Main Causes of Conflict Between Co-Founders
Conflicts between co-founders can occur at any stage in the lifecycle of a startup. Understanding their nature and the most common causes is the first step toward minimizing conflict.
Different long-term visions: Although co-founders may share the same initial idea, their plans and visions for the company’s future may differ and evolve over time.
Poor communication: Lack of clarity about roles and responsibilities can cause misunderstandings and internal tension.
Disagreements over equity distribution: Disputes over company shares and financial matters can lead to serious issues.
Finances and resource usage: Decisions on how to manage funds and invest in different areas of the company can lead to conflict if they do not align with all co-founders’ expectations.
Typical Examples of Conflict
Misalignment of priorities: Failing to prioritize tasks can create tension among co-founders. For example, while the technical partner focuses on product development, the business partner may be concentrating on market expansion.
Disputes over growth strategies: These occur when one party may want to expand into international markets while the other(s) prefer to strengthen the company’s position in the local market first.
Key Strategies to Limit Conflict
Successful startups are often led by founders who are not afraid of conflict and have learned to embrace it. In fact, for a healthy and effective business relationship, partners need to learn how to argue fairly and in good faith to reach solutions that are acceptable to both sides.
To prevent conflicts that can still jeopardize the startup’s success, it is crucial to implement strategies that minimize and effectively manage them. Below are some practical approaches to help prevent conflict between co-founders
Developing an Action Plan
One of the most important steps to avoid conflict is to clearly define the co-founder agreement from the very beginning. This document formalizes the roles, responsibilities, and expectations of each party regarding the company’s development. Key elements that should be included in the agreement are:
Roles and responsibilities: Clearly detail the roles and duties of each co-founder from day one.
Equity distribution: Clearly state how shares and benefits in the company will be divided, ensuring mutual agreement.
Decision-making process: Define how key strategic decisions will be made, such as involving investors, hiring key personnel, or changing the business model.
Exit clauses: Establish commitments in case one of the co-founders decides to leave the startup.
Consistent and Effective Communication
Open and regular communication is one of the most necessary and effective ways to prevent tension in startups. Transparency and honesty among co-founders are key to successful collaboration.
Schedule regular meetings to discuss progress, challenges, and resolve any potential disagreements early on, while aligning on the startup’s goals and plans.
Defining the Company’s Vision and Mission
Co-founders must share a long-term vision and mission for the company. Defining values, culture, and long-term goals from the outset will ensure everyone is working toward the same objective.
Discussion topics may include: company culture, long-term growth, mission, and core values. Ensuring that all co-founders share the same vision helps prevent conflict when making important decisions.
How to Resolve Conflicts Between Co-Founders
Even with all preventive measures in place, unwanted conflicts can still occur. Therefore, co-founders may consider the following solutions:
Seek Mediation from a Third Party
When co-founders are unable to reach an agreement, involving an objective mediator can be an effective solution. A lawyer or a professional consultant with startup experience can help resolve difficult conflicts by facilitating conversations and discussions that allow all parties to express and share their perspectives.
Having third-party assistance helps prevent and manage emotional responses effectively, balances the conflict resolution process, and focuses primarily on the interests of the startup.
Startup Lawyer
When conflicts escalate or involve complex legal issues, the support of a startup lawyer is essential. A good lawyer can provide legal solutions, mediate negotiations, and ensure that the rights of all parties are protected.
Flexibility and Willingness to Compromise
Flexibility and a willingness to negotiate can prevent conflicts from escalating into irreconcilable disputes. Flexibility is key in any professional relationship, especially when co-founders have differing visions.
Listening to each other’s perspectives and concerns, and being willing to compromise on certain issues, can help resolve many conflicts quickly.
Benefits of Avoiding Conflict in Startups
Efforts to avoid or resolve conflicts not only help maintain the relationship between co-founders but also bring several benefits to the startup, including:
Improved team performance: A tension-free environment contributes to productivity and encourages collaboration.
Better business stability: Startups that manage conflict well are more adaptable to changes and market challenges.
Avoiding distractions: Conflicts between co-founders can distract from business goals. Resolving them quickly helps the team stay focused on growing the business.
In reality, conflicts in startups are common. Many entrepreneurs have left their companies due to internal disputes, some were forced to buy back shares, or even declared withdrawal. Many startup leaders who left their companies said the separation between co-founders was due to differences in vision and direction, while others felt their partners who left the company did not share the venture’s values.
Suggestions to Establish Boundaries and Direction
Here are five suggestions to help establish boundaries and direction, aiding in conflict resolution between co-founders:
List all necessary business areas. Then define roles and responsibilities for each individual based on their experience and expertise.
When making important decisions, co-founders should listen to each other’s opinions and perspectives. Once the responsible person makes the final call, all debate should end.
Agree to move forward. Ongoing arguments will only lead to mutual distrust and make everything more difficult.
Don’t let disagreements worsen. Co-founders should address disagreements and conflicts directly as they arise. If not, larger conflicts will become more complex and harder to resolve later.
Avoid partnering with someone completely opposite. Many believe that the ideal co-founder is someone entirely different from themselves to complement skills. But in reality, co-founders need to share core values such as work ethics with their business partners. Without that, it’s difficult to spend time working together. Show and ensure respect for each other’s business approaches, personalities, and skills.
It is evident that preventing and resolving conflicts between co-founders is an essential component contributing to the success of any startup. By establishing clear agreements, maintaining open communication, and seeking mediation when necessary, co-founders can work effectively together and ensure business stability.
Source: National Agency for Science and Technology Information and Statistics
