September 30, 2023

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Navigating a trading partner’s arguments is more difficult when teams can’t separate fact from fiction.

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Many entrepreneurs recognize the startling statistic made famous by Noam Wasserman: 65% of high-growth startups fail because of co-founder conflict.

But many people have not read his book and do not understand how he came to this conclusion.

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Wasserman pulled data from a 1989 study by Gorman and Sahlman, who surveyed 49 VCs about 96 portfolio companies at risk of failing. The researchers found that 91 of the 96 companies had problems within the management team. More specifically, 61 of those companies ranked team issues as a top-three factor contributing to failure.

The 61 companies divided out of the total 96 companies identified comprised 63.5 percent, which Wasserman rounded up to 65 percent.

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Why does this matter to you?

Much of Wasserman’s research — he surveyed 10,000 startups — describes the challenges, limitations and dangers of building a company with friends or family. They found that these teams had greater volatility than those established with strangers.

As a co-founder coach working with companies backed by Sequoia, a16z, and YCombinator, I see this all the time. Here’s what I’ve seen:

There are more startups now than in 1989. There is a greater representation of friends who become co-founders than in the past. The nineties did not face unique systemic challenges, such as building a remote, distributed team whose asynchronous communication often contributed to misunderstandings.

If this anecdotal evidence holds, cofounder conflict is more common today than it was in 1989 and far more dangerous for companies, founders, and investors.

Protecting this partnership provides one of the highest points of leverage to prevent failure. But unfortunately, I often hear too many myths that detract from the ecosystem’s ability to improve teamwork in founding teams.

Let’s debunk 8 of the most common myths of cofounder conflict.

Many founders and investors with an old-school mindset devalue soft skills and downplay the impact mental health can have on building a company. They seemed to think that you could escalate the conflict with willpower, as if naming a problem was tantamount to solving it.

Underestimating cofounder conflict almost always leads to more long-term problems.

When troubling feelings go unheard, they spill over into meetings and uncomfortable feedback sessions. And increasingly, the environment begins to feel political – walking on eggshells, hoping long enough to get acquired or IPO. can hang.

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Underestimating cofounder conflict leads to greater emotional distress and less effective team dynamics, if difficulties can be clarified.

In our first call, several co-founders told me their primary issue is a lack of alignment across key business areas.

I understand why they think so. Pointing out business disagreements is a solid way to show that things aren’t working. It’s a clear sign that something feels “off” compared to the past and that poorly performing team members are less prone to difficult feedback or naming communication breakdowns.

While pointing out tactical or strategic misalignment is a comfort zone for most founders, it is often a symptom rather than a cause of co-founder conflict. For many founders, admitting that there is a problem with the team leads to worry that the problem may not be fixable.

But more often than not, improving communication dynamics creates an opportunity to resolve business issues on its own.

I often talk to founders who are convinced that all their difficulties are related to one person.

They think that if this one person changes his behavior then everything will be fine. Unfortunately, this cycle of blame focuses too much on the individual rather than on systemic contributions to relational dysfunction.

I see this dynamic when resentment builds up, and early warning signs of conflict are avoided. At this point, the conflict seems personal to the extent that it overshadows each person’s contribution to the communication challenges.

Much of the work in these situations involves externalizing the problem—a saying from narrative family therapy, shifting the problem from an individual to a systemic issue.

Once individuals can recognize and understand their contribution to a shared problem, change can be made.

When individuals are set in a business-first perspective, they feel that reorganization will reduce tension between two parties that are not working well together. And while bringing in reinforcements can improve the dynamics of leadership teams, it falls into a classic trap of what Bowenian family therapy calls triangulation.

Trikonasana involves bringing in a third person to reduce tension in a couplet. Here’s what happens in the triangle:

The tension between two persons spreads to a third person. This eases some of the tension in the primary conflict relationship, but also places a burden on a third person who plays the role of team counselor.

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The dysfunctional conflict remains unresolved, affecting all three individuals and their loved ones.

Restructuring doesn’t solve everything. Same with adjusting compensation or equity splits. These are simply symbols of something deeper – power, respect, recognition – remaining unnamed.

This is the textbook triangle. This doesn’t work. While many of these tricks reduce stress for the color, they also have a negative effect, as you see when you throw a rock into a lake – the effect ripples through everything it touches.

When cofounders talk too much to their partners about the tension in their working partnership, their partner eventually tires. They begin to recognize your powerlessness, from which they want to be separated. Feeling exhausted, they are unable to give you the emotional support you need, leading to a more upset and strained family arrangement.

Talking to other team members also has a terrible impact on your culture.

Many non-founder C-suite executive and managerial staff approach me on behalf of their feuding co-founders. This tension destabilizes the employees, who fear for their livelihood while doubting the stability of the company. This creates a culture of back-channeling, which reduces productivity and increases churn and burnout.

I have also seen young teams discussing issues with their boards. This is perhaps one of the most dangerous strategies because it stifles future funding and encourages mismanagement of investors, who may be pulled to step in and intervene.

Even though such interventions are helpful, they disempower founders and reduce their effectiveness. His fitness has been in question for a long time after the issue was addressed.

Evolution solves many problems, but co-founder conflict is not among them.

Founders don’t want to “rock the boat” when things are going well. The fear is that if they say the wrong thing and argue deeply, it will slow down the pace and threaten the success of the organization.

Unfortunately, this creates a pressure cooker in which the need to solve new problems the first time around increases while the ability to provide honest feedback decreases. Founders experience overstimulation when walking on eggshells – many refer to this experience as a “bull in a china shop”.

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Because periods of high-growth demand significant role-related changes – eliminating impostor syndrome, among other things – founders often displace their frustration on each other rather than on more ethereal factors they cannot control. .

The emerging tensions of the increased organisation, structure, process and people problems exacerbate the conflict. One cofounder often rises faster than the other, creating even more tension in the team.

These patterns reveal the importance of prioritizing communication and teamwork first, not second only to product-market fit.

Cofounder conflict can be thought of as existing on a spectrum from low to high, depending on the level of emotional intensity and degree of disruption it has on business performance.

Low levels of conflict are a common occurrence in founding teams.

Business partnerships are under great strain due to the economic pressures experienced by early stage companies. As with other relationships, a sign of health is the flexibility of the relationship to improve after arguments and adapt to changing circumstances.

Higher level conflict is a different story.

Persistent conflict impairs cognition and communication and contributes to burnout. As interactions become more harsh and frustrating, survival mechanisms such as avoidance increase, and the partnership becomes less adaptive to change.

Here’s the truth: Cofounder conflict is ubiquitous. This will happen to you regardless of intent and team combination.

The real question is, “How do we manage conflict when it comes up?”

Many founders want immediate solutions to their problems. His concern for his business and partnership is hard to tolerate.

But no amount of alleged “dazzling glares” from Billion Dollar Coach Bill Campbell can fix your issues in two seasons. If one or two meetings could permanently change deep-seated relational challenges, therapists and coaches would not have a job.

Most cofounder issues are not easily resolved, as they pertain to deeper layers of your personality and background. These contextual and subliminal factors must be taken into account for a clear understanding of the problem.

Once the underlying dynamics are identified, then comes the actual coaching work of changing those interactive patterns. The founding team must then solidify these new habits by incorporating them into long-term routines and updating each other’s internal models for optimal multi-year results.

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