Get Hoo Boy in your inbox every other Sunday.

16 / Too fast → too furious: why we struggle in business partnerships

March 12, 2023
A pair of co-founders squaring off in a power struggle.

Welcome to Issue 16!

There isn’t a big idea in this issue, but rather a bit of exploration.

When I first sat down to write this piece, I wrote it in the voice of McSweeny’s. Humor speaks delightful truths, and while I laughed at my writing, I couldn’t help but feel like it would leave readers with shame. It was funny, but it was, frankly, kind of mean. I rewrote it.

So what can you expect in this week’s issue? We’re talkin’ about co-founder conflict. I noticed a lot of people I know (and my circle is weirdly indexed on being a startup founder) are—admirably—intent on being a great partner to their girlfriend/boyfriend/wife/husband/partner, but they’re also struggling learn what they want from and how to be a great partner to…their other partner, their business partner/co-founder.

So this week’s issue is about WHY we struggle with our business partners. And let me tell you, while this issue is long, it’s dense with insights that I hope become the subject of some good conversations over the next couple of weeks. And in my next issue, I’ll write about HOW we can be better partners to our business partners (and encourage them to do the same).

A Question

“What's your own responsibility for what's been happening? Put another way: what did you do to help create this situation?”

A Quote

“A spirit of candor and frankness, when wholly unaccompanied with coarseness, he admired in others, but he could not acquire it himself.”

—Anne Brontë, The Tenant of Wildfell Hall p. 22

A Tale of Two Partners: Life Partnership vs. Business Partnership

Being better at being married—compared to our parents—is one of the most universal ambitions I run across in millennials. We believe we have the tools—therapy, endless books, a culture beginning to value emotional intelligence—to be better partners to our partners and parents for our kids. I certainly have a privileged reference frame where my circle went to college (even if it was at a state school in the midwest) and are business owners or well-paid knowledge workers. Still, I take pride in what feels like a generational commitment to level up. Marriage is a relationship, and for most, it is the relationship, but for founders and business owners, there’s another relationship that ranks right up there: the co-founder or business partner. And so, it’s striking how much I see people who are committed to being great at one kind of relationship—their marriage or partnership—struggle to keep their head above water in another—their business partnership.

Why We Struggle with Our Co-Founders

So what gives? What makes business partnerships so much more likely to overwhelm us when compared to life partnerships? Let me give you a metaphor. Imagine you gained 200 pounds in six months. Your life has now changed dramatically. You went from fit and healthy to having your doctor, friends, and family remind you of how high the stakes are to be overweight in what feels like a single night. Starting a business is a bit like that for at least four reasons: start conditions differ, it’s easier to blame someone else for their part than take responsibility for our part, we want to protect ourselves and our partners, and finally, it’s easier to say we’re serious about being a good partner than to actually do the work to be one.

A quick sidebar, though, first. I love a good statistical misattribution or mistranslation like in the elementary game telephone. People love to cite Noam Wasserman with a statistic on how most companies fail due to co-founder conflict. I even almost cited it here before I decided to check the facts. Take this one from Entrepreneur.com, for example, “In his book, The Founder Dilemma, best-selling author and Harvard Business School professor Noam Wasserman claims that 65% of high-potential startups fail due to conflict among co-founders.” First of all, the book is called The Founder’s Dilemmas (plural). And in it, Noam cites a 1989 study of 96 portfolio companies across 49 venture capital firms in which he surveyed V.C.s “cited problems within the management team as a top-three contributing factor, making it the most important contributing factor for 61 of those companies.” [1] Nowhere does he mention the word, Co-Founder. That said, most of what you’ll read here applies to “executives on the executive team” as much as it does “co-founders” or “business partners.”

Start Conditions

Marriage and a business partnership are both binding legal commitments that tie two people’s futures together, and the paths that two people take that lead to these two different commitments differ in at least four distinct ways:

  1. The “dating” period is much shorter for business partners vs. life partners.
  2. The stakes increase much faster for business partners vs. life partners.
  3. A business partnership necessitates close collaboration on complicated and complex challenges much sooner than a life partnership.
  4. There is far less cultural preparation for a business partnership’s difficulties than for a marriage.

Dating Period

  • People take their time getting married. In 2021, The Knot surveyed 5,000 people who got engaged that year and found that most couples dated for more than two years before getting engaged, and a separate study found the average length of an engagement is fifteen months [2] [3].
  • People do not take their time getting into business together. I couldn’t find data on the average length of time co-founders spent preparing to start a company together. Still, based on my experience with my own business and the 40+ companies I’ve worked with as a coach, I would be shocked if it averaged over three to six months. The closest comparable I could find was from Noam Wasserman—his book, The Founder’s Dilemmas, summarized his findings from data on 10,000 founders—who found that “40% of founding teams included at least one set of co-founders who had a prior social relationship without having shared a prior professional relationship” [1], indicating that some teams at least knew each other before getting into business together. Interestingly, he found these preexisting relationships did not increase the odds of success but rather increased the likelihood of a co-founder’s departure by 28.6%.

Financial Stakes

  • When we’re dating somebody, we gradually step into shared financial risks. Only when we marry someone, which happens after years, do we enter into a binding legal contract that ties our financial futures together. Signing a lease—moving in together—is another way we do this, and most people don’t move in together for a while.
  • In a business, the financial stakes get high quickly. Your financial futures are bound when you incorporate and split equity. This often involves individual goals like paying off debt, saving for an engagement ring and wedding, a house, college, and retirement. And when those goals depend on how someone else behaves in a business relationship, any slip-up or mistake from one party can feel like a threat to others.

Collaborative Requirements

  • In year one of dating, the collaborative requirements are simple. The most complex thing most people are likely to need to collaborate on is either travel plans, cooking a meal, or throwing a party together. And if any of those things goes poorly, most people will end the relationship and look for a better-suited partner.
  • People need to collaborate on many complicated and complex business problems in year one. In the first year of business, two people need to research a market together, build a product, determine a business model, incorporate a company and split equity (tying their financial futures together in a binding legal agreement), hire and fire people, raise money from investors, and more. If any of these things go poorly, you need to involve a lawyer to split up.

Cultural Preparation

  • We treat marriage like the default path. 53% of American adults are married [4]. Even if our parents aren’t together on day one, we’re immediately exposed to marriage. Our friends’ parents’ are married. Our parents thought about it and decided not to get married, marry, or they got divorced. We’re steeped in the idea that one day, we’ll look for a life partner from very early on. Our parents, friends, and extended family are like Pez dispensers but for marriage advice. And not to mention the deluge of dating shows, rom-coms, marriage plots, and subplots you can only avoid by never turning a screen on. Then, when or if we do get engaged, many cultures and religions have pre-marital counseling traditions to further prepare us for the inevitable challenges two people will face when building a life—and for many, a family—together.
  • We don’t treat starting a business like the default path. There are 31M small businesses in the U.S. (accounting for 99% of companies), only six million of which have employees [5]. Fascinatingly, 55% of American adults will start a business in their life, but most will not make it past their sixth year [6] [7]. For most of us, the default path is “get a job,” not “start your own business.” We’re not steeped in “how to start a business” and “how to choose a great business partner (and be a great partner to them)” in the same way we are our life partners. And while resources like First Round Review’s “Founder Dating Playbook” are a significant step in the preparation department, they’re new and—in my opinion—insufficient, ineffective, and give people a false sense of security.

Taking Responsibility

Both people are responsible in every conflict, struggle, challenge, or whatever you want to call it. There’s a part of the struggle and resolution you need to take responsibility for, and there is a part the other party needs to take responsibility for. The thing is, it’s way easier to see someone else shirking their responsibility and get righteous than it is to look at our half of the equation.

The wonderful team at Conscious Leadership Group makes “taking radical responsibility” the foundation of their methodology, encouraging every individual to commit to “taking full responsibility for the circumstances of their life and for their physical, emotional, mental, and spiritual well-being” instead of “blaming others and myself for what is wrong in the world.” [8]

Peter Drucker shared an excellent example of what taking responsibility for something instead of blaming looks like in this 1967 book, The Effective Executive, by citing an even older example from 1938:

“We all know, thanks to Chester Bernard’s 1938 classic, The Functions of the Executive, that organizations are held together by information rather than ownership or command. Still, far too many executives behave as if information and its flow were the job of the information specialist—for example, the accountant. As a result, they get an enormous amount of information they do not need. The best way around this problem is for each executive to identify the information he needs, ask for it, and keep pushing until he gets it.” —The Effective Executive p. xxiv

For good measure, let me illustrate with a modern example of a pattern I see over and over again. The C.O.O. doesn’t want to give the C.E.O. feedback because they’re afraid the C.E.O. will react with an unpleasant emotion like anger—put another way, “The C.E.O. doesn’t take feedback well.” This is an expert way to shirk responsibility, so let’s break this down. In this example:

  • It is the C.E.O.’s responsibility to take feedback well. Otherwise, they will cut themselves off from the flow of information.
  • It’s the C.O.O.’s responsibility to deliver feedback to their C.E.O., so the C.E.O. has the information they need to make good decisions.
  • It’s the C.O.O.’s responsibility to consider whether the feedback they want to deliver is 1) in service of resolving a conflict or improving a situation or 2) because it would feel good to release their anger or frustration. 1 is a good reason, and 2 is not.
  • It is the C.O.O.’s responsibility to support the C.E.O. or quit.
  • It’s the C.O.O.’s responsibility to determine whether the C.E.O.’s inability to handle feedback well is something they can tolerate or not and, if it is not something they can tolerate, to quit.

For what it’s worth, the C.O.O. in question was me. I was the C.O.O. who didn’t give feedback because I didn’t think my co-founder took feedback well. It was easy to blame someone else instead of taking responsibility for figuring out how to either a) deliver the feedback in a way it was easier to digest, b) accept that my C.E.O. wasn’t going to change, or c) quit. And by not doing any of those three, I undermined her.

It’s a great example because so many of us see so clearly what the other person could be doing better in the partnership. Still, we miss the things we take responsibility for—the things we can control—and miss what could otherwise be beautiful opportunities to 1) grow ourselves, 2) help our partners grow, and 3) build more effective and successful organizations.

Fear, Defensiveness, and Protection

Defensiveness gets a bad rap. People defend or protect things they care about. So if someone’s being defensive, it’s because they give a shit, which can often feel in remarkably short supply. That said, hold your ground too firmly—that is to say, inflexibly—your business will never move forward. There are many things people can get defensive about, all of which are because they’re afraid something bad will happen and always because they’re scared of something bad happening to either 1) themselves, 2) others or 3) both. Let’s break that down.

We protect ourselves because we want to avoid discomfort and pain. Makes sense. And a lot of what we’re protecting ourselves from is other people. We don’t want to get yelled at, we don’t want to take any emotional abuse, and we don’t want to learn hard truths that threaten our identities or egos. But we have to take the long view. When I think about figuring out how to have a conversation with a co-founder about how they don’t take feedback well, that conversation feels painful. I’d love to not have it. But if I take the long view, I know that if our C.E.O. doesn’t get better at taking feedback, the company probably won’t succeed because people will stop giving them the information we need. Which pain is greater? An uncomfortable conversation, or taking an L on four years of hard work?

We protect others because we don’t want others to experience discomfort or pain. Also makes sense. Our co-founder said they’d do something and then they didn’t. Fuck. Now I’m avoiding the pain of an uncomfortable conversation, but also, since I care about my co-founder, I don’t want to hurt them. But I know I’m No Good™ at giving critical feedback (I always end up yelling at people!) So I protect them, freeze up, and zero feedback doth I give. But again, we have to take the long view. You may be protecting yourself and your partner from some short-term discomfort, but the long-term damage of a hundred unresolved conflicts ne’er spoken of might poison you slower than Cersei Lannister, but poison you, all the same, it will.

Serious People

Chris Power is the founder and C.E.O. of Hadrian, a very rad American manufacturing company working on rescuing our aerospace industry from a looming manufacturing crisis. In episode 281 of Invest Like the Best, Chris talks about serious people vs. unserious people, and I want you to consider whether you’re serious. Huh?

Imagine we are all running a town together. Each of us has a role, and a serious person has to perform their function or else society degrades. An unserious person passes responsibility.

Many co-founders are not serious about being great partners to their business partners/co-founders, similar to how many people are not serious about their health. We know that getting enough sleep, eating a healthy diet, and getting 7+ hours of exercise each week are baseline requirements of physical health, and while most of us want to be healthy, we aren’t serious about putting in the work.

So when it comes to our co-founders, if we want to be great partners (and great partners build great companies together), we need to be serious about putting in the work, and while putting in the work won’t be easy, we do understand quite a bit about what that involves. So stay tuned for issue 17, where I’ll dive into that.

Hoo boy, indeed.

Reads & Resources

Articles

If you plan on fundraising in the next 12 months, you need to read this piece by Elad Gil. The piece is a good overview of “how we got to now” regarding the recent public market tech stock price collapses and the current private market fundraising environment. Elad also argues that “No matter, the valuation reset coming for private tech is so stark (50X to 100X ARR in 2021 → 10X) that a recession or drop in spend will only matter on the margin.” Given this bleak picture, he offers practical advice that, while it may feel like an icy splash of water, founders are likely getting used to that.

From Twitter

I’ve followed Dr. Emily Anhalt on Twitter for quite some time. She is a clinical psychologist, TED speaker, Co-Founder, and Chief Clinical Officer at Coa, “your gym for mental health.” So she kind of knows her shit. So I will let her tweet speak for itself: “Psst... any relationship that can be ruined by a thoughtful conversation about how you feel and what you need doesn’t have long-term stability or potential anyway.”

Audio

Tech CEOs aren’t exactly enjoying a moment of public popularity, what with Elon Unchained being the tech sideshow of early 2023 and all. So, listening to Luis von Ahn, Co-Founder, and CEO of Duolingo, speak with Tim was a breath of fresh air. Luis was surprisingly down-to-earth for the CEO of a public technology company, and the story of Duolingo is wholesome in so many ways. Tim and Luis talk for the second time in this episode (in their first recording, Duolingo was 60 people; it’s now 600), so the contrast between the two episodes is a rare view into the mind of an early CEO and a public company CEO.

Books

Every time I quote David Whyte, I cringe a bit. I joke with clients that the moment you first discover David Whyte, it’s only a matter of time before you become a coach. David is a former marine biologist turned full-time poet. Much of his poetry is about our relationship with our work and what it takes to be creative, so entrepreneurs find his work resonates more than a fair bit. His book, Consolations, is a book of poetry that I think most people who’ve never read a book of poetry would love. Each poem is a poem on one word. My favorite? Close. Here’s an excerpt: “Human beings do not find their essence through fulfillment or eventual arrival but by staying close to the way they like to travel…”

Dice Roll

One of the common patterns I see causing drama at startups is when one person proposes the team makes a hard decision in a casual manner, usually giving the team little context, time to prepare and think about the hard decision, and an expectation that the team makes the decision in the meeting or quickly over Slack. People freeze up, lash out, or react otherwise emotionally, and the team is sent into a tizzy. Gokul Rajaram developed a framework to solve this problem, and I love it. It’s called S.P.A.D.E.: Setting, People, Alternatives, Decide, Explain. You don’t use it for every decision, only hard ones. But if you train your team to follow this framework when proposing a solution to a gnarly problem, I guarantee the level of irritation and drama around decisions will decrease.

That’s all for this week. I’m looking forward to what’s next!
Andy.