For various reasons start up ventures often end up with ‘Dead Weight’ Founders and Partners. These are people with misaligned expectations from yours who often become an energy zapper and in the worst cases become an obstacle to technology development, capital raising, strategic alliance formation, etc. In my last article I advised you to “Dump Dead Weight’ Founders and Partners Overboard”. In this article I offer my recommendations about how to avoid taking on ‘dead weight’ founders and partners. Here we go.
1, Recruit people to help with your venture in an intentional manner.
2. Address expectations about contributions, compensation, etc. from the initial point of involvement.
3. Hold discussions with each person in a scheduled and formal manner – not just at the bar or in the car.
4. Start documenting discussions and mutual understandings early on. And continue this practice.
5. Clarify roles and compensation understandings according to each area of contribution by a person. It is ok to have one person serve in several roles, but you should delineate different compensation schemes for each distinct role – for example, programming (fee based) and sales (fee plus commission).
6. Establish goals and performance metrics for each person and each role as soon as practical.
7. Consider offering consulting roles or deferred compensation in lieu of offering equity shares or expectations of employment early on. When long-term involvement becomes mutually desirable, then, and only then, move on to consider other compensation arrangements with each person– such as salary, profit sharing, stock options or equity share.
8. Describe the conceptual business understanding of functional roles, responsibilities and associated compensation in a general non-binding memorandum before meeting with attorneys. This saves time and money with attorneys.
9. Clarify ownership and equity expectations carefully (and from a long term perspective) and then formalize the understanding with legal documentation and mutual sign off.
10. Revisit roles and compensation arrangements with each person whenever appropriate, as the venture evolves, and document any changes.
11. As you add people to your team you need to balance the overall scheme of roles, responsibilities and compensation on a relative basis by considering the entire team as well as future roles to be filled at the company.
12. Engage a venture consultant or HR consultant who deals with start-ups and ramp-ups and who can guide you with workforce planning, role definitions, expectations setting, compensation approaches and other issues.
By following the above best practices you will be able to avoid many situations which might otherwise result in “Dead Weight” founders and partners. Instead, you will be able to focus your energy and mindshare on technology and product development, gaining customers, etc. – all in a more positive working environment. And there will be clarity for all stakeholders to more smoothly move through transition stages and grow your venture.
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About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture accelerator and venture consultant who has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and to ReDesign, RePosition, ReLaunch and to Scale technologies, products, services and businesses. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php
Venture Accelerator Solutions by Syl DiDiego 