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4 Reasons Why Co-Founders Leave — and How Unresolved Conflict Fuels Them

Our ‘startup whisperer’ Jen Wolf embarks on a blog series to help founders cope with and embrace conflict

(Editor’s note: This is the first of a series of posts about co-founder conflict  and how startups can and should use conflict as a tool to help them mature and grow. Have a question or need advice about conflict? Tweet us @initialized and we may use it in a future post. To hear more about co-founder conflicts check out Inc.’s “What I Know” podcast series where Garry Tan dives into his own experience with co-founder disagreements.)

Our relationship with conflict is complicated. 

Unresolved conflict can destroy personal relationships. And in our world, it routinely stifles even the most promising startups. Unresolved conflict builds up like unwanted scar tissue — causing irreparable harm to co-founder relationships and contentious break-ups. Or, worse, the ultimate demise of a startup, and the heartbreaking death of a great idea.

Unresolved conflict is bad. But conflict itself is necessary.

Founders and startup leaders can and should use conflict to their advantage, addressing the smallest of disagreements early. Conflict is a tool that can help you identify differences, resolve them, and build long-lasting alignment. 

In our work as investors, we’re reminded everyday that conflict management is a competency that all startup founders need to have or develop. It’s as important as ingenuity, hustle, and even passion.

We thought we’d share some of our experiences in a series of blog posts about co-founder conflict. We’ll cover it from all angles — why it happens, how to recognize it, and how to use it to your advantage. If you don’t proactively manage conflict — if you actively ignore it — it might just destroy your relationships and your startup.

In this post, we’ll look at our own portfolio and share some of the most common reasons why co-founders have left their startups. We’ll explain how the underlying cause for many of these departures is unresolved conflict.

First let’s talk about the small thing I really love about this big topic: micro-conflict.     

Micro-conflict isn’t a fight, and it’s necessary for alignment 

In high school, I joined the debate team. Turns out, I was pretty good at it. I was actually the State of Washington’s high school debate champion my senior year. To be good at debate you must embrace conflict. You must also be a good listener, hearing and understanding the underpinnings of an opponent’s argument and how each little bit conflicts with your position. Attacking each of those micro-arguments is how you persuade people and win debates. 

Fast forward to my early professional career, where my debate skills — and ability to get to the core of any issue or argument — became valuable in product management. Unlike debate, the ultimate goal of product management isn’t persuasion. It’s the alignment of often very diverse stakeholders. 

To gain alignment, any project manager must be a great listener, identifying the smallest of discrepancies between stakeholder expectations, and resolving them. It’s about openly resolving micro-conflicts — especially early in development. Unresolved conflict or misalignment becomes a much bigger (and more expensive) problem later in development. 

These micro-conflicts are simply differences of opinion or perspective. And that’s where our relationship with conflict gets complicated. Many of us are taught or intuitively believe that conflict is bad.

Micro-conflicts are healthy. They help us understand each other and why we believe what we believe. And when we need alignment — there’s no way around it, even if it’s uncomfortable. 

The startup lifecycle is similar to product development. In addition to building their own product, startup founders must be aligned on how to build a business. Getting alignment on some of those early business discussions is even more important than negotiating a product’s MVP feature set. Yet, those discussions can be even more uncomfortable, especially for founders who may be great at ideas but not as versed in leadership. 

Top reasons founders leave — and how unresolved conflict fuels them

Many successful early-stage startups embrace micro-conflict and address it proactively. While it might look easy for some, great leaders work hard at honing leadership, listening and problem-solving skills so that they can address small conflicts on a daily basis. Experienced founders who understand the importance of conflict might intentionally create an organizational process with tools to address conflict early. 

Many times, however, whether it’s because of the frenzied startup pace or social awkwardness, co-founders avoid micro-conflicts that are happening all around them. Discussions to maintain alignment simply don’t happen. Scar tissue accumulates until things just stop working — sometimes ending in a spectacular and unfortunate departure. 

We took a look at our own portfolio to identify the top reasons why co-founders leave. Here are some findings: 

  • Of the 20% of startups in our fund that had a co-founder departure, nearly half were at the seed stage. Much of the conflict that resulted in departures happened very early, when startups and founders were inexperienced and maybe hadn’t developed strong interpersonal skills. 
  • The top reasons for those departures include: co-founder skills not scaling rapidly enough (30%), performance (20%), burnout (20%), and compensation (10%).
  • The most contentious departures were caused by compensation and performance issues. Nearly all of these were in the seed stage.

So, let’s take a closer look at what caused those departures and how unaddressed micro-conflict played a part. Sometimes it’s as simple as what’s left unsaid. 

Co-founder skills not scaling rapidly enough

Unsaid: “You’re not really a founder. You’re an early employee.”

In the early days of a startup, founders take on different roles that may not completely align with their skills. Some may overstate their capabilities in areas in order to secure “co-founder” status. But as the organization matures, the gaps between the title and their talent become obvious. 

For example, a co-founder may have a natural talent for selling the company vision. But as a company grows, and needs a sales team, the co-founder might not have any experience creating a sales process or managing a sales team. They might be a great individual contributor, but not a good sales leader. As expectations rise — and more investors become involved — the need for acquiring different talent and experience becomes clear. And for someone who still believes they are entitled to co-founder status because of their early sweat equity, taking a demotion can be hard to swallow. 

This sudden bigger conflict can usually be traced back to an uncomfortable conversation that didn’t happen earlier. Eager to keep everyone motivated, early-stage startups can sometimes liberally give out “founder” titles as a reward to those who are first onboard — rewarding friends rather than talent. What might have been an early, difficult discussion about performance expectations and skillset never happened. Instead, a co-founder title was given out to keep the peace. Later on, that unaddressed micro-conflict becomes a much bigger deal.

Burnout 

Unsaid: “You’re not pulling your weight. I guess I’ll have to pull it for you.”

Founder burnout can happen for a few reasons. One of the most common is an imbalance in workload or responsibility among co-founders. One co-founder feels they have to do more to pick up where another may be falling short. Rather than having upfront conversations to re-balance the responsibility, the more involved founder may burn themselves out — and eventually harbor resentment.

Sometimes, it ends badly, with the overworked founder flaming out, realizing that the sacrifices they are making just aren’t sustainable. My colleague Garry Tan avoided conflict before he ultimately burned out and left his startup. 

Burnout also happens when founders who are great individual contributors have a hard time delegating work and trusting others. So, while the company matures and scales, their workload scales with it — to the point where they can’t do it alone. They burn out and leave, but it all could have been avoided if there was clear communication early on about growth. If someone can’t delegate tasks and manage people, they probably shouldn’t have a founder title. 

Performance

Unsaid: “Can you actually do the job we specifically hired you to do?”

Hiring the right people is a talent in itself. Some startup founders simply haven’t developed the skill to do it well, especially when it comes to hiring a member of the founding team. So, if they need to find a specific skill set for a role, they may fail to ask the right interview questions or clearly communicate the specific needs and expectations to the candidate. 

Then they make the mistake of hiring the wrong person. Maybe it’s because there was a relationship at play, or because a candidate’s experience at another successful startup is alluring. Regardless, a wrong hire occurs and ultimately, the person’s abilities do not align with what the startup needs. 

What follows is poor performance, which is commonly compounded by inaction. The team may hold out hope that the hire can step up their performance, and conflict is avoided. We’ve seen startups go on for years with poor performance in one area before any action is taken. The longer it takes, the more contentious the departures.

Compensation

Said: “When we are successful in the future we’ll take care of you.”

Unsaid: “What exactly does that mean?”

Conflict about compensation certainly isn’t unique to startup founders. However, startup compensation is complicated by the dynamic ownership picture as more investors get involved. The pie gets sliced in different ways and in different portions as a startup matures and more rounds of investing take place.

Not only are startup finances complex, but vague promises in the early days of a startup happen frequently. Things get said like, “Don’t worry about the money now, when we are successful in the future, we’ll take care of you.” Someone might take that to mean that a bigger equity stake will be coming their way with the next round of funding. But maybe all it really meant was, “We’re going to be around for a while and if you stick with us, you will be well compensated for a long time.” 

In any case, ambiguous and undocumented promises about money become bigger problems later when expectations and reality diverge. And the primary cause of this is conflict avoidance. Clear discussions, and documentation, about compensation early — as uncomfortable as they might be — could prevent much bigger conflict later.  

Next up: How to embrace and manage micro-conflict

Conflict is complicated. But it doesn’t have to be. Dealing with micro-conflict is a skill that can be learned. And in the next post in our series, I’ll share some tips for how to embrace micro-conflict and offer some tools and advice for reconciling conflict. 

To follow this series, check our blog or @initialized, and tweet us your own question about co-founder conflict.