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How do you fire a cofounder?

I have a friend that has built a very solid business. They have SaaS company and they have already raised a Series A with millions of dollars and sophisticated investors backing their ventures. However, the other cofounder's lack of performance and commitment is slowing the team down in order to accomplish the milestones that would get the company closer to raising a Series B. How should this be addressed to minimize the impact on all fronts?

9 Replies

Jason Gibb
1
0
Jason Gibb Entrepreneur
Real Estate, Director & Business Development, MBA, CMA
Should have already been addressed inside their share structure during company formation. Simplest way is that all founders forming a company are not simply entitled to equity, each has a contract wherein they vest equity over time and can be terminated with cause or non-performance or simply by vote of directors. This way you don't end up with loafers as founders later on. Simplest way is to have shares vest at 20% per year as company grows even for founders. Other terms and conditions apply accordingly. Since they probably don't have this they need to have an open and transparent discussion about establishing such a structure, allow the past to be the past and get everyone to recommit under new structure.
Kate Hiscox
1
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Kate Hiscox Entrepreneur • Advisor
Boss at Venzee
If vesting isn't in place then they will need to reach a mutual agreement which, to be honest, is the right thing to do. He'll be a major shareholder (I assume) even after leaving the company and your friend should try to avoid complications down the road. I suspect, if the other founders primary focus is no longer on the business, he'll be looking to reach an agreement to exit. So.. sit down, discuss the company's future and his needs, agree, move on.
Rod Abbamonte
0
0
Rod Abbamonte Advisor
Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute
You can't fire a Co Founder so if this situation was not previewed on initial agreement will be necessary a lot of talk and eventually negotiation to force this co founder to exit.
Jason Gibb
2
0
Jason Gibb Entrepreneur
Real Estate, Director & Business Development, MBA, CMA
Lets clarify a point. There is no real legal title "co-founder" or "founder" of a business that I am aware of. This is just a customary title, with no real legal rights attached to it. Companies, have directors, officers, employees, contractors and shareholders. A person can have multiple roles and titles. If the co-founders in question are not directors or officers that makes things simpler... I assume they are shareholders. Anyone doing work for the company and getting compensated for that, even with equity is by definition either a contractor or employee. If they are either a contractor or employee then they must have an agreement either oral or written and based on that they most definitely can be fired, terminated or removed from their roles by the directors or officers of the company. I would consult independent legal advisory on this question. Even if they are shareholders that does not give them any right in itself to be a director, officer, employee or contractor in the corp. Also ownership and control of the corp are two different things, it depends on class of shares and what rights are attached and what has been established in the way of corporate governance etc. Directors have the most control, but shareholders get to vote on the directors and directors get to appoint officers, and officers can hire employees and contractors, so there is a process of governance. I suggest understanding it and using it to your advantage, but always in the capacity of what is in the best interest of the company and in line with your fiduciary and duty of care responsibilities to all shareholders.
Steve Owens
2
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Steve Owens Entrepreneur • Advisor
Finish Line - A Better Way for Small Companies to Develop Products
Hero to zero is not uncommon in a startup. If you continue to grow, it will happen again.

Find out what he is really good at - what he is truly talented at. Re-organize his job so he can focus on that one thing, and find other people to do everything else.


Martin Omansky
0
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Kick him upstairs to Chairman of the Board and relieve him of all operational responsibilities. He/she will be so bored with being Chairman that he will either resign or dissipate. Understand, however, that any equity he has will remain with him unless the Company or the investors buy him out. Say - isn't that also a good plan? Question: is he non-productive, destructive, or simply annoying? Sent from my iPhone
Sidney Sclar
0
0
Sidney Sclar Entrepreneur
SID the SECURITY PRO at sidthesecuritypro.com
Easy answer. Hire me as a financial and opeeational Advisor to review the current business plan and recommend any revisions. If I agree, I recommend that the Cofounder in need to be removed does not fit in the future growth of the company. Someone needs to decide if the position needs to be filled now or later. I have experience in hiring and firing including my own family members. No problem. I am just doing my job.


Louis Infante
0
0
Louis Infante Entrepreneur
Electric Vehicle & Sustainable Energy Systems Technical/Business Consultant
I am Assuming this company has created a board with investors represented. If it has, the issues need to be discussed with board members one on one and some sort of strategy needs to be developed to take all operational responsibilities from the co-founder and or bring that relationship to an end with some kind of a financial settlement. If the person did actually contribute a lot to the initial viability of the company, they could be offered some stock but no say in the company going forward. This is a very tricky situation but needs the board to be united in an action plan for success. Louis Infante
Michael Banks
0
0
Michael Banks Entrepreneur
Coach Michael
Hire an experienced and powerful executive coach and him him or her work with both founders and also facilitate the two together. In the past I've done just this very thing with co-founders. Michael Banks
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