Cofounders Need to Learn How to (Productively) Disagree
Mar 15, 2023
If you’re looking to start a business, and run it successfully, the odds are against you. Around 20% of new businesses fail within their first two years, 45% during the first five years, and 65% by year 10. These stats haven’t changed much since the 1990s.
While there are many factors to consider on the road to success, one lies directly within your control. Sixty-five percent of startups fail due to founder conflict, according to Noam Wasserman, author of The Founder’s Dilemmas. That means, if you want your new venture to beat the odds, you need to learn how to productively collaborate, and more importantly, disagree with your business partner.
To learn more about how to do that, I spoke with a series of founders and academics who specialize in entrepreneurship. Here’s what they had to say:
1) Understand that disagreements are inevitable.
Many of the experts I spoke with argue that disagreements are necessary to achieve innovation. “That’s the way it works,” said Lauren Cohen, a professor of finance and entrepreneurial management at Harvard Business School. “If everyone agrees all the time, it means that everybody thinks the same. Successful organizations make a commitment to disagree. That means you’re getting new ideas into the frame.”
In co-founding relationships, disagreements are often more heightened. According to Mike Freitta, who has been coaching and mentoring start-up founders since 2010, it’s a natural part of the journey. “The fact that you disagree with your co-founders doesn’t necessarily mean that you’re doing something wrong,” he said. “Co-founders who say they don’t disagree with each other, they just haven’t been tested enough. Just like marriage, there’s the honeymoon phase where everything’s perfect. It’s beautiful, but that phase always wears off. You need to be realistic.” Freitta advises younger, emerging founders to be mindful of the honeymoon phase and how intense and short-lived it can be.
“For a lot of these young founders, their co-founder is their first partner,” he said. “They’re finishing each other’s sentences. They want to change the world together. My advice would be to harness that.”
Freitta said the way to do that is to understand that the road will sometimes get bumpy and that disagreements are a healthy part of any relationship. Disagreements, when solved productively, can strengthen the venture and bring the team closer together. “If you get it right, your venture will last longer than many marriages,” he added.
2) Create a founder’s agreement.
A founder’s agreement is a legal document that governs your business relationship with your co-founder. Typically, it includes the rights, responsibilities, liabilities, and obligations of each person, and is meant to protect your individual interests and mitigate the risk of a lawsuit.
“Think of it like a blueprint for resolving conflicts within the founding team,” Shikhar Ghosh, a professor at Harvard Business School, told me. “The goal is to make a contract around how to deal with the uncomfortable topics. That way, when you have disagreements, you have something to fall back on.”
Founders navigate so many uncertainties. Getting what you can squared away early on can help you guard the long-term health of your relationship, team, and venture. In equity-involving situations, it can be particularly useful. For instance, if one founder leaves the company, what happens to their equity? Do they get to buy it out? Do they get vested? Can they sell it to someone else?
A few more questions Ghosh recommends you consider include:
What happens if you need to fire someone or each other?
What happens if someone violates a code of ethics?
Who has decision rights, and over what?
Even the most amicable founder relationships with ambiguous decision rights can later lead to very tense contentions, Ghosh explained. As ventures grow, there often emerges a need for a clear, dominant leader in the group, someone who is outward-facing to the public, to venture capitalists, and to investors. All founding teams, even the ones that have grown organically, confront this. “It becomes more difficult for the more egalitarian founding teams, if they haven’t gone through the process of assigning a clear leader,” Ghosh said.
Ironically, Ghosh noted that, despite the security it provides, most of the founding teams he works with are very reluctant to complete an agreement. Having a conversation around “what will happen if you betray me” can be difficult and even demoralizing for a team that wants to hit the ground running. Still, Ghosh emphasized that it’s necessary for your team to get uncomfortable. “Talk about the hard things in the beginning. You don’t want your entire venture to fall apart just because, later on, you disagree on an issue that feels personal,” he said.
3) Assign a third-party mediator.
You can prepare you and your business partner for disagreements by identifying a mediator to step in when necessary. “Look for someone who has no skin in the game,” said Freitta. “It’s the equivalent of a therapist in marriage. Sometimes you need a set of unbiased eyes to help you get through things.” He recommends looking for someone who both you and your cofounders have met together and trust, to get rid of bias. As a person who has played this role for many ventures, Freitta sees a clear benefit.
In fact, Jo Tango, a professor at Harvard Business School and a founding partner at Kepha Partners, told me he placed a facilitator in his venture very early on. “A lot of the times people wait until there’s a crisis, but every needs to be fine tuned at some point. It doesn’t mean that the car is bad or broken. It’s just that every relationship needs to be checked in for a tune-up,” he said.
Tango has seen many venture capital firms implode because of poor communication. In his 28 years of experience, nearly all the successful franchises he’s seen have brought in mediators from the outside when looking to resolve a big conflict. “Firms built to last nearly always bring an outside facilitator,” he said.
4) When in conflict, let data and users drive decisions.
Decisions surrounding product development should ultimately be driven by users, Freitta told me. “When two founders disagree on the direction of a product, they tend to overlook the fact that users or the market should be driving that decision. There are so many decisions that go sideways because founders let go of the user-centric mindset,” he said.
Freitta recommends founders use the technology adoption curve to help them resolve product-driven conflicts. The technology adoption curve is a bell curve that shows how consumers, across demographics, adopt and react to new technologies, products, or innovations. It’s based on a theory that argues there five different recipients (or types of consumers), with different needs and wants: innovators, early adopters, early majority, late majority, and laggards. “You should be getting feedback from the innovators,” Freitta said. “They are more likely to have higher expectations, and they’re going to give you better feedback than anyone else.”
Conflicts around product direction are an opportunity for founders to re-arrive at the foundational understanding that they are building something for customers — not themselves.
5) Always be honest, but speak with compassion.
“A great founding relationship includes two people who are willing to speak the truth, but with compassion. Otherwise, it doesn’t work,” Tango said. Most founders, he told me, are better at one of the two things: speaking the truth or speaking with compassion.
Tango recommends founders work towards finding a balance as part of their leadership development. “The speak-the-truth, bottom-line, focused speaking style doesn’t work in the long term because other people end up feeling alienated,” he said. “The compassionate-only style doesn’t work for long either because it doesn’t address the big issue. It will fester, and then blow up later.
“Being honest doesn’t mean being mean, hurtful, or confrontational,” he said. “Speaking honestly with compassion can go a long way when dealing with disagreements.”
6) Travel together — or grab a drink together.
Founders need to understand that soft skills like empathy and humility are just as important as their technical knowledge, according to Tango. Success won’t be reached from each founder doing their job well. It’s more how they work together — their collaborative relationship is what will produce results and drive the performance of the team.
Freitta recommends founding team members travel together, or go on team bonding outings, to help develop these soft skills and foster new connections. “Don’t just go to a resort somewhere. Go to the woods, camp, and really try to get to know each other’s problem-solving skills. Who gets down and dirty? Who’s taking charge and who’s following? These are all the things that help you understand the person and their competencies that are relevant to your venture,” Freitta said.
Ghosh shared a similar sentiment. “The soft connections you have with your cofounder and founding team members will make a huge difference in your ability to both surface and resolve futures issues,” he said. “Set aside time once a week, or not any less than once every two weeks, to get together and talk about how everything’s going and anything that’s coming up. It doesn’t need to be formal. You can go out to lunch or after work for a drink.”
Even if you feel pressed for time, building these team-bonding habits early on is valuable, Ghosh told me. “Ventures are based on human connections, and ultimately, they are built on trust. The way you build trust is continuously, through times when it’s not being tested,” Ghosh said.
Despite how bad they might feel in the moment, one thing is clear: the experts agree that you will disagree with your co-founder(s) from time to time. Disagreements aren’t a sign that something is broken in your organization. Rather, your ability to manage them effectively, and move forward, will make your partnership stronger in the eyes of investors, employees, and your founding team. Don’t let this easily avoidable obstacle hold your business back from success.