Breaking Up Is Hard to Do: What to Do When a Founder Leaves

Work with enough startups and you’ll inevitably witness (or experience) the unexpected departure of a co-founder. Maybe it’s amicable, perhaps not, or perhaps it’s due to something completely unforeseen. Whatever the cause, it’s a variation of Werner Vogel’s famous dictum that everything fails, and as with infrastructure, you can reduce the risks it presents to your company by preparing. While it may seem negative to prepare for failure, it’s doesn’t have to be—wearing a parachute doesn’t make a pilot a defeatist, it lets them take more risks, with greater confidence. So how do you protect your company, prevent disruptions, and make sure you can get moving forward again if a founder leaves?

Woulda-coulda: What to do in advance

Accounts:

• Share. Share ownership of key accounts with your co-founders, and set them up using a shared company email, rather than a personal email (i.e. dev@acme.com, not dougie@gmail.com). Make sure all founders have access to the shared company account. Do this for AWS, source control (if using Github, create an organization account tied to a company email), and other cloud services like messaging, productivity tools, etc.
• Consolidate. If you’re migrating infrastructure from a personal account (which you should!), you can use AWS Organizations to consolidate billing and ease the transition
• Keep track. Keep a shared inventory of account information for all company accounts—a simple spreadsheet suffices. With the proliferation of SaaS products, you can quickly have a lot of accounts to manage. If account info is kept in someone’s head, and that head leaves, it’s a… headache.
• Compartmentalize. Encourage all employees to separate their use of work and personal email and messaging, and archive email accounts when someone leaves. Some email providers offer vaults.

Other infrastructure:

• Own it. If possible laptops should be company owned and managed, so they can be locked remotely if need be. Like many of these suggestions this will also improve security—there’s less chance of data loss from a stolen laptop.
• SSO. Consider a single-sign-on solution like Okta or OneLogin to consolidate access. They can be expensive, but if you’re at a point where you can afford it, they make account management easier and have the additional benefit of protecting against data loss in the case of theft. And you’ll be ahead of the game if you go for any security compliances, which often require this.
• SSO lite. If you’re not ready for single sign-on, you can still centralize your logins with a service like LastPass or Dashlane. You can assign people the ability to view certain logins, and you’ll be able to keep track of all your company-wide sensitive logins in one place.
• Lock it up. Consider digital locks for your office if you don’t have them. Physical keys can be copied easily, digital access keys can be revoked. It also lets you do things like give temporary access to contractors, or let people in remotely.
• Cheese! Security cameras are cheap, install them if you can. Don’t go all 1984 and have cameras everywhere, but a camera at the point of entrances for the office makes sense.
• Stuff. Keeping an inventory of your equipment is invaluable from day one. Use a spreadsheet to track serial numbers, purchase date, model, who it is assigned to. Makes it easy to know which equipment belongs to the company and which to the employee. If an employee leaves and the equipment is older, consider offering to sell it to the employee at a discounted price. The money can go towards newer equipment, and the gesture might be appreciated by the former employee.

Policies

• Lawyer up. Work with a lawyer to write contractual agreements around intellectual property, prior inventions, non-compete, and employee poaching. If it’s not in writing, you’re potentially vulnerable.
• Define Terms. Be sure your terms on company options are clearly defined: What percent, vesting schedule how long employees have after departure to exercise, etc. should all should be in writing.

Succession Planning

• Be advised. Find technical advisors early on, who you can call on to help with a transition if that becomes necessary. If you have investors or are part of an accelerator or incubator, utilize those networks. This is particularly important if a co-founder is the only technical person in the company. And again, doing this has many benefits even if you never face the loss of a founder—sage counsel should always be welcome.

The Breakup

• Move on up. If the departure is on good terms, and the person was a valuable contributor, consider moving them into an advisory role.
• Don’t be a jerk. If someone wants to move on, support them. Some founders threaten or try to force people to stay. Don’t be that person. A company that encourages people to pursue their interests is a company that earns the respect of their employees. If there’s anger, stay cool, and don’t do anything to antagonize your former teammate. If they’re initially reluctant to engage, they may reconsider after cooling off.
• Use your words. How you handle a separation can go a long way toward preventing or reducing bad blood. Before doing anything aggressive to get control of accounts, ask for it, kindly. Do what you must to protect your company, but be sensitive that this will be hard on the recipient. Ben Horowitz has some great posts on this.
• Debtor’s prison. Often companies will try to keep a contributor on as a contractor for side work. The longer your remaining team takes to adapt and own the technology, the greater the technical debt you will find yourself in. Own the tech from day one. It’ll be slow at first but will save you time and money in the long run.

Picking up the pieces

• Losing it. If you’ve lost access to important accounts, get in touch with the account company and start the process of regaining control immediately.
• Network. Go to investors/advisors right away. That’s what they’re there for. Ask for help finding someone to keep the lights on, and finding a longer-term replacement. Hit up your larger network for same.
• Ask for help. Once you find a short-term stand-in, if they can’t or won’t commit long term, ask if they’ll help you evaluate replacements, especially for technical roles. It’s hard for non-engineers to evaluate engineers.
• Open your wallet. Be willing to give people advisor-level equity for helping with a transition. This is not a small ask, so it’s not time to be stingy.
• Words matter. Be aware of the messaging you use about the departure with your team. This can have a negative impact on the culture and vibe of a company if not handled well. Communicate clearly why the company is moving in this direction and answer any questions raised. Be open to listening to concerns and be thoughtful in how you respond.

A little planning can save a lot of heartache in what is probably already a tense situation. And happily, most of the effort put into it will be worthwhile in any case—it will improve your security, help you better manage your infrastructure, and make it easier to onboard and offboard employees as you grow. And the very act of being organized may prevent the kind of misunderstanding that might result in a departure—sometimes the best way to prevent rain is to carry an umbrella.