If you find yourself with a toxic cofounder it’s important to take action.

Here are the steps to dealing with a toxic cofounder.

Try and work things out.

Put it out on the table as an issue and talk through it with the cofounder.

If the cofounder is indeed toxic then the next step is to work out an exit strategy.

It’s important to bring in your legal counsel before making any moves.

Develop a severance package and a departure date that minimizes disruption to the business. 

If there’s no vesting schedule of equity, then work out an agreement to buy out their equity over time.

It’s important not to break the cap table with dead equity from the co-founder. 

Be fair to all including the co-founder and the team.

Before recruiting a cofounder spend at least six months working with the candidate.

Hire them as a contractor and give them several tasks to see how they perform.

This helps prevent hiring a toxic cofounder in the first place. 

Make sure their equity is on a vesting schedule in case you need to separate early.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.