Entrepreneur Myths (38 page)

Make sure you can trust them with your life

You have to be able to trust your partners with your life. Can you? I’ll make it even easier for you: can you sleep at night without tossing and turning, worrying that your partner is about to cheat you financially?

If you don’t choose your partners carefully, you’ll get financially fucked — sooner or later. Been there, experienced that — unfortunately, more than once. I now choose my venture partners very carefully. What a huge difference.

Brain Candy: questions to consider and ponder

(Q1)
What do you think makes a great business partner? What makes a great founding partner?

(Q2)
What have you learned from your partnership mistakes?

(Q3)
How do you place value on each partner? Is sweat equity the only requirement or do they have to put in the working capital too?

(Q4)
Have you been screwed financially by any of your partners? How did you deal with it?

Entrepreneur
Myth 54
| ‘Til exit do partners part

Partners are not forever. There are very few situations where entrepreneurs remain with the same partners for 5, 10 or 20 years. It’s not necessarily negative. It’s just business. People do their thing and move on.

When you bring partners into any deal, make sure everyone understands the partnership guidelines. One of the most important considerations is the exit strategy for each partner in the following scenarios: (1) The venture has not taken off and some partners want to leave, (2) The venture has not gone IPO or Googlio, and some partners are ready to move on to something else, and (3) The venture is going down the tubes or the toilet.

Newbie entrepreneurs are naïve about partnerships. As I said before, a partnership is like a marriage. Before you form a partnership, make sure you can work with your partners. We’re all different in how we work and live. I have been in more than a few partnerships. Some worked out great, and a few were fucking nightmares.

Here are some of the things I learned through my own entrepreneur and investor mistakes:

If you are experienced and you partner with a newbie entrepreneur, you will probably have issues. This often happens in high tech where an experienced entrepreneur joins up with a younger technologist. I speak from experience that the likelihood of the partnership becoming a clusterfuck is humongous. I have funded teams where the inexperienced entrepreneur caused all sorts of fucking problems simply because they were inexperienced. What happens in the experienced-newbie situation is that the experienced partner has to teach the inexperienced partner the realities of working in a startup.

If age is a factor, then you may have additional problems. I was once in a startup where one of the four partners was young and inexperienced. It created so many management issues such as insecurity, fear and backstabbing (coming from the newbie) that I finally threw in the towel and walked away from all the turmoil. That the startup failed, and I went on to bigger and better ventures. It was a blessing in disguise. I’m now thankful for that stab in the back.

Partners should be entrepreneurs willing to stick around.

In some situations one partner is an entrepreneur and the other is what I call a “wannabe” entrepreneur. This is another formula for disaster. The wannabe entrepreneur comes from a Fortune 500 company, a wealthy family or still works for another company. This partnership combination creates all kinds of problems, especially in regard to (1) the level of work each partner contributes to the venture, (2) the level of risk each partner is willing to take, and (3) how long they stick around. Wannabe entrepreneurs either don’t want to take the risks associated with starting a venture, or they want to keep their jobs while the startup’s validity is tested in the marketplace. When the going gets tough, most of them want to leave.

As long as each partner understands the partnership operating principles, it can work. Problems arise when people assume things. I have often quoted in my
inspiredex
column on entrepreneurdex.com, “Assumptions are the beginning of all clusterfucks.”

When you form a business partnership, think of it like a marriage. It has to work until bankruptcy or laughter all the way to the bank do you part. You have to be able to get along if it's going to last. Your business partnership guidelines should include a few obvious rules that also work for marriage. Here are some of the ones I use:

Guideline 1:
Communication and transparency is critical

Communication is the foundation of any successful marriage. The same thing applies in business. When partners do not communicate well, don’t want to communicate — or worse, lie, you have to get rid of those fuckers.

Guideline 2:
Cheating is not allowed

You have to be able to sleep at night without tossing and turning in regard to whether your partner is going to backstab you financially. I had partners that (1) tried to cut me out of a transaction, (2) cut me out of a transaction without me knowing, and (3) tried to change the equity or transaction percentages just as the transaction was about to close. I got rid of those partners. Life is too short to worry about whether your own partners are going to financially fuck you.

If you are hesitant about your future business partners, then be careful. If you’ve got any doubts about your current partners, then you need to figure out the reason for those doubts. Doubts are dangerous in personal relationships as well as business.

Guideline 3:
Share the chores

When you’re in a startup, learn to share some of the responsibilities, just like spouses do in a successful marriage. Depending on the number of partners involved, make sure one person is not stuck doing something everybody else hates to do — including the person doing the chore. This will get old and your partner will blow up sooner or later. It happens in marriage and it happens in business partnerships.

Guideline 4:
Have fun together

If you found the right business partner or partners, it’s good to have fun together at work as well as personally. I don’t advocate spending time 20-7 with your business partners, but you could arrange an occasional night out with all the partners and spouses for dinner. Even at work, try to incorporate a fun, hard-working culture. Life is too short not to have fun. Just make sure you don’t go overboard and have fun in the bedroom with your partner too, to the detriment of your other personal relationship.

Guideline 5:
Spend time away from each other

This is critical. If you work all day with your partners, then you need space. I’ve had partners call me at 11 p.m. at night simply to chat for an hour after we worked together all day. Maybe they missed me. I know I'm a charming guy, but it drove me fucking crazy. Just like in marriage, give your business partners space or you’ll drive them nuts.

Guideline 6:
Respect each other’s position

You may not agree with your business partners all the time, but you should respect their position on any differences you might have. You shouldn’t belittle them if they don’t agree with you. Please don’t mix politics and work. If your partner is a Republican and you’re a Democrat, don’t spend time jerking off about political ideals. It doesn’t pay the bills.

Guideline 7:
Don’t take each other for granted

This issue comes up in marriage all the time. Couples get comfortable with each other and take each other for granted. This happens in business partnerships too. When your partner does some incredible work, make sure you don’t take them for granted. Make sure they know you value their efforts.

Guideline 8:
Compliment each other

Partners do not compliment each other enough, which likely means that they are taking each other for granted. If your partner has done something fantastic, you should compliment them. It only makes you work better as a team. Remember, everyone loves a compliment, even your business partner.

Guideline 9:
Make major decisions together

This is a biggie. I've had partners make major decisions without the other partners' input, which caused everyone in the partnership major fucking headaches. I've had partners bring other partners into a transaction without even giving me any fucking say so. That doesn’t happen anymore. I guarantee it.

Guideline 10:
Allow for personal time

This builds on spending time away from each other. You should respect each partner’s personal time at work and away. For instance, I like to write during certain periods every day and don’t want to be bothered. When I’m at home, I play soccer for exercise. If you know my personal schedule, don’t call me unless there is a fire at the office. I've had partners call me about business when they knew I was playing soccer. They don’t anymore.

Guideline 11:
Write up that pre-nuptial agreement

I think it is smart to write a pre-nuptial agreement before people get married. Business partners should do the same thing. If you plan to be in business together, you should document the verbal agreement. If your partner is hesitant to do so, you'll get financially fucked down the road. I guarantee it.

Guideline 12:
Manage the money together

Partners should manage the money together. Financial matters should be 100% transparent and decisions should be made together, because if there’s a fuck up, all partners’ asses will be on the line. You can’t point a finger at your partner if you made the decision together. If you have one partner trying to make, manage and control the financial decisions alone, get the fuck out of the venture. This scenario doesn’t work.

Guideline 13:
Develop a protocol for settling differences or issues

How you communicate in marriage is critical to its sustainability. The same thing applies in a business partnership. Screaming, yelling or name calling is not a great way to settle differences in either case. Discuss how to handle disagreements between each other, before you become partners. You don’t want a bunch of passive-aggressive partners on your team.

Guideline 14:
Share the same goals

Marriages can go sour when the two parties don’t share the same goals. Your partners need to share the same business goals; otherwise you’ll have problems down the road.

Guideline 15:
Develop a budget and stick with it

In marriage, you must develop a financial budget to avoid issues. Polls have shown that money issues are one the biggest problems in marriage. Don’t make money management an issue in your venture either.

Guideline 16
: Determine how you will manage employees (similar to managing children)

Disciplining children is another major issue in marriage. It causes problems when one parent disciplines a child with tough love, and the other parent loosens up on the punishment or negates it completely. This is a sure recipe for divorce and very confused children. When you start your venture, you have to agree on the “culture” you want to build. Are you going to have a strict, must-wear-suits culture, or is it going to be fast, loose and free?

What is the discipline and punishment policy for your employees? How will you motivate employees? Will you use fear tactics or positive rewards? Does the management team plan to be transparent or secretive with their employees? Partners have to agree on all of this. You can’t have conflicting cultures at the office.