1. In college - I started a company and tried convincing a couple of really smart friends to join as co-founders.
2. They were risk-averse. They wanted a salary. Even though I had 0 money, I promised them a salary and asked them to join as employees. They agreed.
3. I had no money for salaries, but I went into crazy action mode and got a couple of B2B clients for a random project I saw that people need (even though our main product is B2C as a startup and we later on shut this B2B section after we raised). I did B2B projects, got a cashflow, and started paying them salaries, while I took 0 salary as I reinvested as much as I could.
4. This went on for like 6 months. And I we were finally able to raise $400,000. The I convinced one of the employees to become a co-founder. He agreed. Gave him almost equal equity even though he joined late after we raised, and he was already taking a salary, while I never took a salary until that day. During this we also graduated college and started doing this full time.
5. We built for 6 months, realized we need more time and resources than we realised, and decided to downsize and take pay cuts. I took the largest pay cut to maintain the morale of my co-founder and team.
6. 1 year later, we are still kind of a sinking ship, and we have not been able to raise our next round. I also have no savings due to my minuscule salary.
7. We all pushed hard, and I managed to secure a $220,000 bridge round from existing investors
8. We are now in the middle of the paperwork to get that money in, and finally, there is hope, and I am getting out of my depression and headaches after a long time.
9. I announced reversal of pay cuts, a new game plan on how we will start generating revenue and also raise more soon.
10. Co-founder, out of the blue, suddenly says that he wants to quit. Says he does not care even if we succeed post the new fund round as he wants to switch domains immediately and work on another tech domain. He is willing to give most shares back.
11. I argued that he still has an employee mindset. Founders don't get to quit randomly; we have a responsibility towards investors and employees who stuck with us through all this.
12. As a co-founder, he has the authority to steer the company the way he wants as well, and I am happy to discuss and pivot together. My proposal is we see this current thing through, spend a few more months with the fresh funding on working on the thing the investors put in money for, and if it does not work out then pivot. If it works, still pivot with further funding.
13. He still wants to quit now as he does not want to work on this domain even if we succeed and even if we pivot later.
14. I was blindsided as everything seemed great until today. Until yesterday we discussed how we are going to build the largest company in our current / new domain
15. Even today, we are not fighting, there is nothing that happened between us, he just had a quarter-life crisis and believes his calling is to work in the said new domain, right now.
16. Even though I can code and have a decent tech background and I can manage simple tech stuff, he is genuinely a very smart tech guy, and like a prodigy. Losing someone of that level as a co-founder is a large blow.
Pretty sure that our investors will not continue the financing now, and without the current financing, I do not have enough money to run payroll nor to close the company if required.
Before anyone asks - he does have a notice period. But I will now have to focus on replacing him instead of focusing on things that matter. Also, employees will also be shocked and might leave as we are currently a very small team, and as company that is already struggling, losing one of its founders will spook the employees, and rightly so. They have families to feed.
I am really sad. I imagined us conquering the world together.
I can see that this is so frustrating. In the long term, its better than having a founder who's heart is not in it. And, remember, youre not alone in having to deal with the situation - your co-founder made a decision, he should find a way to gracefully wind down his involvement while helping the latest raise succeed.
You'll look back at this post in 10 years and facepalm over this story. Sorry to say that most of this reads to me as a naïve founder, not as an unreasonable co-founder.
Even so, it clearly is upsetting you. I'd recommend you go ahead and feel how you need to feel, but then work through it, learn some lessons, and move forward. After all, we all started young and inexperienced. You will get better outcomes as you get more experience.
It sucks. Rant it out. Cry it out. Do what you need to deal with the grief. Visualize the worst case scenarios. They might not be as bad as it feels, it might just be the shock of an identity shift.
It is a bit like a marriage... and a divorce. The expectation is to move together as a single unit, not two individuals. Sometimes the partner feels trapped and wants out. You managed to convince the investor it was worth committing to, but you couldn't convince the co-founder.
As someone who has been in the co-founder seat multiple times, very often I think we get stuck in bad situations too. Sometimes selling or closing the company is a better idea than raising.
We sold a company once, only for the acquirers to realize they didn't want to do it either. It wasn't loss making or difficult, we just felt like we were wasting our lives doing it. As you say, founders don't get to quit.
The hazy picture I get is that you are a hustler and surrounded yourself with (as you say) risk averse employees. You made one of those employees a "co-founder" to lock him in? But he doesn't have your hustle mindset. Maybe never will.
The simple, but not easy, option is to take back the shares and let him go. Trying to harangue him to stay is only going to make things even messier down the track.
So the right thing by your investors and employees - keep running the business. Perhaps one of the remaining employees could step up to be the team leader - but only as an employee.
By definition a co-founder should be on equal terms with the other co-founder. As co-founders you share the product/service vision and have compatible attitudes to risk, finances, etc. You just cannot promote an employee to co-founder.
Hey man thanks for posting this. Totally cool imo, I hope he gets better opportunities that makes him happy and satisfied, and I hope you also sort out the mess you'll be left with. You care about this which is why you commit to it, total respect for you. Maybe there are pros in this situation for you too.
The mistake that you made was making them "co-founder" on paper. They never were true co-founder who would live and breathe this thing with you daily. They told you in the beginning ("employee mindset", "wanted a salary") but you wanted to believe they were something else. I do feel for you though because I know how hard it is to find a true partner/co-founder in business.
"I imagined us conquering the world together."
You imagined. He didn't. Big difference. I know this is really hard for you and depressing at the moment but you need to accept the truth and reality. This guy was never a real co-founder.
It is probably good for you if he wants to quit now and give back most shares. Get a lawyer and draft the agreement properly and get him out. Since he got a salary as well, I would push for him getting 0 shares if you can swing it. Then you have things to think about. I don't know the details of your company enough to say whether you can save it or not but if you truly believe it can work and you have seen signs, then don't quit and find a way to get through this.
I run a bootstrapped SAAS without a co-founder and happy to chat offline if you want to vent/discuss.
Better to have a clean break. If appropriate the shares can be bought out so that the "co-founder" does receive some compensation for the vested value. Let him leave and do his next thing.
> but you wanted to believe they were something else
Well many times a founder will do this knowingly to get/keep someone who has other options like much better salary elsewhere, etc.
Not saying it's wrong approach, but have also seen the resentment the original "hustler" has later when this "co-founder" doesn't have the same drive. E.g. thinking "It's not fair", etc. even though they were desperate for the help when they had little money.
I thought slavery is over and we get to pick where we work, if they will have us. Something in Constitutions and laws in various countries write something about freedom. Since you didn't have some iron-clad clause with massive penalties (which I don't know/believe would be legal), then it sucks to be you at this time. To quote the meme with Candance "life is tough, wear a helmet".
Also, dude, the guy didn't want to be there in the first place and must have had zero excitement.
For all youngsters out there: don't marry a company. Do your thing, don't lie, work hard. When you find a better thing for you (and your family) take it. A job is a job. Planning for the projects of 2024 and quitting in January is a-OK, it happens. Life happens.
Dave Ramsey says "move with the speed of cash". I get that the Start-ups and VC game is a whole different beast, but the water was up to your nostrils. It only needs a nudge to get you underwater.
You’re trying to take it in a stride and simply vent about it, but this should be something completely benign.
“Awie, Mr. Entrepreneur can’t focus on things that matter because literally everyone in your company told you your thing doesn’t matter?”
They told you they weren’t interested. You keep trying to do your personality cult employee mindset talk to the wrong people. You don’t know other people, this is a you problem. None of those sacrifices should have been forced on those particular people. In your standard, any entrepreneurial endeavor is worth pursuing by merely being entrepreneurial, which is not true.
The harder pill for you to swallow is that this game is actually not available to people that aren’t rich, it’s all an illusion. Congratulations on raising some capital, that structure is real! But the idea that everyone can build something scrappy and take sacrifices if they just get out of an employee mindset is fiction. The people you fawn over were able to do their own seed rounds and just pretend they were taking sacrifices even if they didn’t.
Yeah the whole "I told him he has an employee mindset" like bro that's because you took an employee (who fought to receive a salary) and "convinced him" to be a cofounder. He's still just an employee just because you gave him a shiny new title and shares (in something that sounds like a sinking ship) doesn't mean suddenly he's not going to think like an employee.
Define "rich." Have you been working in a coal mine since you emerged from the womb or did you maybe have a few things provided for you at some point in your life?
there is a class system, it comes with a support system. I quantified what that support system was while you want to split hairs over the specific word used, an answer that requires a whole dissertation in lieu of a simple word that conveys a shared concept. The support system requires being able to close your own seed round and be unemployed, and having friends in your network in the same situation.
"game is actually not available to people that aren’t rich"
I was with you until this comment. Yes it is easier if you are rich but plenty of examples where people find a way to start a company without being rich.
struck a cord with this crowd huh. it wasn't an absolute and I immediately pointed out them raising [some] capital was real and available to them because they are also an example.
and it wasn't about starting a company, it was about doing what OP did which was playing the venture capital game. anyone can start a company, it takes $100 in the right state.
I think the point was clear but let me know if it wasn't, to you.
You are a junior operator. Senior operators get red pilled on this stuff and build up their intuition about people based on these experiences. Welcome to the real game. It has just begun.
If you or anyone else wants advice on founder dynamics, my email is vinay@loom.com. Happy to give advice and be a sounding board over email. I’m sorry you’re going through this.
"I convinced one of the employees to become a cofounder"
Presumably, based on what you've said, at zero investment from his own pockets.
Then this sentiment like you don't understand why he doesn't have a cofounder mindset... A co-founder feels like something that should happen naturally not something you should have to convince someone of..
You can’t have it both ways. You forced this person into it, against the grain, and now that they want to leave you’re surprised?
It’s a tough pill to swallow but hopefully you learn something about human nature from this experience and don’t become resentful/bitter about it.
This is like purchasing a mail order bride, relocating them to your country, and then being shocked when they decide they want to be in a different relationship because it wasn’t what they thought it would be. Can you blame them? We owe nothing to anyone except our children and our pets.
You’re piling a lot of guilt and shame and pressure onto this individual for leaving but at the end of the day the buck stops with you. Gotta be better about choosing who you work with, and how you do that.
> We owe nothing to anyone except our children and our pets.
While I agree with the general sentiment of your post, this seems like a pretty sad world view. We as humans do form connections and I'm happy I owe people and they owe me, even if at the end of the day, family will always come first.
Yes, we do form connections. The key to successful connections is when it is to the mutual benefit of both parties.
When a more powerful person persuades a risk averse person to take the risks associated with being a co-founder, the relationship is on rocky ground right from the start.
This is one of those tough life lessons that I have also suffered. First, the vast majority of startups failed, and unless you have something to fall back on (like rich parents), you should _not_ take on the risk of starting a company unless you have adequate funding.
The truth about starting a business is that the vast majority fail, and those who succeed typically come from privileged backgrounds. It's very rare for legitimately poor people to succeed because you cannot take the same risks if you have nothing to fall back on.
My suggestion to you would be to get a big tech job and collect as much money as you can. Once you're self-sufficient, you can go full YOLO.
The problem is step number 4. Don’t do that. Don’t give your company away just so you have someone to share your burden. They aren’t you. They don’t have the same engagement. This, is why you fail. Instead, you should have just made them “in charge” of things and given them a larger salary. No ownership. No co-founder.
OP made him a "founder", but he wasn't a founder. Not in his heart. He played along for a while, but it wasn't in it. Founders need an attachment to their companies like it's their child... this was a step-parent, and not a good one.
Now, the question is, why did you make someone who wasn't a co-founder, a co-founder? Was OP overwhelmed? Lonely? Lacked confidence? Wanted someone else to have the same level of attachment and passion for the company? Trying to trap/guilt them from leaving with the title? None of those justify the action. OP F-ed up here at #4.
1- not to diminish real step-parents, that step-up and put in the work, and earn it. Lucky to have met someone who did IRL.
I get the distinct vibe this person has never wanted to be a damn co-founder and instead was hounded into it by a friend who doesn't take no for an answer.
In business, that can be a useful trait.
In relationships, it's a death sentence. People like him are exhausting.
If someone said "You still have an employee mindset" to me I don't think I could stop myself saying something like "that's all I wanted. I wanted work to do and a paycheck to get from it. You elevated me to a position I didn't want and are mad I don't want it."
There was definitely fault on both parties here. Instead of being honest. Doing what was best for the company. However, right out of college? Chalk it up to a learning experience and hit the bricks again after looking long and hard in the mirror. The guy's definitely got the mindset to build a company if that's what he wanted to do.
You really make it sound like you had to convince people to work on your project against what they really wanted to do, so unlikely it was really in their hearts to work on it. It's not really surprising then, is it?
You can't have someone be an effective leader in the company who doesn't believe in the mission anymore. As the leader now, you need to give them the speech that as you build this company, people are going to get on the bus and people are going to get off the bus. We value their contributions and everything they did to help us build the company. You can get through this.
I assume you had a vesting period? If so he can probably only get 25% of his shares anyway-- so him giving 75% back isn't really his choice. It was silly for you to give a large percent of the company away after doing a lot of the work yourself. Big mistake on your part.
> I argued that he still has an employee mindset. Founders don't get to quit randomly; we have a responsibility towards investors and employees who stuck with us through all this.
I don't think you're convincing him to stay. You only sound like a patronizing ass.
People can quit whenever they want. Life is too short to grind on something because, investors.
Had to deal with the exact same situation, in the end I managed to sell the company, but boy were those 2 years down the drain.
From now on, never again, I am now working towards becoming a realtor. The huge difference is that people will accept to work on commission if the goal is clear and self-evident such as selling houses but won't do the equivalent (equity based compensation) if the road is paved with unknown unknowns such as building a company from scratch (or just like mine and your case they'd do it for a while before having a change of heart)
With real estate at least you get to put together a team and be the leader and everybody works on commission so there is no tension and not even the chance of tensions developing.
Teams seem to be longlasting as well, at least from what I could see.
Seems also the most straightforward path to become a millionaire, whereas the startup thing is for people aiming for becoming a multi-millionaire or a deca-millionaire, with some low odds of becoming a centi-millionaire
> Co-founder, out of the blue, suddenly says that he wants to quit
He's known for a long time that he wants to quit, it's just now that he's worked up the nerve to tell you. If you're honest with yourself, I bet you've known it for a long time too.
> I argued that he still has an employee mindset. Founders don't get to quit randomly; we have a responsibility towards investors and employees who stuck with us through all this
...and this is the exact point that you blew it. Why do you think you get to tell him what to do with his life? And why should he put the interests of your empoyees and investors ahead of his own?
He's just not that into (working for) you. He's gone. Let him go and try to salvage what you can.
So . . . you never did anything wrong, selflessly threw your body on grenades, and suddenly out of the blue your cofounder wants to leave you?
I don't think you're being honest with yourself here on many counts.
Have you considered a "couples counseling" scenario with your cofounder? It doesn't even need to be an actual counselor. But it would be useful if you had an uninvolved 3rd party that you and the cofounder and anyone else could talk with . . . a 3rd party that you could trust to give you an objective analysis.
1. In college - I started a company and tried convincing a couple of really smart friends to join as co-founders.
2. They were risk-averse. They wanted a salary. Even though I had 0 money, I promised them a salary and asked them to join as employees. They agreed.
3. I had no money for salaries, but I went into crazy action mode and got a couple of B2B clients for a random project I saw that people need (even though our main product is B2C as a startup and we later on shut this B2B section after we raised). I did B2B projects, got a cashflow, and started paying them salaries, while I took 0 salary as I reinvested as much as I could.
4. This went on for like 6 months. And I we were finally able to raise $400,000. The I convinced one of the employees to become a co-founder. He agreed. Gave him almost equal equity even though he joined late after we raised, and he was already taking a salary, while I never took a salary until that day. During this we also graduated college and started doing this full time.
5. We built for 6 months, realized we need more time and resources than we realised, and decided to downsize and take pay cuts. I took the largest pay cut to maintain the morale of my co-founder and team.
6. 1 year later, we are still kind of a sinking ship, and we have not been able to raise our next round. I also have no savings due to my minuscule salary.
7. We all pushed hard, and I managed to secure a $220,000 bridge round from existing investors
8. We are now in the middle of the paperwork to get that money in, and finally, there is hope, and I am getting out of my depression and headaches after a long time.
9. I announced reversal of pay cuts, a new game plan on how we will start generating revenue and also raise more soon.
10. Co-founder, out of the blue, suddenly says that he wants to quit. Says he does not care even if we succeed post the new fund round as he wants to switch domains immediately and work on another tech domain. He is willing to give most shares back.
11. I argued that he still has an employee mindset. Founders don't get to quit randomly; we have a responsibility towards investors and employees who stuck with us through all this.
12. As a co-founder, he has the authority to steer the company the way he wants as well, and I am happy to discuss and pivot together. My proposal is we see this current thing through, spend a few more months with the fresh funding on working on the thing the investors put in money for, and if it does not work out then pivot. If it works, still pivot with further funding.
13. He still wants to quit now as he does not want to work on this domain even if we succeed and even if we pivot later.
14. I was blindsided as everything seemed great until today. Until yesterday we discussed how we are going to build the largest company in our current / new domain
15. Even today, we are not fighting, there is nothing that happened between us, he just had a quarter-life crisis and believes his calling is to work in the said new domain, right now.
16. Even though I can code and have a decent tech background and I can manage simple tech stuff, he is genuinely a very smart tech guy, and like a prodigy. Losing someone of that level as a co-founder is a large blow.
Pretty sure that our investors will not continue the financing now, and without the current financing, I do not have enough money to run payroll nor to close the company if required.
Before anyone asks - he does have a notice period. But I will now have to focus on replacing him instead of focusing on things that matter. Also, employees will also be shocked and might leave as we are currently a very small team, and as company that is already struggling, losing one of its founders will spook the employees, and rightly so. They have families to feed.
I am really sad. I imagined us conquering the world together.
Rant over. Thank you for attending my RantX talk.