Co-founder mismatch: when conflict becomes a problem and how to solve it

Not every founder conflict is productive. The 3 red flags of founder mismatch and what investors can do before disagreements damage the company.

While conflict can be a valuable tool, not all conflict creates value. In founder teams, the same differences in perspective that drive innovation can also become a source of friction that slows down or destabilizes the company. For investors, this is one of the most critical risks to identify and manage early.

This article from our three-part article series focuses on the point where conflict stops being productive and starts harming the company. We talk about how to recognize fundamental mismatches between foundersm and what practical steps founders and investors can take to address them before they escalate further

Read the previous post in this series: Don’t let a good conflict go to waste

3 main red flags for founders

Conflict between founders is not inherently bad; on the contrary, as we discussed in the previous article, it is often necessary. Rein Lemberpuu emphasizes that all situations must be viewed on a scale: “At one end, there is only conflict, and at the other end, there is only harmony. Both are bad, but a good team is somewhere in between. A fundamental mismatch occurs when there is no balance.”

According to Rein, a fundamental mismatch is usually a combination of several different inconsistencies, but the biggest warning signs are the following:

1. Vision conflict – the most fundamental problem is when founders disagree on what they are building. “There should be no conflict about the vision of what the company should do. If I want to make rubber bands and you want to make some kind of AI orange peeler – and we argue all the time and try to steer the wheel one way and the other, everything else will go haywire,” Rein describes. If there is no common direction to decide on, every decision becomes a dispute, and everything else – strategy, product, team – will also start to fluctuate constantly.
2. Ambition conflict – even if the direction is the same, the problem can arise in magnitude. For example, if one wants to build a small, efficient company and the other wants to grow aggressively, every decision – hiring, investments, risk – creates a confrontation.
3. Personality conflict – even a very large personality difference can be fatal. For example, a very dominant and a very introverted person can theoretically complement each other. In practice, this often means that one dominates and the other withdraws – or conversely, communication does not work at all.

When the founders are already “in a fight”

In the previous article, we talked about how people tend to see every conflict as a fight. In fact, a conflict is only a fight when people are unable to approach the disagreement with curiosity and lack the resources to learn from each other.

A conflict that is too resource-intensive to resolve or for which there are no resources at the moment is simply a cost. At that point, the conflict does not bring any benefits and the conflict starts to harm the company.

“The first thing to do is to find out whether the founders have disagreements about the company’s strategy or whether they are at the personality level. Of course, they are usually a bit mixed, but a strategic conflict can be resolved in principle, while a personality conflict is much more complicated,” explains Rein.

How investors can protect their investment

When a conflict has reached a point where it affects the functioning of the company, Rein says investors need to intervene. As shareholders, they have the right and interest to have a say in the company’s future, and it’s better to do so sooner rather than later. It’s unrealistic to expect the situation to “resolve itself” – especially in the context of a startup, where time and money are limited.

Here are 3 main ways to resolve conflicts that are damaging the company.

1. Enforcing decisions – conflict before a decision is made is normal, but once a decision has been made in the company, everyone must respect that decision. “If someone doesn’t respect that decision, that person’s position must be removed,” says Rein. “It may seem harsh, but you can’t run a company if someone works against you. It’s hard enough to build a company; it’s 10 times harder to build a startup, and if someone undermines it from within, it’s basically impossible.”
2. Replaying roles – if the conflict is at the personality level, decisions may not resolve it. Then the only option is to reposition the positions so that these individuals do not come into contact or work together as much.
3. Removing one party – if the previous options are not enough, the most uncomfortable decision must be made, and one person must be removed from the equation. Rein admits that there isn’t a noble solution to such situation, the question is purely practical: “You simply assess soberly which person is more necessary for the company. With each person, we take some capabilities away from the company, but the question is whose loss is more catastrophic for the company. And the biggest loss is to let the quarrel continue.”

Don't wait for people to grow out of conflict

According to Rein, it's not worth waiting for self-development to solve a problem: "In theory, it's possible, but not in practice at the pace of a startup. Self-development is such a time-consuming measure that you run out of money before a person changes. In addition, development cannot be forced – a person can only do it themselves."

In short, conflict is not necessarily bad, but not every conflict is good. Positive conflict leads to better decisions, but unconstructive conflict can lead to the collapse of a company. Better communication does not always help in resolving a conflict, but specific management decisions need to be made.

Stay tuned for the final post in the series:

• Founder mismatch: when conflict becomes a problem and how to solve it

Dealum’s co-founder Rein Lemberpuu is an entrepreneur, investor, and mentor who has founded over 30 companies – from one-person companies to organizations with several hundred employees – and made dozens of startup investments as an investor. He has worked as a mentor for 10+ years, led an international startup mentor program, and is the founder, CEO, and mentor of the self-development school .Contriber School.