of lowering his compensation for the work he's doing.
these are the kinds of things you learn so that your 2nd and 3rd time around are easier.
again, I don't know the full details of your situation but there is two sides to a story. Whatever you end up doing won't be pretty but talking is and discussing things hombre a hombre is the best approach.
Would you file for divorce based on an HN article about overrated spouses?
As others have pointed out, it sounds like he does do a fair bit for this company but you're blind to it. The one trick he's clearly missed is getting to this level of distrust with his cofounder. For that, though, it is not clear that you should fire him. Maybe he should fire you...
No matter what its going to be messy, and you need to be absolutely sure its worth going down that road before you do it.