Starting up with a friend

I have a good friend who I've known for many years. Very smart. So I ask him if he would be interested in coming up with a domain and told him he would be rewarded if we became successful. His response was that he would, but he wanted me to write up a contract. I thought, You've got to be kidding me. So I put on my lawyer hat and spent several hours writing up a contract making sure the language was as sound as could be. He was impressed by the contract (remember, very smart) and wanted just a couple things worded differently. Fine. After all of that effort, he did not come up with an acceptable domain name. Maybe the contract was a smart move, but that kind of thing seems over the top sometimes.

If you promise a reward based on 'success', then your friend was right to get a contract from you.

For such a small contribution though the whole thing sounds rather silly. Better to pay something upfront and/or ask for pro bono.

This is basically how family works. Every party should have a right to be 'right' in the agreed range of situations (my wife is always right in the house, no matter what).

So, the founders should split the territory and then follow to the agreement.

Excellent article. I wasn't seeing eye to eye with the cofounder of my first startup, and didn't realize it until a couple years in. He wanted a comfortable business that allowed him to take Fridays off and spend more time out of the office. I had visions of being the next Microsoft and wanted to pump every dime back into the business.

It led to him quitting after the first couple years, and me driving the company to a lucrative acquisition. We hadn't issued our initial shares with an ESOP, so he got his full percentage, even though he didn't do most of the work. But the biggest problem was early on, when he wasn't working a 40 hour week and distracting everybody else from being a hard core startup.

I was hired in 1997 at Secure Networks by Alfred Huger, who I had known online since I was in high school. We were friends outside the company, but nobody in the world would say the work relationship was friendly. Al was like Matthew Broderick's character in "Glory"; whatever terms you were on with him before the company --- and Al and I were peers --- at SNI, Al was in charge. I got yelled at a lot. I have to stop to consider whether he was the best boss I've had, or just in the top 2.

I started Sonicity in '99 with two friends, which didn't work out for some of the same reasons here, but also for other reasons, like fairness concerns, no clear lines of communication, lots of overlap, and (of course) a cratering market. We might not have ended so badly had we not taken money, but whatever flimsy rapport we had before the startup didn't survive the strain of having a board and several new vectors of company politics (a CEO, a competing management faction, etc).

(I'm on good terms with both my cofounders there, and almost went to work with one of them at Bloomberg years later --- he's since started and sold a digital music player company).

Incidentally, the "working with friends" problem also occurs outside the founders team. We hired lots of our friends at Sonicity, and that was a problem too. If you aren't totally clear about your expectations (and we never were), friends expect a particular kind of management that is hard to maintain. Ironically, the best performer we hired at Sonicity is someone I almost got in a bar fight with the year before we started the company.

I started Matasano with Jeremy in 2005; Jeremy and I go back to 1995. One of the things I think we did right, right off the bat, was to bring on a third person (also a good friend) as our boss. Neither Jeremy nor I have little thought bubbles coming out of our head saying "I'm the CEO". I'm Karl Rove, Jeremy is Condoleeza Rice, and neither of us want to be the Commander in Chief.

We've had conflicts, but the simple tactic of surrendering final say in the company has defused them; I'd be fired before drama I started wrecked the company, which is actually a really comforting thought.