How to break up with a cofounder - before getting ‘married’

For a while you have been working with your potential cofounder and realised that he / she is not the right person. Your potential cofounder however thinks that this is all a done deal - that you will be the cofounders and that you will both share equity in the future business. 

Oops. Here you are… you made the mistake of giving the engagement ring on your first date. Then you realised that you are actually not such a perfect fit and now you wonder how to get yourself out of this mess.

Here are some useful tips to help you navigate the muddy waters. 

How does it happen? 

You have an idea. And then you go around, talking to others about your idea and look for people who might be of help to get the idea off the ground. Especially if it is the first time you are on this journey, the mistake happens very easily - giving out the engagement ring on the first date (or one of the first few dates). How does it typically go? 

Potential date: Yes, I really like your idea. I could do this, that or the other.

You: Sounds great, let's get started. I am very enthusiastic about it and want to get the ball rolling asap. You get some equity and can be a cofounder. We can talk about the details later. 

Potential date: Yes, let's go. 

What could go wrong? 

As you work together, you realise that your Potential Date is:

  • Not available for the project as much as needed or agreed

  • Not delivering his / her part 

  • Just not the right fit 

Firstly: you are actually lucky to realise it now. Earlier, rather than later. 

Secondly: you have some mess to clean. Because what happened is that you gave the cofounder a ring and then you want to say - well, it was just a pretend ring actually i want it back and we can still be friends. You have raised expectations - a cofounder title is a flattering title (especially if you don't think about the amount of work needed) and vague equity promises have the tendency to stick in the memories (and become quite sizable).

What to do now?

You have 2 major challenges to deal with:

1. Navigate the broken hearts waters

That is the emotional / relationship part of it. 

To navigate this is not easy, but it is possible. You need to understand the other party. To understand that you did not manage expectations right and help the Potential Date with the disappointment. Handle with care. Handle in person. Appreciate the damage done and your own part in it. Try to find out if there is anything else that can be in interest of both of you - advisory board position? External partner? Credit for early stage contribution? There is almost always something that can be used to smoothen the pain. Be creative.  I have seen this go terribly wrong - ending in mediation or court. And I have also seen this done well - and even achieving the ‘we can still be friends’.

2. Cover your back

Very often in the initial enthusiastic stage, there was no clarification about several important issues, such as  - what happens if the parties will part? is there right to any compensation for the work done by the potential date? Is there any confidentiality or intellectual property protection for the idea / project? 

You are where you are so no point crying over the spilt milk.  It could be worse. Like realising you are not the right fit - AFTER getting married (i.e. potential cofounder date being a fixed shareholder of your business). 

If you did manage to navigate stage 1 well, the best thing is to repair your mistake. Here is how. For the certainty and clarity of everyone, have a written agreement with the Potential Date to cover:

  • No future rights of the parties against each other or the potential project 

  • Confidentiality 

  • Intellectual property assignment 

What certainly not to do?

In any case, do not kill or damage your business in its infancy by staying in the cofounding relationship which you know is wrong just because:

  • You don't like break-ups 

  • You still prefer to have somebody to work with (even if it is not the right person) rather than nobody 

  • Or simply because you think this is an easier solution. I promise you. It isn't. 

How to do it better in the future?

I will go in more details in the upcoming cofounder dating series, but here is the super executive summary for you:

  • Manage expectations: please be very clear, transparent and open that in the initial stage - you are getting to know each other, and for both parties - trying out if the future cooperation will be right fit. And - that there are no strings attached until you both decide that you want to do it - and then talk about how to do it. 

  • Sign Memorandum of Understanding: with ANYBODY that you - however temporary - cooperate in the development of your business - the best (and very recommended) practice is - have a simple, written document outlining the main conditions - duration of the cooperation, its objective, compensation (if any), intellectual property rights assignment, confidentiality and dispute resolution. No, I am not telling you to spend lots of time and money on legal contracts. I am advising you to protect yourself, your business, idea and reputation - by having simple, clear, written and affordable agreements in place. 

You can do it! Wishing you all the best to do it right and if you feel you need an extra support, get in touch. 

Jana Nevrlka