Do You and Your Business Partner Need Co-Founder Couples Therapy?

This week, we’re talking about something that sounds a bit silly but could be the most valuable thing any of you will ever do for your business – co-founders couples therapy.

I’ve talked a lot in the past about the importance of choosing the right co-founder and getting all of the proper agreements in place so everyone’s clear on everything up front. I stand by that, of course, but since building a business is so stressful and ever-changing, just like a marriage, even if you chose the perfect co-founder and you agreed on how everything should look upfront, you’re still not going to make it through such a close relationship for any length of time without experiencing conflict at some point.

There’s nothing wrong with conflict, it’s a normal part of human interaction and it can actually be quite helpful in a business setting because you need to examine competing ideas and evaluate what would really be the best course of action in order to succeed. You don’t want everyone just agreeing with everything and nobody having creative ideas or thought-provoking concerns about the business’ strategy. The trouble lies in how that conflict is handled by the co-founders.

Now, I’m not a therapist and you’re not sitting in my office with me, so I’m not going to pretend I can give you some therapy through this computer screen and fix your relationship with your co-founder. I can, however, help you identify some tried and true signs that you need to find someone – a real, live, in-person therapist – who can.

Just as in a marriage, in a business there are some sure signs that your relationship is on thin ice and that you’re probably good candidates for co-founders couples therapy:

First up: does either partner feel like they’re not being heard? It’s one thing to have two different opinions, talk it out, and choose to go with one or the other. It’s another thing for one partner to bulldoze the other so she feels like her opinion isn’t even being heard or respected. A partner who doesn’t feel heard is a partner who will soon feel very resentful.

Which brings us to sign #2 you and your co-founder need to head over to couples’ therapy: either partner feels resentment towards the other. Resentment is poison in any relationship whether it’s a business partnership, a marriage, or just a friendship. If either partner is resentful, you need to go deal with it now.

Clue #3 that you probably need couples therapy with your co-founder is that either partner wants out of the business, but it’s not because he or she doesn’t believe in the business’ potential for success anymore. If a co-founder starts saying things like his heart just isn’t in it anymore or he wants to pursue other opportunities but maintains complete confidence in the business’ potential, there’s more than likely something else going on. Yes, maybe the co-founder just has a short attention span, but more likely there is an issue with the relationship that he may not even be aware of, but that is making him want to exit the partnership.

If you or your co-founder is experiencing any of these feelings, you should get your butts to couples therapy ASAP. Your business depends on you and your partner working well together and being able to communicate and make decisions about strategy and direction without any strong negative emotions clouding your judgment or slowing down the process. Besides, co-founder couples therapy seems to be the rage these days with everyone from Cisco to Stanford to Google offering it for their top executive teams or student co-founders. Does it sound silly to say my co-founder and I are in couples therapy? Yeah, I suppose; but if it will help your business thrive it’s well worth it.

If you’re an aspiring entrepreneur, the best thing you can do for yourself is to just get started. That first step is huge!
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How Should Startup Founders Split Equity?

As you put together your team for building your business, it can be a bit of an awkward conversation to sit down and start doling out ownership of a company that doesn’t exist yet, especially if you have personal relationships with the people you’re founding with. Many entrepreneurs find this discussion to be so awkward that they actually put it off and then they have a huge headache on their hands when they don’t have anything down in writing, the company has started to grow, and founders disagree on what direction the company should head in and how much of it each one owns. You can avoid this whole mess by taking the bull by the horns from the beginning and hashing all of this out from the start. Trust me, it’s way less awkward to have these conversations now than it is to have them after you’ve all been working for a year. If you want your relationships and your company to remain intact, get this equity split business handled right away.

So, if you’re with me and you want to get this figured out right away, how do you determine who gets what?

To be honest, there is no right way of splitting up the equity in a startup, but there are a few things to take into consideration with your founders as you determine who’s entitled to how much of the company.

First up is any financial contribution. Some founders chip in cold hard cash to fund a business, some don’t. Clearly, if someone is putting in money, he or she should be compensated for that contribution, just as any investor would be, with equity.

Next up is sweat equity. 99% of the time, startups are built through the sheer determination and hard work of their founding teams and that sweat equity that is put in and not compensated with a typical salary and benefits package should definitely be compensated with equity instead. Be honest about the contributions that each member of the team is making . How much time are they putting in? How integral to the company’s success is the work they’re doing? How much would you have had to pay an outsider to do the same work? Some of you may be working part time, some may be full time, some may be chipping in where possible but not have a regular commitment – all of this is typically taken into account when determining equity splits.

You’ll also want to consider the experience levels and roles of all of your founding team members. This overlaps quite a bit with the sweat equity piece, but it’s worth noting that a senior executive forgoing salary and working full time is not really of the same value as an entry-level worker forgoing salary and working full time.

Additionally, most founding teams take the idea and any associated intellectual property into account. Now, how this is done varies widely. If there is formal intellectual property, meaning patents, copyrights, trademarks, etc., brought in by one team member, that intellectual property certainly has value and that value should be noted. When it comes to the idea itself, however, opinions diverge. Some people believe that the person who originally had the idea should get the lion’s share of equity; others believe that the success of a business has so much more to do with execution than the idea that bringing the idea is worth almost nothing when divvying up equity; and others fall somewhere in between these two extremes. It doesn’t matter so much what you believe in this instance, it just matters that you and your cofounders are on the same page about it and get all of these details figured out and put in writing from the beginning.

Finally, you’ll want to make sure that those cofounders who remain involved in the company’s growth and development over the long haul are compensated differently than those who are a part of building the business at the beginning but then depart long before the company reaches success. Everyone, and I do mean everyone, should be on a vesting schedule so that anyone who leaves long before the rest of the founders doesn’t get the same amount of ownership as those who stick around through it all.

Again, these are some factors that are most commonly considered when dividing ownership rights between cofounders and they’ll, hopefully, help you get the conversation rolling with your cofounders and steer that conversation to the most relevant pieces of information, but the key here is that you address the issue and get everything in writing from the beginning – not that you divvy up equity based on a template.