Among startup businesses, about half survive the first five years. Businesses can fail due to poor business models, lack of capital, outdated technology, or a variety of other reasons.
But businesses can also fail because of the breakdown of personal relationships between co-founders.
Photo courtesy of Texas A & M University via Flickr.
According to Noam Wasserman’s The Founder’s Dilemmas, only 16.1 percent of high-potential startups have a sole founder. The remainder is built either by co-founders or a founding team. Among founding teams, 43 percent are comprised of friends, compared to approximately 25 percent that are comprised of prior co-workers and 11 percent that are comprised of family members.
In the book, Wasserman acknowledges that beginning a company alone is an isolating and lonely process. It is unlikely that a sole person can provide all the social, human, and financial capital needed to fully sustain a project. Co-founders can help share the burden of beginning a start-up, as well as fill talent gaps.
However, there are also disadvantages to having partners—including giving up equity, dividing decision-making control, and having problems related to communication, coordination and incentives.
For co-founders that are friends, the startup is less likely to retain the original team than founding teams that are not based on friendships. This is due, in part, to the likelihood of friend co-founders avoiding “discussing the elephants,” or the problems facing a business. Friends are more likely to avoid conversations that they perceive will be difficult to have, which can lead to greater conflicts that can damage both the relationship and the startup.
In his book Zero to One, entrepreneur and investor Peter Thiel agrees that coordination plays a role in conflict among co-founders.
Thiel notes that “most fights inside a company happen when colleagues compete for the same responsibilities.” This is particularly difficult for startups when “job roles are fluid at the early stages.”
Thiel attempted to solve this problem at PayPal by giving individual employees defined roles and having only one employee responsible for an individual task.
However, this requires strong communication among the founding team: a resource that can be in short supply for startups exploring uncharted territory.
If co-founder relationships can make or break startups, what can help strengthen the relationships?
Recent reports from The New York Times and National Public Radio examine the potential advantages of couples therapy for startup co-founders. The articles suggest that marriages and startups have a lot of similarities and can often fail for the same reasons—including lack of communication, different desires for the future, and unclear roles and responsibilities
Counseling can provide the space to air grievances, to address perceived slights, and to recommit to each other, the work, and the startup.
The growth of counseling among startups has increased in recent years. For one psychologist in the San Francisco area, “counseling for those working in startups is now so common that he recently visited four young tech entrepreneurs in one day.”
For another psychologist interviewed by NPR, the “number of requests he gets for co-founder counseling has doubled in the last year.” In addition, educational institutions like Stanford Business School offer a course on group therapy, which even features readings about how to make marriages work.
The startup co-founders of Genius.com and Aspire Recruiting have found counseling to prove beneficial in helping maintain the friendships that led them to enter into business together.
In addition, counseling has helped them address their business challenges, and the new resulting business relationships, in a productive way. As one of the co-founders of Aspire Recruiting said to NPR,"I think, overall, it resulted in both of us being more aware as people, and balanced."
Because there are intrinsic problems that will emerge with startup co-founders, counseling can help prevent explosive breakdowns that could irreparably damage the company.
Healthy founder relationships help create healthy companies, which will likely result in a better chance for the company to survive and grow. Startups, especially those with founding teams comprised of friends and family, can benefit from relationship counseling. The counseling can help mitigate the risks, to both personal and professional relationships, associated with beginning a startup.
Bennett Hypothesis 2.0 (part 2)
Underutilized Resource in Understanding College Readiness
Emily Fetsch is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, and assists in the processing of new grants including grant research, grant write-ups, setting deadlines, and reviewing financials. She also assists in writing literature reviews and informative briefs, and conducts quantitative and/or qualitative analysis on the economy, policy, and entrepreneurship.
Get our best content, straight to your email inbox.