On Trust, Founder Fall-Outs, & 6 steps to get things back on track

This post first appeared on Venture Beat on Friday 22nd August.


Relationships are built on trust, and they require work to keep alive and well.

In his book The Trust Edge, David Horsager outlines the eight pillars he believes enable trust to occur within a relationship. The eight pillars are clarity, compassion, character, competency, commitment, connection, contribution, and consistency. Should any one of these start faltering, a relationship can quickly start falling apart and possibly lead to permanent damage.

In the craziness that is an early-stage startup, where founder roles are sometimes ambiguous to start with (even more so with leading co-founders), it’s no surprise that many of the reasons for companies falling apart are related to founder disputes and loss of trust between co-founders.

Note: On this post, the focus is not about whether companies that have a clear CEO are better off than those that are joint efforts from the start. Company organizational structure in the very early days is a very fluid thing and perhaps the subject of another blog post entirely.

So what can you pro-actively do?

1. Create a culture around a set of shared values and live by them. Shared values and a strong brand built on them make decision-making easier, since you have a “constitution” that everyone agrees with, upon which to base your choices.

2. Define roles and responsibilities clearly so things don’t fall between the cracks, and make sure that everyone feels confident that each role has gone to the person most competent to handle it. One organizational model you might find useful to help outline this process is called the Responsibility Assignment Matrix (I prefer the one called RASCI), whereby you assign people responsibility for an item, but you allow others to be consulted, informed, and supported, and perhaps you allow someone else to be accountable as well.

3. Make each other accountable for your individual parts that contribute to the group’s goals — some people like to have standup meetings before the start of the day in front of the team to highlight what they are working on.

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4. Communicate often, even if at times it can be difficult to do so. Although naturally lots of the topics of conversation will stem from work-related matters, lots of stress can also come from areas that are outside of work. By taking time during the week to just catch up, you can sometimes learn about external reasons for people’s reactions. Although this won’t excuse them, sometimes the awareness of an issue can lead to a meaningful discussion on how to jointly deal with it.

Also, keep in mind that as the company grows and requires new types of work, personal founder circumstances can change and can affect the amount of effort required by a one of the co-founder’s roles. This change can further amplify any latent issues, so communicate frequently to make sure you address these items quickly.

5. Have a plan should things fail between founders. If failure between founders leads to you having to part ways, it will be easier for everyone if you have a pre-agreed way of dealing with equity splits and intellectual property ownership. As a starting point, feel free to use the Founder’s Collaboration Agreement to deal with some of these issues.

6. If things do go sour, take action swiftly to reinstate trust or to re-organize internally as necessary.

If trust is breached, and things do go downhill between two co-founders, you need to align intentions. Ask yourselves whether you are open to the following options as outcomes.

Option 1 – complete reconciliation and re-establishment of trust between founders

Re-establishing trust is not easy. It takes courage to admit faults and failures and to apologize for them with a serious intent of not doing it again.

Because re-building trust can take time, both parties have to feel a desire and have the energy to address the issues that led to the breach of trust and then to come up with functional resolutions (a starting point would be the six actions outlined above) to not have them occur again. However, If one of the parties is offended beyond redemption, then it’s best to consider the alternatives below.

Option 2 – one founder takes the leadership hat and the other(s) a more operationally defined role Option 3 – the founders jointly agree to bring a new leader into the organization Option 4 – the offending (or offended) founder leaves the company Option 5 – the founders jointly agree to shut the company down

The last option, of course, is the least preferred one, but at least it is clear to all parties what the final option is when discussions start off. I have also omitted any kind of legal intervention action by other shareholders from the above list, not because they are not possible legally (depends on what your shareholders agreement states), but because they are best not done unless the founders are on board.

In conclusion, maintaining trust takes work, but by investing in it early and over time, you guarantee a far more functional and collaborative working relationship between all founding parties.

Carlos Eduardo Espinal is a partner at London-based startup venture acceleration platform and investment fund SeedCamp.

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