So Vishwas, my question to you is - I wanted to start a business with a couple of friends
of mine but everyone is suggesting against it.
So what they are saying is that you must have your finances in place, you must have a proper
plan in place.
If you don't have it, friendship and business can really work against each other.
So, how do I ensure that it doesn't happen?
I want to keep my friendship safe and I also want to make sure that the business works!
So, how should I go about this?
So, I think it is a very practical question.
So when you are going to start a business, there is a very high probability that you
are going to start it with your friends.
Because obviously, whenever you have a billion dollar idea, you are going to ask around in
your immediate circle - be it either your colleagues or your friends and you would always
expect your friends to come and pitch in your business.
And I have also done the same thing.
In fact, I also have a co-founder.
Before GoodWorkLabs also, I started multiple companies with multiple friends of mine and
I have also learnt lessons the hard way, just like any other person has learnt out there.
You know there are both pros and cons of starting with friends.
Let us look at the pros first - The pros are that you can trust your friend like nobody
else.
Because in business, you want to trust somebody because people can really cheat you.
People can try and say a lot of things but they don't keep their end of the bargain.
And if you don't have trust on your co-founder, it is gone!
If you look at it - what is one of the key things because of which a Startup fails?
It is because co-founders fight!
They are not always aligned with their thought processes.
It is the number one reason according to me.
Everything else is after that!
But can we get away from co-founders?
No!
If you don't have co-founders, you can't even start a company.
It is impossible!
You cannot have a one-man show!
It is not at all possible.
So, what is the best way of dealing with it?
The best way of dealing with it is basically having a clear cut plan and not leaving things
for future.
So, what really happens is - when you are starting something, you are very gungo about
things and you want to just get started.
Then you decide to incorporate a company and decide to take 50-50% and you are all set
to start.
Or if three people are there, then it is going to be 33% each and we are going to start.
After a couple of years, if things are going great, it is fine!
If things are not going so great, one person starts losing interest.
Then he/she says "Man, either I am getting married and going somewhere or I am going
for my MBA or something has happened somewhere and my finances are not working out, so I
want to go."
But now how do you let them go because there is no exit plan.
So they have already taken 33% - it is not like you don't have a clear-cut plan.
So before you get into that, have a clear-cut idea of what this particular person is going
to bring to the table, what are you going to do?
Have diversity in the team.
And then have a clear vesting period.
For example, 25% of your stocks get vested every year and these are things you want to
do.
In 4 years, you get all your stock.
So, in a couple of years if somebody is leaving, atleast you know you are giving them whatever
they have earned, let it vest and after that they can go.
Like this, you can have multiple plans.
The other pitfall of having friends in the company is - let's say someone is not pulling
up the effort or is slacking, they suddenly lose interest in something or they are just
lazy.
Or people change, what are you going to do?
You cannot have a very clear conversation with your friends.
That is the biggest problem.
I would also bring in even family members.
It is not easy to go and talk.
It is extremely uncomfortable to talk.
So that is why I think, other day I was reading about a statistics in the US that about 30%
of the companies that were started with friends as co founders failed!
And then if you look at the success ratio of any startup, they are like 90% fail.
So from 30% to 90% you do the odds.
I mean if you look at it, you may want to really reconsider if you want to start it
with your friends or not.
It is really a double-edged sword but it is also something that can be overcome with the
right paper work and right expectations and having the right kind of execution plan in
place.