So I am a technical founder that was building a web based platform. I had quit my 9-5 to live off savings to run my startup full time. I was working on building a team when I was connected via another entrepreneur to a PhD student that had an idea that could be a white label for my platform.
After talking through that for a while, he approached me that my product could be used overseas, and after giving me a glimpse of his network and connections, I paid him $1500 to do a more in depth plan of how to take advantage of the overseas market, a breakdown of institutions and investors to target, and more. He seemed like a well connected guy in business, venture capital, and international circles. The problem was that I was cultivating relationships that also have connections in the same market, and when I mentioned I wanted to leverage them, he insisted that he be the “exclusive guy” to handle that market. (And later got very frustrated anytime I talked about leveraging them, saying “He’s got this”).
We worked together for a bit. He ended up actually going overseas and taking a full time job as a Venture Capital advisor (working 60-80 hour weeks at his new job). I connected with another Startup entrepreneur with a similar idea, and since he was a business and lean startup guy (my overseas expert was definitively not a lean startup guy) I thought he would be a good guy to build a team with. And also someone we could do in depth product iteration with. I had already spent a few multi-hour product concept conversations with him However my overseas guy and him butted heads on a couple phone calls, and then my overseas guy started trying to block us from working together. He was not comfortable with entering into any kind of business arrangement with someone he’s never met in person. Demanding that all talks of working together cease until he can meet the guy in person which would be several months away. Essentially saying “it’s him or me”. I ended up cutting things off with the lean startup guy, and now was working only with the overseas guy.
Then we wanted to build a mobile app. Originally we were looking at a firm to develop it, but once I got the price tag quote, I decided I wanted to get a student to help me build the app myself or spruce up the mobile web app. My partner got angry saying “That he doesn’t appreciate me making decisions as if I was still a single founder.” And was blocking me from working with the student, demanding that he vet his resume. And talk down the firm’s price. He wasn’t comfortable with someone he doesn’t know working on an app that could go in front of his relationships. Worried about his reputation. We spent several weeks fighting about this. Eventually the student moved on to other projects.
We eventually decided to do a mobile web. But he wanted new design mockups made. He wanted to engage the same firm. Instead of paying the expensive prices of the firm, I wanted to bring in my friend to both set up our Agile project management as well as do the designs. He was a guy that worked full time, but did his company as a side venture. My partner got very upset: “I don’t know these people!” The firm quoted a very expensive rate for a landing page and designs. My friend would do both of those things included in the price for setting up our PM environment. My partner said “no go, I’m not putting my reputation on the line with someone that doesn’t have an established track record.” When I said what we are looking for can be implemented much cheaper than this firm was quoting, he said “It’s not about the technology, it’s about the people. I don’t know these people, they don’t have an established track record. You seem to ungrateful for the fact I’m connecting you into networks that you would never have gotten access to on your own.”
So I ended up paying out of my reserves both my friend and the high priced firm.
The high priced firm didn’t produce much of anything of value.
Then we got into the equity fight. I had been trying to set up a grunt fund using the Slicing Pie (www.slicingpie.com) equity method for the company for a while. I had become well versed on how the model works for a startup. My partner flat out refused to use it, saying it didn’t capture “the value he brings to the table.”
I tried to explain how that model works, including asking him to read the book about it. He said he didn’t have time to read any books, and someone with his pedigree should be able to get a fair equity split without having to use the Slicing Pie method. Talking up his credentials, and telling me he’s a part of “Elite Circles.”
He demanded 50% of the company. Saying that it’s his relationships that are powering this. he has overseas experience and I don’t, and that “I can be replaced.”
I told him no to 50%. At the same time I realized I couldn’t rely on his as the sole partner and told him I was building a team. He demanded that his equity be settled before any other team members are considered and repeated his demand for 50%.
When I was told by my advisors to offer him 35% while I hold 51% and leave the rest of the company in reserve. (35% being too large in my opinion). I sent that to my partner and he said no deal. And that’s when things got very ugly. With him threatening to start a competing company if he didn’t get “fair terms.”
Note: The Slicing Pie method (estimated into the future based on expected contributions, taking into account other team members, would give him between 8-15% of the company). Prior to the 51-35 split model I proposed that he get 20% fixed equity split, and the rest of the company equity would be managed by the Slicing Pie method. He said “No deal.”
We nearly broke things off then and told him the deals off. But then we talked and I said I didn’t want all our work to go to waste, and we pressed forward, but we never signed or finalized any agreements regarding equity split. Essentially the equity discussion was tabled. But he came away with the impression that equity would be split 50-50 even though I never told him I agreed to a 50-50 split.
Afterwards we did submit a budget for a potential $150k project from one of his connections.
Later I began to gather the people I wanted to bring on my team. Another developer, and a lady that was very good at networking, selling, and evangelizing, and had a decent sized network as well that could be leveraged. Who also had an idea that could utilize my technology. We were talking about how we can work together, and I bought her into the co-working space I was working out of so we can work together. My overseas partner came back to the States for a week, and I wanted to make an in person introduction so I worked to set up a meeting at a coffee shop. But my overseas partner pushed back “Who is this person? Send me a resume.”
I shared her bio. And he came back to me , “No, I don’t have the bandwidth to be having meetings like this”, “she’s not going to be able to add any value”, and “we have to step our game up regarding the types of people we associate with.” So the intro meeting never took place. Incidentally in the whole week he was in the States, I only spent about 1 hour talking to him in person.
Me and her along with the developer had a series of conversations about what is lacking about our firm and whether my overseas partner was adding any value. And neither of them were really keen on working with my partner. I told them about the potential $150k project but neither of them were very convinced.
At this time I was burning through my personal financial runway. And the development of the product was slipping. My overseas partner was very upset that we didn’t have a product to the market and that his reputation was being damaged as a result. At that point we had not brought in a single dollar.
I was telling him that I wanted to bring the lady and the developer in to build out our team. He was pushing back hard.
The arrangement the lady and I were going to is that her original product idea overlapped enough with what my product did already that we could effectively merge them together with what we are doing overseas. I would be the tech lead, she would be business lead on the flagship site we would produce with the platform, and my overseas partner would be lead on overseas markets.
I communicated with overseas partner the plan, as well as plans for getting the product launched. He was insisting he has to be the CEO.
The next time he game back to the States he was in full asshole mode. I wanted to make an in person connection between the 2 or them this time. But he was more interested in connecting with the founder of a new accelerator the lady was supporting. But he didn’t want to go through the lady. He instead wanted to go through his own connections. When I told him we have to go through the lady, he responded “I don’t handle my relationships like that!”
Me and him met in person again (once again only 1 hour for the entire time he was stateside) and he told me that his business credentials were a lot stronger than those of the lady’s (and those of the founder of the accelerator she was supporting). Complaining about “this is very distracting” And that if she won’t accept that he’s the CEO then we don’t have to work with her.
He left to go back overseas once again with him and the lady never even meeting.
My personal financial runway continued to burn.
After that I was trying to get the deal going, and trying to get us together to form our team. My overseas partner was really complaining that his reputation was being damaged as a result of the product not getting to market. And was complaining about the lady’s resume, and was saying “I don’t know this person. I have never even met her!”
We ended up having a long drawn out fight via phone with him telling me “I was disrespecting our agreement about how we would work together.” That he wants to keep the company me and him, 50/50 equity split. And that he would find another developer to start a competing product if I didn’t do things according to his terms.
I tried to put my foot down and flat out layout this is how the company will work going forward. “This is what is going to happen” I said. His simple response was “That is not the tone or language to take with someone you want to have a positive working relationship with.”
The other developer had since moved on to other projects in the time we were fighting about everything. My overseas partner said he is open to working with her, but she had to accept him as the CEO. And that equity is 50/50 so any equity she gets comes out of my share.
By this point the lady put her foot down and said, she is not interested in working with my overseas partner. “If we are working together he will not be a part of the company.”
The last communication I ever had with my overseas partner was me relaying that she has said he is a no go for the team. He didn’t respond to that, nor did I make any attempt to talk to him again.
So that’s my story of a Co-Founder horror story. I’m still working with the lady, but I was seriously hoping to leverage my overseas partners resources in synergy with hers.
He was insisting that he wasn’t the problem. I seem to think he was (as do others) but that’s just one perspective. Wondering if there are other countering points of view on the matter. I do think about how the whole affair could’ve worked out differently.