Co-founder conflict: the pitfalls and how to avoid them

Last updated: 5 August 2024. 

Together with cash flow issues and insufficient market need, co-founder conflict is one of THE biggest contributors to startup failure. And yet it rarely gets a look-in when business plans are drawn up and the other bases are covered.

Maybe because it’s a more abstract consideration than the financial projections and project management. Maybe the practicalities get side-tracked amidst the romance of all those ideas and all that optimism.

If this is you, then let me be the one with the cold water here:

You will have issues. Along with death and taxes, it’s one of life’s certainties.

Vestd founder and CEO Ifty Nasir warns that, in a worst-case scenario, friction between founders can kill a startup.

Sadly, 65% of startups fail due to interpersonal tensions within the management team, according to author and professor, Noam Wasserman.

But forewarned is forearmed, and this article will let you know what to look out for and what you can do to mitigate that risk. While still keeping some of that romance alive… 

Right from the start, ensuring all the stakeholder's visions are aligned, and all roles understood, should be paramount.

Talking through these potential issues and documenting your agreements can save the arguments, your blood pressure, and maybe even the future of your company when you do meet those bumps further down the road.

How to avoid co-founder conflict

Cement your company’s goals and vision

Yes, this one should be well-established. The market fit. The need. Your strategy for growth.

But other eventualities such as acquisitions or new partners are issues with the potential to cause serious friction later on. Clarity and transparency from the outset go a long way to nullifying this particular threat.

Know your target market

The product/market fit, you should be clear on. But that’s only one aspect. Have you drilled down on who your viable target market is and how you are going to reach them?

This is another area that can have co-founders pulling in different directions. And another is where clarity from the outset removes the ambiguity and, with it, much of the potential for issues later on.

Be process driven

Of course, every big decision won’t be made at the start. You’ll be making plenty on the hop as your business evolves. An established decision-making process and contingency for disagreements from the outset is vital. In other words, a conflict resolution strategy.

Clearly outline responsibilities

Are all co-founders clear on their respective roles and responsibilities? Where they begin and where they end. What action will be taken in the event any party neglects theirs?

Whether an informal document or more official co-founder 'prenup’, having that awkward talk now, and getting everything down in black in white, establishes expectations and removes confusion.

Equity

This one not only causes the most conflict but can render the rest irrelevant.

How can a split where everyone feels their contribution is appropriately recognised and rewarded be agreed? It’s usually a delicate balancing act, but one that needs to be addressed sooner rather than later.

A 50/50 even split is rarely the answer. What if one co-founder doesn't contribute at all or deliver as promised? They could still walk away with a slice of the pie they didn't rightfully deserve.

That's where Agile Partnerships (aka a co-founder prenup) comes in. You can determine equity rewards based on agreed performance milestones. 

These are the most common causes of co-founder conflict and - like any relationship - if ignored, they can fester and become much bigger than they need to be.

Front-loading those difficult conversations, taking the time to prepare and outline your expectations and establish procedures, will give your startup the best foundations for success.

Tips to take away

1. Put your plans in writing
2. Have ‘conflict meetings’
3. Try to spend some time with your co-founders away from work

Conflicts are inevitable (even necessary) so a pre-agreed conflict resolution game plan provides clarity and direction.

Schedule fortnightly or monthly meetings to meet any issues head-on, taking the sting out of those potentially thorny issues (or at least getting them out in the open).

These meetings also give you an opportunity to address them away from your employees, ensuring morale is not adversely affected.

And finally, spending time away from the pressures of the workplace builds trust and strengthens your bond for the more testing times that await.

When you're ready

With Vestd, you can avoid a number of these pitfalls by designing conditional equity agreements with your co-founders at the very start of your journey.

Be ready for whatever the future holds! Get started today.