early month It’s like the beginning of a new romantic relationship for a startup: full of promise and excitement, everyone is seduced into a blissful state of possibility. In the age of wine and roses, it’s natural to want to focus on the positive is. Imagining the worst-case scenario, let alone planning, might be seen as the antithesis of launching a new partnership.
Unfortunately, as too many co-founders and spouses have found, the best time to plan for negative outcomes is at the beginning of a relationship. All too often, it leads to unruly lawsuits with no clear winner.
It’s hard and awkward, but it’s important for co-founders to plan for possible future turbulence. At a minimum, startup co-founders should:
- Force tough conversations during the launch phase and recognize the potential for conflict down the road.
- Hire an attorney to help draft incorporation documents that clearly spell out the rights and obligations of all co-founders.
- Agree in advance on the procedures for avoiding and resolving deadlocks and the process for removing founders or facilitating their peaceful exit.
Don’t put off difficult conversations
Relying on collateral promises, conversations, emails, and understanding is a recipe for litigation over the years.
When there’s an endless amount of work to do in the startup stage and no revenue, co-founders naturally take on a lot of the tasks and work tirelessly (and often paid) to launch new ventures. without) works. No one wants to spend extra time talking about possible future discord.
Additionally, co-founders are often full of positivity in the startup stage, and wargaming for negative outcomes can be viewed as a “vibe killer” and counterproductive to a successful launch. I have. It’s always easier to postpone a difficult conversation for another day when money and time are more abundant.
It can feel like the worst time to discuss worst-case scenarios, but the start-up stage is always the best time to plan in the face of negative consequences. There are several reasons for this.
First, co-founders are generally on relatively equal footing during the startup period. Each co-founder typically has a contribution (and risk) to capital, connections, labor, or something else, and whoever is in a position to be responsible for the ultimate success or failure of the business (still ) No one is here. No one knows what will happen or why. Also, everyone is at relatively equal risk of failure.
In other words, because it is in advance, the startup stage is in many ways the easiest and fairest time to plan fairly for the future.
