This is the third piece in our ‘Dear Sifted’ series, where we ask you, our readers, to send us your startup problems, before rounding up some top notch advice from industry experts. Need some sage wisdom yourself? Submit your startup problems here. You can do this anonymously if you prefer.
And if you missed the first two, here’s the experts' advice on managing a cofounder breakup and finding the right chair for a board.
The problem: Should I fire my cofounder?
“I’m the CEO and cofounder of a post-Series A business. My cofounder and CTO doesn’t seem up to the job and the tech side of the company is suffering as a result. We’re hiring a head of engineering and CPO to make sure the tech finally works.
I want to get the head of engineering and CPO to work directly under me and not my cofounder, and we might need to hire a different CTO in the future.
What should I do about my cofounder? Firing him doesn’t seem like the right thing to do and there would be a number of leaver clauses to navigate. Would it be best to find him another role at the company, or should we let him go?”
The investor perspective: Sarah Barber, CEO of Jenson Funding Partners
Barber has coached several CEOs through cofounder breakups and advised on conflict resolution throughout her time as an early-stage startup investor, financial director and consultant.
"You’re in a difficult, but common, situation. Being CTO of a business post-Series A is not the same as being the CTO of a business pre-seed, or indeed post-Series B or C. While some gifted people can grow with a company, many more are outgrown — but that doesn’t mean their skills can’t add value in other areas of the business or at other firms.
The people decisions are the most important you’ll make as a CEO. It’s especially difficult not to be emotionally affected when making decisions about those who have been with you since day one.
How (and how not) to run a startup.
When it comes to a cofounder, your business is your shared baby — divorce is a painfully accurate analogy.
Sadly, this means it can become a legal quagmire. It sounds like your cofounder is legally bound in place, so you’re not just at risk of hurting feelings here.
Any outcome will require compromise from both you and your cofounder, so seek legal advice and make sure you understand the legal parameters of what’s possible before you enter into negotiations.
While lawyers will help you resolve things on paper, the only way you’re likely to resolve the situation amicably is through open conversation. Awkwardness aside, honesty really is the best policy.
Remember that you’re dealing with a partner, and therefore the ideal outcome would be mutually beneficial so your relationship can remain intact. If you approach it sensitively, you may even find your cofounder agrees with you. You won’t know until you raise the issue.
Once you’ve made the decision you also need to get the board involved. Not only is it important that they are abreast of major company decisions but they can also provide additional support until a replacement is found — as being the lone founder can be a lonely position without help."
The advisor perspective: Matt Clifford, cofounder and CEO at Entrepreneur First
Clifford is the cofounder and CEO of startup incubator Entrepreneur First. He’s been advising and coaching founders from pre-incorporation to Series B and beyond, with a focus on building strong cofounding teams, for over a decade.
"I’d recommend working through three steps here to avoid a tricky situation blowing up into something much worse.
First, validate your diagnosis. How sure are you that the problem is your cofounder? It might well be, but this is a big and irreversible decision and you want to make sure you’re dealing with the root cause, not treating the symptom. Advice and input from experienced mentors and investors — ideally with a technical background — will be invaluable.
Second, design your target steady state. Your cofounder steps down as CTO… what next? Will you need any further input or work from him? Support during a handover? Are you definitely the right person to manage the CPO and head of engineering? It sounds like you expect your cofounder to remain a significant shareholder, which adds extra complexity. The surest way for this situation to go wrong is not to have a plan for where you want to get to.
Third, minimise pain and mess. Let’s assume that you decide the right outcome is for your cofounder to leave (there are exceptions, but it is *very* hard to successfully transition a cofounder to a lower ranking executive position long term). If you don’t want to or can’t fire him, you need to work out what a good outcome looks like for him. I’d spend time thinking about what you can give him that aligns incentives, allows him to save face and draws a line under the situation. You need to be hard-headed on the company’s behalf, but also minimise the risk of things blowing up. Again, make use of experienced advisers.
The founder perspective: Anonymous founder and CEO
They split with their cofounder after two years of building and scaling a startup together.
"This is always such a tricky situation.
Before you make any call on whether you should consider them in another role in the business, list out if they add value that no one else could. For example, around the vision or deep experience and knowledge of the space. This should give you a clearer idea on whether or not you’re doing it to be nice — or it’s crucial they stay connected to the company.
Be careful about placing them somewhere else in the company just because you think it’s the kinder thing to do — in reality it won’t play out positively. They will likely become disgruntled, which would cause more problems and lead to further unhappiness, impacting the team and your growth.
When and if you do have the conversation, understand what’s important to them. This could be leaving with some equity or a payout, or leaving with respect and a good reputation. They helped you get the business to where it is, so of course you want to acknowledge that.
I know it feels so tough right now but you’re not alone in this challenge and once it’s handled you’ll never look back."
Keen to get the expert opinion on a disagreement with a cofounder, the best ways to deal with pushy VCs, how to support struggling employees or anything else? Submit your startup problems to us in this survey below — totally anonymously if you prefer — and we’ll get the experts’ perspective on what you should do.