How To Settle Founder Disputes, How To Setup Your Company

The Startup Help Desk

In this episode we answer questions submitted by founders just like you, including:

• What corporate structure should you have? Does it matter?
• How do you scale hiring?
• How do you resolve co-founder disagreements?

You can submit questions for us to answer on our website https://www.thestartuphelpdesk.com/ or on Twitter @thestartuphd - we'd love to hear from you!
Episode Notes:
Q1: What corporate structure should you have? Does it matter?
If you intend to raise venture capital:

• If you’re building a startup and you want to raise money, you’ll want a DE Corp. Lots of people want to wait on raising $$ before switching from an LLC or a foreign entity to a US parent but need to think other way round. Do this 1st to get the investors interested.
• There are great tools available: Stripe, Atlas, AngelList Stack
• Clean cap table with co-founders getting roughly the same equity
• Early on you usually only issue shares to the founders, on a vesting schedule with cliff - very important. And all money you raise would be debt on a vehicle like a SAFE or convertible note.
• Random advisors, departed founders or former employers with double digit stakes will kill chances of fundraising before you get going.

If you do not fit into the DE C Corp bucket (perhaps you don't intend to raise venture capital or your company is a small business), then you may consider another company type. Consult an attorney.
Q2: How do you scale hiring?

1. Spend more time on it. Recruitment is one of, if not most important job at the company. Likely 1 cofounder almost 100% on it. And yes, that means delegation
2. Find candidates wherever you can - post your jobs on social media and angellist, community boards, use the marketplaces, make sure your investors have your logo on their site, and of course - contingency fee recruiters - there are downsides, but most startups use them to fill their pipeline.
3. Get an In house recruiter. If you have 3+ job openings it’s time. You can start by getting a contractor to embed with your team but given the importance of this job, you’ll want someone on the full time and equity based compensation.

You also need to establish a consistent hiring/interviewing process so that many different members of your team can act as hiring managers.
The most important thing you can do is to focus on ensuring everyone understands what your criteria is and why. Otherwise, they will just add their own criteria and hiring will get unreliable and inconsistent.
Q3: How do you resolve co-founder disagreements?
You need to invest in your co-founder relationship long before you have a disagreement. Build trust, do things together outside of work and make sure you have open and honest discussions. Remember, if you and your co-founder have different expectations it will result in conflict.
If you do have a disagreement, start by identifying the differences and understand why they exist. Do you disagree on facts, or weigh risks differently? Build lists of pros and cons and see if there is a way to agree. If necessary, consult someone outside such as a board member or advisor. In the end, make a decision and commit to it even if you disagree.
For many decisions…

• You can use data to inform the decision. Let’s say you are debating a new product feature. Wireframe it and interview 10 customers. Analyze the results to make a decision.
• Some decisions will fall into a specific co-founder’s bucket. Give each co-founder authority over certain domains: product, technology, sales, marketing, etc.

That being said, there will be plenty of decisions that demand real debate. If you are in a real gridlock, change your “battle arena”. To introduce a new perspective, take your debate for a walk or to a new venue.