Cofounder disputes - try mediation
“Tensions in cofounding team are frequent and if handled properly, can strengthen your startup. If not - they could brake it. How can you as a founder increase your chances of make instead of brake? Mediation is one of the most useful and needed tools for cofounders that no-one talks about.”
Content:
Why so important for cofounders - some scary numbers
What is mediation
How to do it? Link to standard mediation clause
Trouble in paradise? Or dream team? Cofounder disputes are more frequent than you might think.
Let us start with some scary numbers. Statistical research [1] as well as empirical evidence from startup investors or serial entrepreneurs indicate that about ⅔ of startup failures is due to people (cofounder) issues.
⅔! Not 5% or 10%. 66.6% !!. Now I would be purely speculating on the split between how many could have been avoided by diligent cofounding team set up (MANY!, prevention always beats correction) and how many could have been salvaged using the proper tools. But I suspect quite a few too.
Majority of my work is focused on the prevention side, but this time I want to share with founders the tool that is the best to use - if you are too late for prevention and the cofounders dispute is on the table.
Whether the dispute is about the equity split, leaving cofounder, performance, roles or commitment (to name the usual suspects) - if you came to the point where you think you are not able to resolve the dispute yourself - ACT! How?
Delay in solving a conflict can be very costly. It frequently leads to growing resentment and very quick downward escalation in the team.
Ask for help - let me introduce Mediation.
What is mediation? Mediation is a flexible process conducted confidentially in which a trained neutral mediator actively assists cofounders to work towards a negotiated agreement of a dispute. Both parties are in ultimate control of the decision to settle and the terms of resolution. It can be a far more effective – and much cheaper – way of resolving issues than going through the courts. (link to CEDR source)
Mediation is one of the most effective tools because it is typically:
Cost effective
Has less damage on the relationship then the adversarial methods (because it does not create ‘winner’ and ‘loser” and is not imposed by third party)
Fast - professional mediators set a very fixed framework within which parties need to find a solution - limiting the negative impact of long term ongoing dispute
If you ask me - not enough, but mediation has been gaining increasing popularity in the last years in many areas - from international politics to family disputes. Very successfully it is also being used in cofounder disputes.
Why is mediation especially useful for cofounders:
Time is of an essence
Low cost
Less regulations and jurisprudence (previous cases that the courts could use as guidance) than in other areas
Very often very little official written contracts and agreements
How to use mediation?
The ideal scenario is that you think about a possible future dispute upfront and agree to mediation as a preferred tool in your cofounder agreement.
If you have not done that - talk about your cofounders as soon as dispute with which you need help arises, suggest mediation (and explain why) and if you get the buy in - which I hope you do, use some of the recognised certified mediators to get out of the deep dark woods.
Wishing you all the best.
[1] Wasserman, N., Mundt, T., & Harvard Business School. (2015). The Founder’s Dilemma (Harvard Business Review). Harvard Business School.