On Why Founder Prenups are Essential… A Lawyer Argues!

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Wow, everyone’s starting to realize that it is internecine arguments and conflicting personalities among the founders that kill companies. Not competition. Startup Lawyer has some great observations on this topic, including a to-do list of what to make sure you sort out with your partner: (1) the goals each of you have for the startup; (2) the goals each of you have for yourself; (3) duties, job descriptions, and hour commitments; (4) who pays for what; (5) who gets paid first and why; (6) what happens if one of you wants out; (7) what happens if one of you wants to sell the company, raise capital, or end it; (8) what happens if one of you gets disabled or dies; (9) what happens if things take longer than expected; and (10) whether launching other startups, i.e. “moonlighting,” is...

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Risk Factor: Business Partner Disappearing

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Here’s a situation we’ve seen a lot, that we deal with in the book in detail: one business partner disappearing. Often, it’s just too hard and scary to deal with emotionally challenging situations so too often, people who are young and inexperienced, or old and in pain, run rather than confront. We have a bunch of strategies for dealing with this, but one interesting aspect is: the early warning detection system. What are some signs that a partner is likely to run away from a difficult situation with his partner, rather than confront it with you? Here are a few signs that we’ve seen: He’s young. This is much more a behavior associated in immaturity than with responsible adults. This obviously doesn’t imply most or even many young people do this; rather, the converse: just if that it is done, it is most likely someone young. This usually happens slowly, not immediately. So he withdraws from communication piecemeal. Longer times before he responds to emails? More unanswered phone calls? Those are big red flags! Is he in a difficult situation, either due to some tense conversations, or for personal reasons? These are often the triggers to just...

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Mark Suster on Why Founder Prenups are Important

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Mark Suster says it best: Startups breakdown because of founder in-fighting. What we’ve been saying for years! Here are some key points of his: But there is no such thing as “no politics” since we’re human beings and we’re genetically wired for politics. It’s called social interaction and understanding peoples’ motives, what makes them tick, who they don’t get along with, what rivalries exist, etc. is a very important part of being a leader. It’s why I wrote a post outlining why the job of a CEO is often “chief psychologist” – especially if the company grows beyond 20 employees. He includes lots of great examples of partnerships breaking down, including some of the less-known ones (Foursquare). Worth the read in its...

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What if your Business Partner Doesn’t Grow To The Next Level?

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As a business grows — the challenges to the founders grow. It’s like dating: when you start dating, you just need to find fun things to do; but that’s a different skill set than, say, parenting or providing for a household! What if your partner is great at the early challenges, but not at the later ones? Before we answer this, the first step is identifying when it’s happening — and tell him. Maybe he realizes it? Maybe he doesn’t. There are two great ways to identify it when this happens. Sometimes, your partner will realize it himself, with a little prompting. People who are more honest about their own personalities tend to do this. Sometimes, he’ll rise to the challenge. Sometimes, he won’t. But it’s important to give him the respect to let him know that you want him to rise to the challenge. And then, if he doesn’t: when you do confront him, he will be psychologically and emotionally prepared, because you will have already suggested to him to rise to the next level. If he doesn’t rise to the challenge — and 9 out of 10 times, they don’t (but enough do, so it is definitely worth keeping an open mind) — then the challenge is what to do. The best medicine, of course, is the preventive medicine: an ounce of prevention, as Ben Franklin said. Talk at the very beginning of the project, about how both of you will need to rise to challenges you don’t expect — and do miserable work that you hate, but that will help you grow. Is he ready for it? Does he want to seize the opportunity? If not, then lets write in the various contingency plans directly into your founder’s prenup! This deals with question like: what are the general types of challenges you expect both of you to rise to? The specific ones? In each case, what do you do, or not do, if-or-when they...

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Welcome to FounderPrenups.com!

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Any questions? Contact us here.

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