Co-founders on different sides

So I have 2 other co-founders. We started a company (online) and have bootstrapped it the whole way. At first it was a side project/hobby and gave us a fun way to learn along the way with VERY minimal cost on our end as it is basically a website (which we have built and designed ourselves with NO prior experience). There is an opportunity coming up soon that could potentially allow us to gain a huge following and boost our reputation. Me and another co-founder see the potential for this and are willing to put money down to get our site redesigned and all the features built that would allow us to grow into what we see being a huge opportunity. The other co-founder does not want to put any money down and thinks we should do it all ourselves (which has taken us 2 years to get where we are today, and that is with no prior web development, marketing skills etc)

What do we do now? We don’t want to go against what he wants, but is there a way to convince him this is a good idea and better in the long run? He keeps bringing up “Well, all good entrepreneurs do everything themselves.” This may be true for some, but taking risks is what it’s all about right??

PLEASE help!

  • Do you have an ownership structure or is everyone just split evenly at this point?

    If you feel strongly about the need to invest for growth (assuming it’s a 2-1 majority) and they don’t want to play, then it’s time to figure out an equity buy-out (doesn’t have to be cash, but he/she shouldn’t benefit from future growth).

    I’ve put money in to things I’ve been less than thrilled about because of the sweat equity I had already put in. I was ultimately right, but we were able to recoup our money thankfully. The 3rd founder may come on board just for the fear of getting left behind. It could be just a cash flow issue for them personally as well. If they want in and believe the vision, but just don’t have the cash, be creative and find a way to keep them in tow without diluting their equity too much.

  • Thanks for the response! We currently have evenly split equity but the vote to outsource is in our favor 2-1. Its also a sticky situation seeing as how we are all friends, but something we may have to work around.

    Getting the money to get it done isn’t an issue, it’s getting the other to see how this would be better in the long run.

  • It’s easy to burn through a ton of money for a site redesign. It’s not clear to me why a redesign would make your business profitable if it is’t profitable now. Inexperienced entrepreneurs can fall into the trap of spending money under the guise of “you have to spend money to make money”. Managing remote developer/design teams is difficult, and it’s very easy to burn through a lot of money with nothing to show for it.

    Remember that you could be wrong about all of this. Every entrepreneur sees “opportunities”, but they rarely materialize, after all.

    That said, it’s completely possible that you’ve correctly identified a huge opportunity. If you’re totally convinced the investment is going to be worth it, put up the whole amount by yourself. Then all money the business makes goes you, until you get back 3x the invested amount. That way everybody wins.

    • A site redesign + features added. The features will help get users which will help get us profit. Site redesign is just icing on the cake.

  • I’m probably not in the same category as you are regarding entrepreneurism – my wife and I have an online presence selling digital downloads and course. But… I certainly started where you did regarding knowledge of site design and doing it all myself.

    At some point, however, I realized that I was never going to get our site to do what it needed to do as I don’t have patience for that stuff and – more importantly – I needed to be producing product and promotional stuff.

    Enter outsourcing.

    I have a guy in the Phillipines who I pay full time at $800/month who migrated our site and does all day-to-day webmaster activities, including plenty of custom coding.

    I pay his wife part-time at $5/hour to do all manner of virtual assistant stuff from transcription to building blog pages and more.

    My social media person who handles our (very) small ad budget for Facebook, Twitter and Pinterest is a British expat who lives in Hong Kong and works for me part-time at $10/hour.

    Others I have built relationships with over time and hire as needed: Book editor (US), graphic artist (Croatia), Kindle book formatter (Bangladesh), etc.

    My point is that you can find excellent, highly-skilled help at very reasonable prices to turn your ideas for the website into a reality one phase at a time. My site is WordPress, but you can find experts to work on anything. Just start on oDesk with a small project and use that to test compatibility.

    If it works out, try another project. If that works out and you have established a trust relationship (i.e. s/he trusts that you will pay for work completed and billed), then move beyond oDesk and set up an arrangement to work with him/her directly with payment via PayPal so they don’t lose the 10% cut that oDesk takes.

    Ta dah… you now have a technical expert “on staff” who knows your system and can implement whatever you want one step at a time. Be fair, give bonuses and modest raises and you’ll have an invaluable resource.

    Build your virtual team a little at a time.

    I don’t know what you had in mind for your website upgrades, but this could be another pathway that all could agree upon that has limited financial risk.

  • Apologies… I re-read your post and see that you are discussing outsourcing already. My point is that it isn’t necessarily expensive, can be taken in stages and if your recalcitrant partner sees the return on a modest initial investment, then he may be much more willing to proceed with some outside assistance.

  • Sure, if you want any advice on how to post jobs/select candidates (there are some things I’ve learned to better ensure success) then I would be happy to offer advice or examples. You can contact me via our website contact form, search for Classroom Caboodle. I’m serious.

  • 2’s company, 3’s a crowd. It’s not easy having the convo, but it seems that the 3 of you will need to sit down and hash it out.

    Ask the 3rd founder, what would the 80yr old future him want the present him to do? (regret minimization theorem)

  • Seems pretty straightforward: from a control basis, 2 of the 3 should be able to form a controlling interest on this subject.

    To make it fair – I’d formally incorporate and share out the equity as you would all agree is fair, then have the founders who are willing to invest, to do an equity round which dilutes the existing equity.

    You’re probably going to get fights over valuation, but at least this makes it very clear on the control and equity (pre- and post-investment).

    Alternately you can offer to buy out the holdout, but that would probably cost you a lot more.

    The remaining issue is whether there are operational issues should the holdout stop working/leave or decide to sue. Be aware and prepared before taking any steps such as outlined above.

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