65% of High-potential Startups Fail due to Disputes among Co-founders!
It's a fact that almost all startup co-founders have disagreements, and that is a sign of a healthy exchange of ideas which in turn is beneficial to the growth.
65% of high-potential startups fail due to disputes among co-founders writes Professor Noam Wasserman in his book "The Founder's Dilemma."
Conflicts are increasing because startups are impatient for quick growth (maybe due to pressure from investors) and co-founders from diverse backgrounds find it difficult to work together.
When founder differences cannot be reconciled because of a false sense of ego and the conflicts begin to spill into the open, it is fatal not just for the company culture but even to the survival of the company,” says TN Hari.
Stepping on each other’s toes is a sure-shot recipe for disaster.
There have been numerous examples where the founders have been shunted out / forced to exit, owing to internal conflicts or when the investors side up with a co-founder against another.
So, how to deal with co-founders' conflicts?
It starts with the agreement, it should clearly mention the roles, time commitment, and stake of each co-founder.
Some founders also opt for equity vesting at yearly intervals, instead of full allotment at the beginning with milestones clearly defined in place.
Founders should also draft the agreement pre-defining the clear terms of separation, including who would/can act as a mediator in terms of disputes (usually the board of directors, advisors, etc.)
Investors must not step in at every instance of conflict. But, if we need to choose between competence and attitude, we will always go for the right attitude - Parag Dhol, Athera Venture Partners.
Sources: ET, YourStory, MoneyControl.