I am the CEO of my startup, and have two co-founders. I hold the most shares among us, but our ownership percentages are fairly close. We have no other employees.
One co-founder is only involved part-time because of another job; he has useful connections for our business, but can't contribute much day-to-day.
The other one works in the company full-time like me, but needs to be guided through almost everything they do, taking very little initiative to solve problems on their own. I often feel that in the time I spend worrying about whether or not they have accomplished their next important task (and constantly following up with them), I could have just done it myself.
Am I better off trying to motivate them to contribute more, or looking for new team members?
I feel your pain — I've been there several times in a couple of my companies. Each situation ended up being unique, and had to be handled differently.
I think there are a few things to consider before you make your decision:
1. What is in your cofounder's way?
Is you cofounder being held up by a lack of clarity? Lack of motivation? Lack of autonomy?
One of my past cofounders was very good at getting the job done, but didn't naturally have the skill to lay out tasks in a manageable way. To get around this, I worked with the whole team (4 people) to write up process documentation that removed the need to "figure out what to do next" that was tripping up this cofounder.
2. What job was your cofounder brought on to complete?
And is it being completed?
One of my companies brought on a cofounder simply to give us a marketing platform — he had a huge online audience — but he did nothing else. At first, this caused tension; once we had specifically laid out who was on the team and for what purpose, it was easier to identify where responsibilities lay.
3. Is your cofounder capable of doing the job?
One of the more painful ordeals I've gone through in business is bringing on a good friend, then realizing that — despite his talent and intelligence — he just wasn't able to perform the job I'd hired him for.
His skills were better suited for a different job: he needs hands-on management; he works better with repetitive tasks that don't require big-picture thinking; he lacks assertiveness and confidence, which were critical for the management-level role he'd been hired to do.
After I tried to clear everything in his way, it became clear the company couldn't survive if he remained on the team. I had to lay him off.
4. Do you just simply not like the way this cofounder works?
In one of my startups, there was a cofounder who I didn't know all that well, but he had amazing industry contacts and domain knowledge.
However, once we started working together it became clear that we had VERY different working styles. He drove me completely nuts with (what seemed to me to be) a very ADHD-style of planning, with projects starting and being dropped and then coming out of nowhere with a call at 21:00 to discuss something critical that would be forgotten tomorrow.
I'm sure I drove him nuts, too.
So eventually we ended up selling that company — it was that or shutter it — because we knew there wasn't a chance we'd be successful if we continued as we were.
Working with other people is tricky in general. Our instinct is to assume that we're the best workers on the planet and everyone else is incompetent, an idiot, a slacker, or all of the above.
Usually it's a combination of an organizational-level lack of clarity, poor communication, no processes, and (sometimes) plain ol' we-don't-see-eye-to-eye-on-things-ness.
Hopefully that helps. Feel free to get in touch if you'd like to hear specifics on my situations, or if you'd like any help devising a strategy for resolving your cofounder trouble.
I've got a tactical model you may find useful to employ to remove the tension and resentment before it escalates.
I'm currently on my second startup, it's just myself and one co-founder.
A decade ago, I had three other partners. What I learned then was that everyone will go through different challenges in their own lives, at different times. This of course, affects our ability (time, energy) to contribute to the business.
Others (Jason, Ken) have answered your question here from important angles you should consider first. I wanted to add some tactical tips (a model, in fact) that you could put into place; but only after you've covered those big-picture topics.
These techniques all assume one thing however: trust. If you don't have that, then you really shouldn't be in business with your co-founders.
First, if you have revenue, you can assign everyone the same hourly rate. The income you distribute amongst the team is simply a matter of how many hours everyone worked.
If you don't have predictable income yet (but you have some), you can split the income you do generate in the company amongst yourselves, based on the proportion of hours worked in that period. This actually works better than a flat hourly rate, as it provides more incentive for everyone to really work on the venture making real revenue.
Let's say you choose quarterly as your time period, and your timesheet has you working twice as much as your co-founder. You'd then naturally get 2/3 of the income generated in that quarter.
Even though you might have a 50/50 equity split, you can put in an agreement between yourselves that treats all income generated by the company for the first (or next) x years this way. Perhaps x is five years, by which time, these sorts of issues typically of concern in a startup, won't be as pressing or even relevant.
Another variation to this is to track company income from inception. The proportion of time each co-founder puts in over the life of the startup to date, is the proportion of its generated income that they are owed. This removes co-founders "surging" their efforts in quarters that are known to bring in a disproportionate amount of revenue (should such a situation be possible in your startup).
Yet another variation that tests everyone's commitment to the business, is have all work income generated by all partners (whether through other day jobs, contract revenue etc.) put into the company pot, and re-distributed in this model. In that way, the co-founder only participating part time has a bigger role: they are helping bring in income for everyone, and it gets distributed based on how much time everyone is putting in respectively, across all of these activities.
Finally, you can add a time component to this whole formula: time logged in the first year of the company is like the deposit of a financial investment into the company: it earns interest.
It is worth more than the same amount of time deposited into the company in year three, when the company is likely more established. Generally, as time goes on, as there is less risk to pour your time into the company; you should have more clarity about the company's prospects.
Thought of another way: the Angel takes on more risk than the Series B venture round (a downround being the exception here).
Therefore, the Angel's investment, dollar for dollar, is going to have a higher percentage of ownership. Similarly, you can treat everyone's investment of time in the early days this way; it gets seasoned. You incentive co-founders to put in more effort early when it is not as clear that you'll succeed, and when the company most needs that push.
With these tools in place (you can setup a spreadsheet to track this), you will not resent your partners if they need to take a 6 month sabbatical, or work much fewer hours than you do. It can take the tension out of these critical relationships.
Note that if you don't yet have any income from the venture, but you expect it will be coming soon, extend the timeframe of the model to cover the point that you would have reached success (and then some) or have ultimately disbanded.
This model is like training wheels. It's a gentler transition from the standard FTE or solo contract income world into one of shared destiny with your co-founders.
I've tested a variant of this model and it has worked beautifully.
I hope that gives you some tools to consider. I could write reams more. If you'd like to follow up with ideas on how to put this into play for your specific scenario, feel free to get in touch with me here on Clarity.
I've done a ton of work on conflict management, starting / managing difficult conversations, and picking up the pieces after it goes poorly.
Here are a couple of tips on starting the discussion with someone who is not pulling their weight:
1. Decide what you need and want from the discussion before it ever starts... I can't tell you how many people I see that wade into a heavy discussion without knowing what the exit point is for all parties. By knowing, bottom line and what you need from that discussion, you can re-direct it towards that simple outcome if things spiral out of control.
2. In your first few sentences, re-assure the person this is a safe discussion... If there person doesn't know their fate in a heavy discussion, they're much more likely to be defensive. Start the discussion by letting them know you don't want out, you don't want them out, and this isn't a "fix it or we're done" discussion. Re-assure them that you are proud to work with them and that this discussion is meant to strengthen an already great team.
3. Promote COLLABORATION not COMPROMISE... Collaboration is two people working to meet each others' needs, whereas compromise is two people trying to give up as little ground as possible. Start by asking them if there is anything YOU can do to help them move towards the middle and pull the weight you need them to pull.
4. Set a date to re-evaluate... If the discussion is open-ended or viewed as a rant / lecture, you won't get a whole lot of follow-up. If you set a date to revisit (2-4 weeks is ideal), then it creates some sense of urgency and internal monitoring and people are more likely to accommodate your vision.
Hope that helps... you could write a novel on this stuff.
Remember, starting the conversation is the most important aspect. You cannot go around hoping people understand frustrations that you have not voiced. Remember to protect people's dignity and value - people who feel cared for will often bend over backwards for you.
I'd be happy to give you more tips on your specific situation... feel free to contact me through Clarity to set up a consulting arrangement.
There are a lot of variables here. As the CEO you have to set expectations for how your team members, regardless of equity status, are expected to perform. Startups, just like larger businesses, need to be very clear on job expectations, what makes a success and what doesn't. Ultimately holding equity does not make someone a better worker. If you feel you have created a problem for yourself by allocating equity to partners who do not carry their weight then you hopefully have a buy/sell agreement in your operating or partnership agreement. I've had to do this several times. Some of them didn't go well and some did. I'd be happy to discuss it with you.
I have been involved in many startups, some successful and some not so successful. When a team of founders gets crosswise its a harbinger of real trouble. You can sit down with your cofounders and discuss the problem openly and hope that you can solve the problems by everyone agreeing. However, unless you have un-vested stock, or contracts that require a certain amount of contribution, or some other leverage, you are reduced to mere persuasion without any leverage. If you would like to discuss this further, please feel free to get in touch with me.