Battles of The Co-Founders

On his 40th birthday in August this year, a long winding post emerged on the personal blog of BK Birla, co-founder and CEO of Bangalore based Zopnow.com, an online grocery shopping portal, invested by Accel Partners. Birla, 40, accused his other co-founder Mukesh Singh, 38, of ‘breaking his trust, changing bank accounts, and siding with investors’ to oust him from the CEO position and the company, which the two old friends and colleagues from Amazon founded in 2011.

“It is sad for me not because I have been ousted from a company I built, but the way it was plotted and planned. I was outsmarted by you dear friend. Trust me mate this hurts beyond repair,” IIT-Kanpur alumni Birla, wrote in an emotional post on his blog to his co-founder and friend Mukesh Singh of nine years.

Speaking to ET in response, Mukesh Singh, co-founder of ZopNow says that besides professional reasons, he remains friends with BK Birla. “If we will look at the history of Zopnow, it will always be two co-founders, not one. Between friends, misunderstandings do happen, but am sure they clear pretty soon.”

“Nevertheless, it’s good to startup with friends as you know them for a long time,” he advises other young and aspiring entrepreneurs.

man woman hands holding broken heart

While Corporate India has seen a history of battles between brothers be it the Wadias, the Bajajs or the Ambanis, the country for the first time is seeing a battle of the new age co-founders who have started up businesses in the last five years. Globally there have been enough examples such as Twitter, Apple, Yahoo or Groupon, where co-founders who were asked ousted from their own company. In India, however the acrimony in startups rarely leads to long drawn legal battles, as many of them are yet to break even, leave alone become big. But the discord is impacting the credibility of the business, the investors, and also the careers of the young entrepreneurs who would want to raise future funds for newer ventures.

Experts said conflicts are increasing because startups are impatient for quick growth and people from diverse backgrounds are finding it difficult to work together. “Entrepreneurs, especially the younger ones, act without thinking and the older founders are rigid in their views,” said Krishna Tanuku, executive director at Wadhwani Centre for Entrepreneurship at the Indian School of Business.

The Main Reasons

Such mismatches often lead to messy break-ups.  Gaurav Kachru, 38, cofounder of Dealsandyou.com left the company because of disagreements with the bigger partner, Harish Bahl, chairman of the Smile Group which incubated the venture. “Functional knowledge can be built but not value systems,” said Kachru, who went onto launch 5 ideas, a startup accelerator in Delhi. Kachru’s exit was followed by his wife Pearl Uppal, also quitting the post of chief executive of FashionandYou.com, an e-commerce portal run by the Smile Group.

A number of mentors and investors are now stepping up to help startups manage conflict. In a recent case, Tanuku counselled a team of technology entrepreneurs to make changes in their cofounder agreement that would take note of individual contributions. “Each felt he was doing more work than the other,” said Tanuku, who declined to name the startup, but said it was close to shutting down until he and other mentors intervened.

Venture capital investors said they are categorising team discord as a primary business risk. “It is when the boat starts shaking that differences emerge,” said Parag Dhol, a managing director at Inventus Capital.

John Kuruvilla, cofounder of daily deals website Taggle.com, fell out with his partners who were impatient to change the company into an online retail venture. “Despite being the single largest shareholder I respected their views and handed over the reins,” said Kuruvilla. However, within six months of his exit the company was forced to shut down in the face of mounting losses.

Breakup11

Role of Investors

“Team discord is one of the most profound fears which I as an investor look out for,” said Arihant Patni, co founder Nirvana Venture Advisors which runs a $75 million (about Rs 505 crore) fund that invests in internet ventures.

Instead of waiting to douse fires, investors are also being proactive. Berlin-based Rocket Internet, an early-stage investor, was keen to gauge the compatibility of cofounders of online food delivery platform Foodpanda—Amit Kohli and Rohit Chadha—before investing in the startup. The investment firm urged the two entrepreneurs “to date”.

Kohli, 35 and Chadha, 30 met each other for a few weeks over drinks until they realised they had common goals. “It’s very important to gel with your cofounder, with whom you will spend the next decade of your professional life,” said Kohli, an IIT-Delhi alumnus and former McKinsey consultant. The team camaraderie has helped Foodpanda grow nearly 95% every quarter.

Entrepreneurs too are coming up with innovative ways to minimise conflict. At children resources portal, MyCity4Kids.com, founders follow the democratic principle of “majority wins”, for decisions.

The three-person founding team, which vacations together every six months, has mandated a vote of 2:1 for every major decision. “At companies with just two cofounders, the domain specialist should get a veto right,” said Asif Mohammad, 39, the chief technology officer and cofounder.

Breakup

Investors, aware that conflicts will occur despite the most stringent precautions, are also preparing the ground for amicable separation. “Often we sense the conflict during the first presentation by founders,” said Sunil K Goyal, founder of YourNest Angel Fund. Goyal then advises the founders to draft agreements defining the terms of separation. “The agreement should clearly mention the role, time commitment and stake of each cofounder.”

Experts insist that founders look beyond friendship and the informal culture within startups to draw up a clear division of responsibility. “Stepping on each other’s toes is a recipe for disaster,” said Anees Ahmed, 46, chief executive officer of IT-services firm Mistral Solutions. Ahmed teamed up with his childhood friend and former colleague at Cranes Software, Rajeev Ramachandra to set up Mistral. While he remains the boss, Ramachandra, 47, is the chief technology officer at the Bangalore-based firm.

Dhol of Inventus is of the view that investors must not step in at every instance of conflict. “But when we need to choose between competence and attitude, we will always go for the right attitude.”

©TIL

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