Ask HN: What's a good way to handle cofounder leaving? | Hacker News Reader

Ask HN: What's a good way to handle cofounder leaving?

7 pointsEGreg4 comments

Suppose your cofounder has raised a substantial amount of friends-and-family money and you've raised angel money, and built a startup. All existing stakeholders are looking for a return and your startup already generates revenue but not enough to just start paying dividends. The understanding was always that you will raise VC. You have a great product and lots of traction. However...

Your cofounder who everyone has always seen with you just quit. At this point you can continue to raise the VC money but they'll wonder why you are suddenly a solo founder. You want to raise VC and grow fast instead of slogging for years to generate a return via dividends. The question is, how best to handle the question of why he quit, to VCs and to original investors? This is what happened and my main goal is to produce a return for investors, who have been waiting for years. VC would help, but does it make sense to get another cofounder just to impress VCs and generate a faster return for investors? Or perhaps I just won't compromise anymore and let the chips fall where they may? Anyone been through something similar, I'd appreciate some advice.

My random advice from the internet is to realistically assess the company's chance of success. The sunk costs are sunk costs. They have no correlation to future success. The only thing that correlates with future success is the current state of the company and with a founder leaving a two person team that state might not be viable.

A couple of points, in the Silicon Valley terms, startups don't pay dividends and return on capital comes in the form of increased value of equity. If the FFF round was sold to the investors based on paying dividends, there is a disconnect between those investors and venture capital investors with Silicon Valley VC investment strategies. This is something to consider in terms of whether the company ought to consider.

Going forward with the company means that the FFF investors may wind up with nothing. In terms of Silicon Valley style startups, that's the most likely outcome of all such startups. If protecting the FFF's assets is a primary goal, winding down the company and returning proceeds may be the best likely return even if it is pennies on the dollar.

Finally, the last piece of the puzzle is to be realistic about your motivation and enthusiasm for carrying the business forward alone. A sense of obligation is often a path to resentment and resentment is probably not a hallmark of success.

Anyway, my empathy on your plight. Good luck.

Suppose your cofounder has taken a substantial amount of [...] money

If you mean "taken" in the literal sense of actually taking it, call the police. If you mean the cofounder earned it while working on the business, say they earned it.

At this point you can continue to raise the VC money but they'll wonder why you are suddenly a solo founder.

Investors don't "wonder". They'll ask why your cofounder left. Just tell the truth.

If your business is years old then it's too late to add another founder. Founders are the people who started the business. That's all. Whether you should bring in another person (as a partner, employee, etc) depends on what your business needs. Having two (or more) people running things isn't a show you put on to raise money; you often need more people simply because there's too much for one person to do. If your business is established and has traction that might not be the case.

I fixed "taken" to be "raised". We raised money. Our investors want to see returns. VCs want to see teams not solo founders.

I hear what you're saying. Personally I think the preference to see more than one founder is the main problem in all this, and maybe I should just ignore it. A company with a good team and popular products is quite fundable regardless of how many founders are still with it. Right?

VCs don't want teams, they want business cases that have shown to be scalable.

Do you need your cofounder? Can your business continue without him/her? If so, continue to build out your business. If it's worthy of another round, it will come. If not, you just have a healthy business and you could always focus on a stock buyback program with interest to offer a more instant gratification for your angels/f&f investors. About 99,9999% of business are funded this way.

Everyone's always hoping to score big time, but if a startup grows into a regular business that's a pretty good result. Even a little dividend after ten years beats a liquidation.

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