Role definition and Founder conflict

I was recently supporting a founder who was dealing with a CoFounder looking to exit but retain their equity, it was a sticky situation since there the company required stock to hire new talents and given the co-founders share this would be hard to achieve. 

The challenge came from a negotiation point where the cofounder wished to retain the all of their share without adding any additional commitments. What it really came down to was “what would be the ‘fair value’ share that the exiting cofounder could be fairly entitled to in proportion to their future commitments”

One of the ways to resolve this was to look at the role this cofounder intended to fill upon exiting, its important to highlight that this is all about being specific, what was the cofounder going to agree to do, what would be a result evident that this was done and what would be the reasonable time commitment associated with this. By being specific in this way, ambiguity is removed, and we can apply an opportunity cost/ monetary calculation to the commitment. We can look at the time, relative to the task, and the share the cofounder has, and determine a dollar value to the time committed, then compare that with an opportunity cost – would this be better and more efficiently done, cheaper by an external or hired 3rd party? Is this something that the cofounder is best positioned, willing to and rewarded fairly for taking on. 

At the end of the day, this specificity and detail is about clarity, alignment and ensuring realistic expectation for all parties.

Given this wasn’t the first time I’ve seen this, its a pretty important step in thinking about your business and how to work with your cofounder.

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