The Dangers of a Startup Democracy

Back in January 2007 while taking a shower I thought up the idea of my startup. 😉
I’m a business major, but I can’t write a single line of code. I knew I’d also need someone I to help with marketing and administrative parts and since my budget was nearly nonexistent, these would have to be people I could trust, and who’d be willing to take sweat equity. I started talking to a few of my friends. It was my 1st mistake.

Two of them were already working at other jobs, but I was not willing to spend our tight budget on salaries from day one. I figured I could get their attention by offering to split the company between us. Three of them accepted: two were really close friends from high school who had worked together previously on a few websites. The third is a university classmate who I figured would help me with my workload. This is where I made my 2nd mistake.

I was able to convince each person to come work with me on the startup in exchange for 24% of the company. I like involving people in the things I do (2 heads are better than 1!) so at first I was OK with our “28%, 24%, 24%, 24%”-agreement. I thought I had listened to the right people… so off we went! This is where I made my 3rd mistake.

By June/July we were working in the garage of one of our cofounders. Within a few months we were facing some challenges. We got along great, but I felt that I was unable to have a strong enough voice in any part of the decisions, even though I was the father of the idea! My word was not carrying enough weight in part because of my own inexperience, which me feel that everyone knew better than me. So this is when I started to get really paranoid. (Paranoia usually comes into effect when someone starts feeling uncomfortable or insecure).

About the same time a friend at a VC firm introduced me to a new mentor: a 30-year-old with vast internet experience, but most importantly a guy who had “been around the block” and with whom I could really relate on my many levels. One day I spoke with my mentor about how the company was divided up. He immediately started to ask me the type of questions that make you think.

I realized the mistake I had made when dividing the company — I had started a democracy. I began to understand that this conflict could mean my idea might die before it even got off the ground! I feared that if I them of my concerns, my friends/co-founders would flip out and I might lose their friendship. But I understood that I myself was the one that had to feel the most comfortable, or the project would not survive.

After much thought, I presented my teammates with the idea that I was not comfortable with how the company had been divided and that the situation made it difficult for me to impose my wishes on this project. Without a doubt, this confrontation was the hardest issue I had dealt with in my life. I was extremely distraught and even a month later I could not eat or sleep well, not to mention work well.

To make a long story short, we lost one of our co-founders and I lost one of my best friends — a guy whom I counted on when my father passed away, my wingman for the nightclubs. In less than a year I went from promising him that we would “make it” to not even talking to him. Maybe this all a bit overboard but I finally understand that an entrepreneur’s emotions’ are a rollercoaster ride.

I made several mistakes in my decisions about how to build my team of startup founders. But this is what life is about, learning about your past mistakes so that they don’t get repeated.

As a fellow entrepreneur just remember the following:

1. Stay away from working with friends.
I cannot stress how big of a mistake this is!!! I know that everyone says this but I did it and assume that others might be tempted to but DO NOT! Even though you share everything with them and feel extremely comfortable, you can always go to them for advice but remember that companies will come and go, your friends will always have your back.
2. Get advice from everyone, don’t only listen to a family friend,
ask a teacher, as a fellow worker, ask your dog but do not go with only one piece of advice.
3. Surround yourself with people who have been around the block like I did with my first mentor, we were able to bond and speak frankly; if it had not been for his questioning I have no idea where I would be today. Always ask them questions!
4. Do not let things drag on, if you feel uncomfortable with a decision that even you yourself made, talk about it with your co-founder immediately and see how things can be resolved.
5. As the primary founder you better have an authoritarian role in the start-up process,
this might sound harsh but if you had the idea of the project, then you are the one that should take the final decisions but of course ALWAYS take into consideration what your teammates have told you (this is one of the reasons why working with friends is hard… it is not the easiest to disagree with them)!

Nathan Schorr
is the founder of Blahsports, a social content network focused on sports.