Chapter 22Avoid Cofounder Conflict

Dharmesh Shah

Dharmesh is the cofounder and CTO of HubSpot, a provider of inbound marketing software and now a public company with a market cap of over $5 billion. He is also the curator of the popular OnStartups blog and community and has been a Techstars mentor since 2009.

A common reason for startup fatalities, particularly in the early days, is some sort of conflict between cofounders. One of the main reasons for cofounder conflict is that many aspects of the relationships were either ill-defined or misunderstood. To minimize the chance of this, it’s critical that you and your cofounders come to agreement on some key issues. I’ve framed the most important of these as a set of questions that cofounders should be asking each other as they enter into the business relationship. Many of these questions are hard, but they get only harder with time. The sooner you address them, the better off your startup will be.

How should we split the equity? While there can be different aspects to this, the basic question is really simple: Who gets what percentage of the company? There are different schools of thought on how to arrive at an equitable answer. A perennial favorite is to decide that each founder should own an equal share. Or, you could try to come up with some formula that uses a bunch of different factors such as experience, market value, contribution to date, and expected contributions in the future. However you split up the equity, the important ...

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