My cofounder is starting a business on the side

My cofounder and I have been working together for about 2 months. She is a close friend and prior to me bringing her on as a partner, she never expressed interest in starting a business but I think seeing me make progress woke up her entrepreneurial spirit.

So we’ve been working together but I found out through a mutual friend that my cofounder has been planning to start an Event Planning biz (it’s non-conflicting with our company). When I confronted her she got incredibly defensive and said it was just gonna be a side business and nothing has been started yet. She said she didn’t tell me because she didn’t think it mattered.

Not sure what to make of if it, but my instincts are going with ‘shady’.  Am I wrong?

  • This is a not a good sign. If you are in the technology business and building a product, you need the team to focus 100% on a singular plan. Ask her if she can commit to that?

    Also, there is never anything called a side business, people start side businesses hoping that eventually it grows into something that becomes their primary job.

    • Thanks, that’s exactly what I was thinking. Event Planning is something I’ve known her to be pretty passionate about. Our business is in travel and she loves it, but this all comes off to me as someone covering all bases. If our thing takes off, dump the “side” business, and if that takes off – dump me.

      I will ask her what you suggested but I’m wondering if working with someone like this is worth it

  • Seems to me like you made the mistake of taking her on as a co-founder without a contract stipulating that she had to dedicate x amount of time to the business. I don’t blame her; maybe she figures your business isn’t great so she’s starting something on the side that could potentially be better.

  • If this is a formalized business, you should have employment contracts in place for the officers. This is a protection for both the company and the individual. I’m assuming that you don’t have these in place, which is not unusual.

    I went through a very similar thing and it wasn’t long before my cofounder left. I think it’s a sure sign that they are losing interest, or no longer passionate in what they’re doing.

    It’s a tough situation, because your cofounder is probably going to deny losing interest and will try to convince you that it’s just a hobby. Mark my words though, as soon as that “hobby” picks up steam, they’ll drop you like a bad habit.

    If you haven’t put employment contracts in place (that cover hours, commitment, non-compete, etc.) you should do so now. This will serve as a good opportunity to talk openly about expectations.

    • Thanks very much, we have a contract in place but not everything is covered – including the employment aspect (I know I know).

      She was very excited to be brought on to my project and I can see she still is, but I don’t think she’s passionate about it and that may be the problem. Also, yeah I think she may be waiting to see if her ‘side’ business picks up

  • Did she join as a cofounder/full partner, or was it just “oh hey, I’ll help you out a bit”? Assuming the former and that your biz is fulltime not a side one too:
    Tell her you need to know that she’ll be on it fulltime and if not, you’d rather clarify and have her step away while you’re both still good friends, etc. If she protests and says no, then look her in the eye and ask her to confirm then that she will not pursue any other side businesses. If you don’t believe her, exercise your option to remove her from the company.

    This also assumes y’all have vesting in place to minimize messiness. In the event that she leaves, cover ALL legal bases: See a lawyer to clarify that all IP remains with the company, sign relevant documentation, buyout/revert any outstanding equity, etc to prevent any future claims against you when business takes off.

  • Of course it matters. It will be all that matters when/if her side project takes off. It will jeopardise her contribution to your project down the line and of course if she bails out you can’t take the offered equity back. It also means that there is a communication problem in your relationship. It may mean that she does not believe in the idea (are you the strong opinionated btw?) or other worse things that I’d rather not assume.

    If you would like to protect your friendship, you’d better think hard and make a decision soon.

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