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Ask HN: How to deal with a co-founder who has wasteful spending habits

98 points by ta647898 4y ago

My co-founder partner is the CEO of our company and I am the other co-founder. This is a tech company with size of 30 people. Last month a company retreat event announced and it is scheduled only 5 weeks forward. I learned that with other employees on Slack. It is a 5 day beach vacation to very far away. It cost like 10% of annual revenue of the company and company is barely profitable. It is announced that our business partners also will come so all managers including me must attend (None of our business partners attended). I rejected and didn’t go. During this economy, how wasting so much money on beaches, midnight parties at pubs, and yacht tours can be normal? How can I deal with this behavior of treating your partner like any other employee? How can I fix this communication problem and prevent future abuses?

cmmeur01 4y ago
Not allowing one person to spend 10% of your revenue in one go sounds like a good place to start.
- sergiomattei 4y ago
  Yeah. What are the structures that allow a co-founder to unilaterally make this decision? Do your job, say no.
  - conductr 4y ago
    It’s an absence of structure most likely. Typically this would be budgeted and board approved or spend over a certain threshold would require certain approvals.
  - deleted 4y ago
    [deleted]
MrMan 4y ago
get out
- ffhhj 4y ago
  after the party
verdverm 4y ago
There's a good book called Founder Dilemmas that is good thinking through these types of things https://ia800509.us.archive.org/4/items/TheFoundersDilemmashowentrepreneur.comByNoamWasserman/The%20Founders%20Dilemmas%20%28howentrepreneur.com%29%20by%20Noam%20Wasserman.pdf https://ia800509.us.archive.org/4/items/TheFoundersDilemmash...
brigandish 4y ago
You're going to have to speak to them, and it's going to be a difficult conversation for both of you. I therefore would suggest reading a book called Difficult Conversations[1], I can't recommend it enough. It's part of a series based off of research conducted at Harvard, of which Getting to Yes, and Getting Past No are two of the others, also highly recommended. [1] ISBN 9780143118442
officialchicken 4y ago
Hire a CFO or head of finance would be a good start - if possible. With 30 employees you are probably missing a lot of opportunities related to accounting and expenses. In the meantime, clearly setup and define spending controls as it pertains to bizdev. Create -per-department/-per-project budgets and limits (e.g. approvals required over $X amount) with incentives to stay below these lines.
- m00x 4y ago
  I've never seen a company with a CFO at 30 employees, that's extremely wasteful. A good accountant would do at that point. It's a huge mistake to hire a CFO too early unless you're a fintech.
  - conductr 4y ago
    Fractional CFO is an option. Someone needs to be doing the CFO job at the strategic level. An accountant is usually not right for that.
    - m00x 4y ago
      Most tech companies don't need to do very complex financials. Accountants are often good enough, or at least advisors. Maybe your idea of a fractional CFO is the same of my idea of an advisor, in which case it's just a term difference.
      - MacsHeadroom 4y ago
        As a former fractional CFO at a 12 person company I saved many multiples of what I cost despite the company having a great accountant whom the CEO spent a lot of time with. Advising can only get you so far, especially if the CEO is incapable of taking action on it. Sometimes even smaller companies can benefit from more constant accountability.
        m00x 4y ago
gus_massa 4y ago
How much equity do each one of you have?
pedalpete 4y ago
Just to clarify, the event has already taken place? Is that correct? You said the business partners were supposed to attend, but none of them did. I think this is probably a good opportunity to sit down with your co-founder and discuss what went wrong. Rather than just accuse them of wasteful spending, create a learning experience for them (or you). The type of questions you'll want to ask is 1) Why did they think it was a valuable way to spend company money? 2) What sort of result did they expect? If partners were supposed to attend, did they expect an increase in revenue from the event? If not, why are they spending money on partners/ 3) What would they do differently next time? 4) Is there a way they could have reached the same goals without spending the money at all? How can they be more creative, etc? Perhaps the CEO had a master plan that didn't work out (unlikely), perhaps they just wanted to blow off steam. Maybe they heard it's what other companies did, and therefore thought it was a sign of what they should be doing. I wouldn't attack them, but make sure they understand that you believe this was not a good use of company funds, and that as a result of these actions, you now must do X, Y, Z in order to get back the money that was spent (how much more sale, how much more advertising, which leads to more hiring, etc). Paint the picture in clear detail of what the event cost beyond the dollars spent and time lost. For every $100 they spent on the event, the company needs to earn $240 (or whatever your margins are after tax, etc etc). This way you can make it clear that the next time they attempt to do something like this, that they understand the cost isn't the $$$ going out, it's the cost of getting those $$$ back in! Also make it clear that there are limits to how much they should be spending without discussing it with you. I assume they wouldn't make a major hire without consulting you, so why would it be OK to spend a huge chunk of revenue. There are probably some notices you may want to write down about the event to keep just in case of future litigation, etc. But you'll want to speak to somebody with legal experience about that...and do the legal thing after the discussion.
- atdrummond 4y ago
  This is absolutely the way I’d recommend to tackle the situation. It not only enables you to understand what his mindset actually was but open the dialogue and improve your respective personal processes to avoid the situation again. It’s also a collaborative approach as opposed to an antagonistic one.
Jugurtha 4y ago
Is the CEO non-technical, older, more focused on wining/dining/if-we-just-land-that-one-logo/we'll-land-investors/social-proof-board-name-dropping/networking-is-the-game/exagerating-sometimes-lying and do you have disproportionately less equity, were you bearish on getting to 30 people in the first place before being a solid, viable, business? Do you find yourself thinking that the company could run with fewer than ten very specific people? Does work get done more effectively when the CEO does not interfere/mess things up but you don't allow yourself to say so? Does it happen you watch clips from The Office's Michael Scott and it hits too close to home? PS: Also, are you sure you're a co-founder and are you certain you actually do have equity? Did a lawyer you (not the company/CEO) have paid go over this? Are you in the bylaws?
- paulcole 4y ago
  On the flip side, is the OP a tech dork with no people skills who sneers at any MBA they meet? Remember that we’re only getting 1/2 (at best) of the story here.
  - Jugurtha 4y ago
    Glad you made it back from the retreat to tell us the other half of the story. Joking. I'm curious what the answers will be. OP doesn't strike me as oblivious to what an MBA is about, or as a "tech dork with no people skills who sneers at any MBA they meet"... Although I wonder how many hugely successful companies were founded by people like that.
    - m00x 4y ago
      > Remember that we’re only getting 1/2 (at best) of the story here. Glossed over the actual important point. OP is kind of a loser for not just talking to his co-founder and airing his laundry on HN. It doesn't show much emotional maturity on his side.
      - cassepipe 4y ago
        When you are faced with abusive people and have not met people like that before or are accustomed to it, you just feel something is wrong but you need to share your feelings and how you see things with others to be sure you are not in the wrong, that the situation is abnormal, plus you're generally afraid of the consequences of speaking to the abusive. Not everybody can handle conflict well and while it is a good skill in life, judging it morally does not help
ensignavenger 4y ago
Have you tried talking to them about it?
- tootie 4y ago
  I was going to say "yelling" but same idea. I'm guessing OP knows this already but is being avoidant and/or just trying to moan to a receptive audience. OP: that sucks and it shouldn't have, but you're cofounder too so go tell this guy he just wasted precious company funds on pure vanity and it's damaging the company.
ethn 4y ago
Immediately, without any context other than what you've provided, I would no longer trust him--you should be included in the loop for any major decision like this. If he has no particularly rare redeeming qualities (or if he does, if you can survive without him), discuss it with the board directly. In my experience it is better to not take chances and to aggressively confront this otherwise later you will regret ignoring duplicitous behavior.
notananthem 4y ago
Beat them to upping the burn rate by.. a lot, until neither of you own anything. Everyone needs financial controls and financial accountability. No one should be able to spend without cosigners. If you set that up early, it will be in your company's blood. If you don't, you will ALWAYS have a culture of wastage.
- m00x 4y ago
  It's actually very common to have a spending limit without having to ask other directors. This company should have it as well.
katzgrau 4y ago
Read "rocket fuel" by Mark Winters. It sounds like the CEO is a classic visionary - big picture people person, grand ideas, bad with details like operations and money. It also sounds like you may be their complement - good with details and proper planning - a classic "integrator" This is actually a great combination, but in order for the company to benefit from your complementary abilities you've got to get separate responsibility appropriately. At 30 employees you should have a fractional CFO or at least a situation where the COO/integrator can keep expenditures in check. CEO needs to let the team do what it does best.
dehrmann 4y ago
> During this economy It's not 2001 or 2009 (yet). Inflation is high, unemployment is very low, so it's hard to say where the economy is actually at.
- ziddoap 4y ago
  I don't think the point of OPs post was to debate about the exact state of the economy.
- naniwaduni 4y ago
  "Hard to say where the economy is actually at" sounds like you have a lot of uncertainty about where the economy is at!
  - dehrmann 4y ago
    True, but "in this economy" usually implies it's bad. It's not bad right now; it's complicated.
    - ghaff 4y ago
      Yes, but per the parent, uncertainty (which I don't think anyone would argue with) suggests that one should at least be conservative--which includes being maybe more careful with expenses than otherwise. And an apparently at somewhat extravagant retreat sounds like something to be avoided if I were advising.
IncRnd 4y ago
* During this economy, how wasting so much money on beaches, midnight parties at pubs, and yacht tours can be normal? * How can I deal with this behavior of treating your partner like any other employee? * How can I fix this communication problem and prevent future abuses? It seems as if you haven't spoken with your business partner. You should do that. Explain your position. Be firm. Set boundaries. It doesn't need to be a long conversation, but it needs to happen. If this is your company, take charge. ----- I've answered your three questions below, based upon my experiences. The answer to your first question is labled #1. The answer to your second question is #2. The third answer, labeled #3, attempts to answer your third question. 1. It doesn't matter whether this is normal. You should ask whether it is useful and acceptable for your company. Above and beyond that, you need to set boundaries regarding co-owned funds. A marriage won't last between two people who don't speak with each other. In many ways founders enter a marriage with each other, so they need to speak with each other and keep their lines of communication open. After all, you've entwined your financial and business lives together. 2. Stop acting like an employee next to your partner. The first step is to talk with them instead of reaching out to random people on the Internet. It's possible that your co-founder does not see a problem but would be willing to change if you spoke with them. It's also possible they do not see you as an equal. Either way, you need to find out what is going on. 3. You actually didn't state a communication problem in this post. That tells me you don't always speak up and in this case may not have spoken your mind with your partner. If you want them to treat you as a partner, you need to treat them as as a partner as well. Otherwise, they'll never know what you want them to know.
- svnt 4y ago
  > It seems as if you haven't spoken with your business partner. You should do that. This is the most valuable comment so far. The problem is lack of communication and/or possibly lack of respect of boundaries, but the lack of details and passive-aggressive responses to the event indicate the relationship needs work. The money does not seem like your primary issue. If you don’t repair things with your cofounder then 10% of revenue (which frankly sounds like it is probably kind of a small number given your other clues) doesn’t matter.
  - 4y ago
WheelsAtLarge 4y ago
I've dealt with a similar situation. Some people just don't consider money important until they don't have it. You won't be able to change his ways so don't try. It will just be unproductive confrontations. An agreed upon budget might help. The budget should have a line item for these type of items. But I suspect you already have a budget and he's not following it. You won't be able to change him so you need to look at the situation seriously and decide whether it's worth continuing. The reality is that startups without financial discipline will have a hard time surviving. Good luck.
frozenport 4y ago
Meh. 10% isn't a make or break move, and it may be worth the cost if it keeps employee retention up. Real problem is to figure out if you guys got what you paid for.
- tehlike 4y ago
  My personal opinion, may be off, vacation etc rarely keeps retention up. Noone stays saying "wow off-site 6months ago was amazing, I should stay".
  - justsomehnguy 4y ago
    If anything, this actually speeds up some people. "Wow, I can't stand these people at the work and now I need to bear them NOT at the work?"
  - JimmieMcnulty 4y ago
    Oh some absolutely do, based on the bonds formed during that off-site.
    - safety1st 4y ago
      Especially for a remote company, these team get togethers can be make or break. An annual all expenses paid visit to an exotic destination is a life changing benefit to some people and adds a physical dimension to relationships with coworkers that Zoom doesn't. It translates directly into more trust and retention. It's a significant cost but well within what you can afford if you lease little to no office space.
jupp0r 4y ago
Sounds to me like you have a fundamental trust problem between you and your co founder. You need to fix this (if that’s still possible) if you want to play an active role at the company going forward.
ulfw 4y ago
Are you sure you're co-founders or are you just the first/early employee? If you're co-founders you need to be able to talk to each other. Not on Hackernews. There's muuuuuch much bigger issues here than some 'wasteful spending'.
bleachball 4y ago
> Last month a company retreat event announced and it is scheduled only 5 weeks forward. I learned that with other employees on Slack You came to know from other employees about it on Slack? Are you sure you are a co-founder? Have you checked with the other co-founder what your company sells? Who knows the company maybe be selling sea surfing items or beach balls and it would be a perfect thing to invite everyone to the beach to promote the products.
pnw 4y ago
There’s not really enough detail in your post to analyze. 10% of revenue could be nothing or it could be millions. Are you venture funded? What’s your burn rate and runway and how much did this cost in comparison? I know plenty of companies who have gone 100% remote and spend part of the money they save on company retreats in order to get actual facetime with each other. It’s not clear if this applies to you or not.
- deleted 4y ago
  [deleted]
- bjornsing 4y ago
  OP says they have 30 employees and are (barely) profitable, no? That’s enough of an indication to me: cost was about 3 people’s annual salary.
  - MacsHeadroom 4y ago
    10% of annual revenue is not 10% of annual burn. Their MMR could be $20k, making the cost $24k or about $800 per person for a week long retreat. That doesn't seem insane. There's simply not enough information in the post.
    - bjornsing 4y ago
      > 10% of annual revenue is not 10% of annual burn. Not in general. But if the company is “barely profitable” then revenue is approximately equal to cost, and thus 10% of annual revenue is approximately equal to 10% of annual “burn”.
morpheuskafka 4y ago
I know there is a quote (maybe Paul Graham?) about the sign of dotcom-era startups failing being when they bought Aeron chairs for the office. But to me, there's a big difference between putting money theoretically into the company's work environment, branding, physical presence, etc. even if a bit extravagant, and blowing through 10% of revenue on bacchanalian pursuits that don't leave you with anything of value whatsoever a week later. This raises serious concerns about whether the CEO is actually upholding their duty to shareholders. Someone else should have been involved in planning for something that expensive anyway.
lacker 4y ago
I have bad news for you. Cofounders are like any other employee. You don't automatically get a say in every decision just because you were one of the company founders. Often, the CEO has the power to simply fire you. The CEO certainly has the power to demote you to a non-decisionmaking role. The CEO does not have to listen to you about every little decision like having a company retreat. First, you should have gone to the company retreat. As a manager it's your responsibility to support team-building things like this, even if you don't agree with the CEO's decisions. Second, your communication style is hurting you. Don't just reject the CEO's initiative. Don't complain about your boss on HN in a way that, honestly, will be completely obvious to your CEO if they read this thread. Politely bring up your objections, and if the CEO overrules you, accept it and move on. It's a company retreat, you must have more important problems.
cutierust 4y ago
I think the crux of the problem is not expenses themselves but that you learnt it from slack. It doesn't matter if the CEO is wasteful or miser, it looks like his decision making is one sided. I don't see much future in things frankly.
gnicholas 4y ago
If you have 30 employees you presumably have venture funding, and if you're calling yourself a cofounder then you presumably have a decent chunk of equity. How much equity do you and the VCs have in total? From a purely practical perspective, if you have over 50% then you have leverage over the CEO. You can't credibly threaten to fire him over this one incident, but you can rein in potentially worse behavior. It would also be wise to figure out why he did this. Does he have a family that he was trying to appease by hosting an event on sandy beaches (so they could tag along gratis)? Is he hitting a wall and worried other people are also, and wanted to let people relax a bit? Regardless, someone should have been in the loop on this before it went out on Slack. Even a sole founder should be getting a gut check from others before planning a trip that could cost 10% of revenue. If I'm reading this right, did this trip move you from being profitable to being in the red? But the bottom line is to see who has the majority of the shares. If it's you and others, great. If it's him, then you just have minority shareholder rights, which wouldn't kick in at this point. If he's enriching himself at the expense of the company, then you can take action. Good luck!
deleted 4y ago
[deleted]
danielrk 4y ago
Regardless of what it says on paper, you two are not co-founders.
osigurdson 4y ago
This sounds like a made up story to me. The numbers don't even make sense.
gre 4y ago
Make more money and your problems will go away.
Brian_K_White 4y ago
What to spend on and why is a complete and utter judgement call and quite subjective. The examples have to be pretty extreme before you can declare wasteful. Maybe they are, but all you can really say is that you have two different approaches and personalities, and that is something you have to figure out before getting into bed with someone who either doesn't work the way you approve of or understand. They may think you are sabotaging the business by being too myopic and focussing on the wrong details. Failing to deliver the load of goods by avoiding buying the truck or the fuel, or attract the right driver, or attract the right customer. Personally the cost of such a retreat wouldn't matter to me at all. What would matter is if the employees consider it just more insufferable work imposed from out of touch bosses, or actually a good thing. What is the stated purpose of the reatreat? Is that purpose valid? Does it actually attain that purpose? It sounds like you have no idea about any of those questions or their answers. Is that because they were never communicated or the cofounder has no idea either, or might it just be that you don't see it and it's really just a limitation of your own? An event like that is not automatically damning, but acting like it is, is actually a bit of a red flag against you, as though you don't recognize any indirect values and only think that spending money is bad. There is always the "in this economy" excuse. It can be said every day forever, and so is actually meaningless. A retreat like that is more likely to be a bad idea if it's some horrible forced-fun work-intruding-on-personal-time thing that only the boss wants, no one else wants, and the boss has no coherent plan and purpose that maybe makes it correct to initially override what everyone says they want.
- ralusek 4y ago
  > Personally the cost of such a retreat wouldn't matter to me at all It probably should. If your only question is "what is the value of this?" and not also "and what will it cost?" then you aren't doing a particularly useful analysis. > It sounds like you have no idea about any of those questions or their answers This strikes me as needlessly presumptive and rude to OP
  - m00x 4y ago
    > This strikes me as needlessly presumptive and rude to OP What's rude is airing your dirty laundry to strangers and not talking about it to your partner. Imagine if OP was talking shit about his wife here. It's incredibly immature.
gumby 4y ago
In my first startup one of my two cofounders was the initial CEO and I wanted to be the one who managed the cash. As it happened we only had to have a couple of those tough conversations because the three of us were all pretty parsimonious, but I slept better having some controls in place and knowing we wouldn’t run out of money.
fxtentacle 4y ago
How much equity do each of you have? If you co-founder put in a lot of money, but you didn't, he/she might be able to out-vote you. Do you have a board or VC oversight? Maybe they instructed him/her to do this? Also, did you mean partner == "business partner" or were you actually dating? Because that would be an entirely different dynamic.
spaceman_2020 4y ago
Is this a one-off thing or are there similar instances of wasteful spending? If its a one time thing, maybe your CEO had a reason - he/she might have felt that the employees had been working too hard and deserved a break, or might have noticed that productivity and morale were flagging.
m00x 4y ago
I'm not sure how the first thing that came to your mind isn't "I better talk to them about it.". Co-founder relationships are like marriages, only losers go vent about their partners on the internet to give their side of the story. Smarten up, go talk to them. Maybe the lack of emotional intelligence on your side is why he didn't tell you ahead of time.
philprx 4y ago
Two things kill a lot/ most startups: * Money problems * Founders alignments You at least have one of these problem, possibly two in the future. Only way to fix this is to re align and make sure you don't run out of money. Re align means discussion and demonstrating what works. A good book on how to conduct these discussions and gather clear data on the company (that shows afterwards if an action was good or not): Traction Good luck my friend, entrepreneurship is hard.
neilv 4y ago
Like others have said, talk with your co-founder, and consult your own lawyer to make sure you actually are a co-founder (and aren't getting pushed aside). You might also want to consider asking HN admins if they'd delete this post, since the ~28 employees will realize which company this is, and maybe you'd prefer they not read about a leadership disagreement/misunderstanding on HN. As we know, a big part of startups is constant learning, and today can be one of many learning moments, for you and CEO. If it turns out one/both of the cofounders has to tell everyone they made a mistake, IMHO that can double as a great culture message, about honesty, humility, psychological safety, and learning.
- SQueeeeeL 4y ago
  >If it turns out one/both of the cofounders has to tell everyone they made a mistake, IMHO that can double as a great culture message, about honesty, humility, psychological safety, and learning. If this CEO is already dropping thousands of dollars on beach vacations trying to pretend it's client outreach, I have a sense they're probably one of "the bad ones" who don't really have a ton of ability to contextualize their own actions and how they'd be viewed by others. Much more likely they'd double down on their own megalomania (but this is a forum post on a website, so it's obviously hard to say.)
eurasiantiger 4y ago
Honestly, this seems like a play to get rid of all the business partners. One plane crash to kill ’em all.
deleted 4y ago
[deleted]
0xthrowaway 4y ago
tester756 4y ago
> It is announced that our business partners also will come I think "beaches" and "midnight parties at pubs" may be cheap way to make better&stronger connections with your business partners Alcohol despite all shitty things is good at getting people "closer"(?)
silvestrov 4y ago
> learned [...] on Slack [...] 10% of annual revenue This is a major red flag for me: it is such a huge expense that the CEO should have discussed this with his co-founder and other top-level mgmt before deciding on it and definitely before announcing it. This is not a lack of communication. This is a lack of respect of other people, thinking their input is irrelevant.
ada1981 4y ago
This is a leadership issue (yours) and a culture issue. I’d recommend you discuss this with your leadership coach and address the underlying communication and relational patterns of which this is a symptom so you can get leverage on the culture. If you don’t have that kind of support, happy to gift you a session or two from EarthPilot.org Great opportunity here to take deeper responsibility, to grow, and ultimately take your project to a new level.
r0b05 4y ago
You might need a mediator to bridge the communication gap.
dustingetz 4y ago
hey, you need a psychologist (expensive therapist) to talk to weekly - to process your own feelings as a foundation for communication with co-founder; you can offer couples counseling as well but that is less in your control - impactful communication starts by having your own affairs in order which is in your control.
throwawayacc2 4y ago
I think there might be a miss alignment of values here. It all depends on what you see the purpose of the company to be. Some people are dedicated to the company as an entity of it’s own and the product they build and the people working there. It is a valid and respectable way of looking at things. From your post, I have a sense you might fall into this category. Assuming you subscribe to this point of view, it makes sense to consider the retreat an abuse. Other people do not see companies like this. Instead, they see the company as an means to an end. A tool to use for enhancing financial opportunities and abilities and living a full, luxurious, rich and comfortable life. I believe this too is a valid and respectable way of approaching things. This is how I personally view companies and their purpose. With this point of view, a vacation expensed on the company is not an abuse. It’s the intended purpose. If you would like to see a decent portrait of this different philosophies I would recommend seeing the difference between Dany Crane and Paul Lewiston in Boston Legal. Of course it might also be the case this was a miss alignment of business strategy and not fundamental values. If he invited the business partners perhaps he saw it as a business opportunity to renew contracts, perhaps upsell more services, etc. Whatever the case might be, I think a very frank discussion between the two of you is in order. Business strategy should be aligned, yes, but far more importantly, fundamental outlook on what the company is for. Best advice I can give you is, don’t leave this unaddressed but address it in a professional manner in order to understand where the other co-funder is coming from. Once you understand his position you will be in a position where you can make an informed decision about your future and the future of the company.
nnoitra 4y ago
Come on, live a little. A small vacation of 6 months to Bora Bora never ruined a company! Enjoy. Life is short. Carpe diem.
ajl666 4y ago
Why didn't you sign an operating agreement from the get go? You engineer automatic, axiomatic, algorithmic systems but failed to engineer your most important system for success. You're screwed. This kind of 'partner' isn't.

98 points by ta647898 4y ago

cmmeur01 4y ago

Not allowing one person to spend 10% of your revenue in one go sounds like a good place to start.

sergiomattei 4y ago
Yeah. What are the structures that allow a co-founder to unilaterally make this decision? Do your job, say no.
- conductr 4y ago
  It’s an absence of structure most likely. Typically this would be budgeted and board approved or spend over a certain threshold would require certain approvals.
- deleted 4y ago
  [deleted]

MrMan 4y ago

get out

ffhhj 4y ago
after the party

verdverm 4y ago

There's a good book called Founder Dilemmas that is good thinking through these types of things https://ia800509.us.archive.org/4/items/TheFoundersDilemmashowentrepreneur.comByNoamWasserman/The%20Founders%20Dilemmas%20%28howentrepreneur.com%29%20by%20Noam%20Wasserman.pdf https://ia800509.us.archive.org/4/items/TheFoundersDilemmash...

brigandish 4y ago

You're going to have to speak to them, and it's going to be a difficult conversation for both of you. I therefore would suggest reading a book called Difficult Conversations[1], I can't recommend it enough. It's part of a series based off of research conducted at Harvard, of which Getting to Yes, and Getting Past No are two of the others, also highly recommended. [1] ISBN 9780143118442

officialchicken 4y ago

Hire a CFO or head of finance would be a good start - if possible. With 30 employees you are probably missing a lot of opportunities related to accounting and expenses. In the meantime, clearly setup and define spending controls as it pertains to bizdev. Create -per-department/-per-project budgets and limits (e.g. approvals required over $X amount) with incentives to stay below these lines.

m00x 4y ago
I've never seen a company with a CFO at 30 employees, that's extremely wasteful. A good accountant would do at that point. It's a huge mistake to hire a CFO too early unless you're a fintech.
- conductr 4y ago
  Fractional CFO is an option. Someone needs to be doing the CFO job at the strategic level. An accountant is usually not right for that.
  - m00x 4y ago
    Most tech companies don't need to do very complex financials. Accountants are often good enough, or at least advisors. Maybe your idea of a fractional CFO is the same of my idea of an advisor, in which case it's just a term difference.
    - MacsHeadroom 4y ago
      As a former fractional CFO at a 12 person company I saved many multiples of what I cost despite the company having a great accountant whom the CEO spent a lot of time with. Advising can only get you so far, especially if the CEO is incapable of taking action on it. Sometimes even smaller companies can benefit from more constant accountability.
      - m00x 4y ago

gus_massa 4y ago

How much equity do each one of you have?

pedalpete 4y ago

Just to clarify, the event has already taken place? Is that correct? You said the business partners were supposed to attend, but none of them did. I think this is probably a good opportunity to sit down with your co-founder and discuss what went wrong. Rather than just accuse them of wasteful spending, create a learning experience for them (or you). The type of questions you'll want to ask is 1) Why did they think it was a valuable way to spend company money? 2) What sort of result did they expect? If partners were supposed to attend, did they expect an increase in revenue from the event? If not, why are they spending money on partners/ 3) What would they do differently next time? 4) Is there a way they could have reached the same goals without spending the money at all? How can they be more creative, etc? Perhaps the CEO had a master plan that didn't work out (unlikely), perhaps they just wanted to blow off steam. Maybe they heard it's what other companies did, and therefore thought it was a sign of what they should be doing. I wouldn't attack them, but make sure they understand that you believe this was not a good use of company funds, and that as a result of these actions, you now must do X, Y, Z in order to get back the money that was spent (how much more sale, how much more advertising, which leads to more hiring, etc). Paint the picture in clear detail of what the event cost beyond the dollars spent and time lost. For every $100 they spent on the event, the company needs to earn $240 (or whatever your margins are after tax, etc etc). This way you can make it clear that the next time they attempt to do something like this, that they understand the cost isn't the $$$ going out, it's the cost of getting those $$$ back in! Also make it clear that there are limits to how much they should be spending without discussing it with you. I assume they wouldn't make a major hire without consulting you, so why would it be OK to spend a huge chunk of revenue. There are probably some notices you may want to write down about the event to keep just in case of future litigation, etc. But you'll want to speak to somebody with legal experience about that...and do the legal thing after the discussion.

atdrummond 4y ago
This is absolutely the way I’d recommend to tackle the situation. It not only enables you to understand what his mindset actually was but open the dialogue and improve your respective personal processes to avoid the situation again. It’s also a collaborative approach as opposed to an antagonistic one.

Jugurtha 4y ago

Is the CEO non-technical, older, more focused on wining/dining/if-we-just-land-that-one-logo/we'll-land-investors/social-proof-board-name-dropping/networking-is-the-game/exagerating-sometimes-lying and do you have disproportionately less equity, were you bearish on getting to 30 people in the first place before being a solid, viable, business? Do you find yourself thinking that the company could run with fewer than ten very specific people? Does work get done more effectively when the CEO does not interfere/mess things up but you don't allow yourself to say so? Does it happen you watch clips from The Office's Michael Scott and it hits too close to home? PS: Also, are you sure you're a co-founder and are you certain you actually do have equity? Did a lawyer you (not the company/CEO) have paid go over this? Are you in the bylaws?

paulcole 4y ago
On the flip side, is the OP a tech dork with no people skills who sneers at any MBA they meet? Remember that we’re only getting 1/2 (at best) of the story here.
- Jugurtha 4y ago
  Glad you made it back from the retreat to tell us the other half of the story. Joking. I'm curious what the answers will be. OP doesn't strike me as oblivious to what an MBA is about, or as a "tech dork with no people skills who sneers at any MBA they meet"... Although I wonder how many hugely successful companies were founded by people like that.
  - m00x 4y ago
    > Remember that we’re only getting 1/2 (at best) of the story here. Glossed over the actual important point. OP is kind of a loser for not just talking to his co-founder and airing his laundry on HN. It doesn't show much emotional maturity on his side.
    - cassepipe 4y ago
      When you are faced with abusive people and have not met people like that before or are accustomed to it, you just feel something is wrong but you need to share your feelings and how you see things with others to be sure you are not in the wrong, that the situation is abnormal, plus you're generally afraid of the consequences of speaking to the abusive. Not everybody can handle conflict well and while it is a good skill in life, judging it morally does not help

ensignavenger 4y ago

Have you tried talking to them about it?

tootie 4y ago
I was going to say "yelling" but same idea. I'm guessing OP knows this already but is being avoidant and/or just trying to moan to a receptive audience. OP: that sucks and it shouldn't have, but you're cofounder too so go tell this guy he just wasted precious company funds on pure vanity and it's damaging the company.

ethn 4y ago

Immediately, without any context other than what you've provided, I would no longer trust him--you should be included in the loop for any major decision like this. If he has no particularly rare redeeming qualities (or if he does, if you can survive without him), discuss it with the board directly. In my experience it is better to not take chances and to aggressively confront this otherwise later you will regret ignoring duplicitous behavior.

notananthem 4y ago

Beat them to upping the burn rate by.. a lot, until neither of you own anything. Everyone needs financial controls and financial accountability. No one should be able to spend without cosigners. If you set that up early, it will be in your company's blood. If you don't, you will ALWAYS have a culture of wastage.

m00x 4y ago
It's actually very common to have a spending limit without having to ask other directors. This company should have it as well.

katzgrau 4y ago

Read "rocket fuel" by Mark Winters. It sounds like the CEO is a classic visionary - big picture people person, grand ideas, bad with details like operations and money. It also sounds like you may be their complement - good with details and proper planning - a classic "integrator" This is actually a great combination, but in order for the company to benefit from your complementary abilities you've got to get separate responsibility appropriately. At 30 employees you should have a fractional CFO or at least a situation where the COO/integrator can keep expenditures in check. CEO needs to let the team do what it does best.

dehrmann 4y ago

> During this economy It's not 2001 or 2009 (yet). Inflation is high, unemployment is very low, so it's hard to say where the economy is actually at.

ziddoap 4y ago
I don't think the point of OPs post was to debate about the exact state of the economy.
naniwaduni 4y ago
"Hard to say where the economy is actually at" sounds like you have a lot of uncertainty about where the economy is at!
- dehrmann 4y ago
  True, but "in this economy" usually implies it's bad. It's not bad right now; it's complicated.
  - ghaff 4y ago
    Yes, but per the parent, uncertainty (which I don't think anyone would argue with) suggests that one should at least be conservative--which includes being maybe more careful with expenses than otherwise. And an apparently at somewhat extravagant retreat sounds like something to be avoided if I were advising.

IncRnd 4y ago

* During this economy, how wasting so much money on beaches, midnight parties at pubs, and yacht tours can be normal? * How can I deal with this behavior of treating your partner like any other employee? * How can I fix this communication problem and prevent future abuses? It seems as if you haven't spoken with your business partner. You should do that. Explain your position. Be firm. Set boundaries. It doesn't need to be a long conversation, but it needs to happen. If this is your company, take charge. ----- I've answered your three questions below, based upon my experiences. The answer to your first question is labled #1. The answer to your second question is #2. The third answer, labeled #3, attempts to answer your third question. 1. It doesn't matter whether this is normal. You should ask whether it is useful and acceptable for your company. Above and beyond that, you need to set boundaries regarding co-owned funds. A marriage won't last between two people who don't speak with each other. In many ways founders enter a marriage with each other, so they need to speak with each other and keep their lines of communication open. After all, you've entwined your financial and business lives together. 2. Stop acting like an employee next to your partner. The first step is to talk with them instead of reaching out to random people on the Internet. It's possible that your co-founder does not see a problem but would be willing to change if you spoke with them. It's also possible they do not see you as an equal. Either way, you need to find out what is going on. 3. You actually didn't state a communication problem in this post. That tells me you don't always speak up and in this case may not have spoken your mind with your partner. If you want them to treat you as a partner, you need to treat them as as a partner as well. Otherwise, they'll never know what you want them to know.

svnt 4y ago
> It seems as if you haven't spoken with your business partner. You should do that. This is the most valuable comment so far. The problem is lack of communication and/or possibly lack of respect of boundaries, but the lack of details and passive-aggressive responses to the event indicate the relationship needs work. The money does not seem like your primary issue. If you don’t repair things with your cofounder then 10% of revenue (which frankly sounds like it is probably kind of a small number given your other clues) doesn’t matter.
- 4y ago

WheelsAtLarge 4y ago

I've dealt with a similar situation. Some people just don't consider money important until they don't have it. You won't be able to change his ways so don't try. It will just be unproductive confrontations. An agreed upon budget might help. The budget should have a line item for these type of items. But I suspect you already have a budget and he's not following it. You won't be able to change him so you need to look at the situation seriously and decide whether it's worth continuing. The reality is that startups without financial discipline will have a hard time surviving. Good luck.

frozenport 4y ago

Meh. 10% isn't a make or break move, and it may be worth the cost if it keeps employee retention up. Real problem is to figure out if you guys got what you paid for.

tehlike 4y ago
My personal opinion, may be off, vacation etc rarely keeps retention up. Noone stays saying "wow off-site 6months ago was amazing, I should stay".
- justsomehnguy 4y ago
  If anything, this actually speeds up some people. "Wow, I can't stand these people at the work and now I need to bear them NOT at the work?"
- JimmieMcnulty 4y ago
  Oh some absolutely do, based on the bonds formed during that off-site.
  - safety1st 4y ago
    Especially for a remote company, these team get togethers can be make or break. An annual all expenses paid visit to an exotic destination is a life changing benefit to some people and adds a physical dimension to relationships with coworkers that Zoom doesn't. It translates directly into more trust and retention. It's a significant cost but well within what you can afford if you lease little to no office space.

jupp0r 4y ago

Sounds to me like you have a fundamental trust problem between you and your co founder. You need to fix this (if that’s still possible) if you want to play an active role at the company going forward.

ulfw 4y ago

Are you sure you're co-founders or are you just the first/early employee? If you're co-founders you need to be able to talk to each other. Not on Hackernews. There's muuuuuch much bigger issues here than some 'wasteful spending'.

bleachball 4y ago

> Last month a company retreat event announced and it is scheduled only 5 weeks forward. I learned that with other employees on Slack You came to know from other employees about it on Slack? Are you sure you are a co-founder? Have you checked with the other co-founder what your company sells? Who knows the company maybe be selling sea surfing items or beach balls and it would be a perfect thing to invite everyone to the beach to promote the products.

pnw 4y ago

There’s not really enough detail in your post to analyze. 10% of revenue could be nothing or it could be millions. Are you venture funded? What’s your burn rate and runway and how much did this cost in comparison? I know plenty of companies who have gone 100% remote and spend part of the money they save on company retreats in order to get actual facetime with each other. It’s not clear if this applies to you or not.

deleted 4y ago
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bjornsing 4y ago
OP says they have 30 employees and are (barely) profitable, no? That’s enough of an indication to me: cost was about 3 people’s annual salary.
- MacsHeadroom 4y ago
  10% of annual revenue is not 10% of annual burn. Their MMR could be $20k, making the cost $24k or about $800 per person for a week long retreat. That doesn't seem insane. There's simply not enough information in the post.
  - bjornsing 4y ago
    > 10% of annual revenue is not 10% of annual burn. Not in general. But if the company is “barely profitable” then revenue is approximately equal to cost, and thus 10% of annual revenue is approximately equal to 10% of annual “burn”.

morpheuskafka 4y ago

I know there is a quote (maybe Paul Graham?) about the sign of dotcom-era startups failing being when they bought Aeron chairs for the office. But to me, there's a big difference between putting money theoretically into the company's work environment, branding, physical presence, etc. even if a bit extravagant, and blowing through 10% of revenue on bacchanalian pursuits that don't leave you with anything of value whatsoever a week later. This raises serious concerns about whether the CEO is actually upholding their duty to shareholders. Someone else should have been involved in planning for something that expensive anyway.

lacker 4y ago

I have bad news for you. Cofounders are like any other employee. You don't automatically get a say in every decision just because you were one of the company founders. Often, the CEO has the power to simply fire you. The CEO certainly has the power to demote you to a non-decisionmaking role. The CEO does not have to listen to you about every little decision like having a company retreat. First, you should have gone to the company retreat. As a manager it's your responsibility to support team-building things like this, even if you don't agree with the CEO's decisions. Second, your communication style is hurting you. Don't just reject the CEO's initiative. Don't complain about your boss on HN in a way that, honestly, will be completely obvious to your CEO if they read this thread. Politely bring up your objections, and if the CEO overrules you, accept it and move on. It's a company retreat, you must have more important problems.

cutierust 4y ago

I think the crux of the problem is not expenses themselves but that you learnt it from slack. It doesn't matter if the CEO is wasteful or miser, it looks like his decision making is one sided. I don't see much future in things frankly.

gnicholas 4y ago

If you have 30 employees you presumably have venture funding, and if you're calling yourself a cofounder then you presumably have a decent chunk of equity. How much equity do you and the VCs have in total? From a purely practical perspective, if you have over 50% then you have leverage over the CEO. You can't credibly threaten to fire him over this one incident, but you can rein in potentially worse behavior. It would also be wise to figure out why he did this. Does he have a family that he was trying to appease by hosting an event on sandy beaches (so they could tag along gratis)? Is he hitting a wall and worried other people are also, and wanted to let people relax a bit? Regardless, someone should have been in the loop on this before it went out on Slack. Even a sole founder should be getting a gut check from others before planning a trip that could cost 10% of revenue. If I'm reading this right, did this trip move you from being profitable to being in the red? But the bottom line is to see who has the majority of the shares. If it's you and others, great. If it's him, then you just have minority shareholder rights, which wouldn't kick in at this point. If he's enriching himself at the expense of the company, then you can take action. Good luck!

deleted 4y ago

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danielrk 4y ago

Regardless of what it says on paper, you two are not co-founders.

osigurdson 4y ago

This sounds like a made up story to me. The numbers don't even make sense.

gre 4y ago

Make more money and your problems will go away.

Brian_K_White 4y ago

What to spend on and why is a complete and utter judgement call and quite subjective. The examples have to be pretty extreme before you can declare wasteful. Maybe they are, but all you can really say is that you have two different approaches and personalities, and that is something you have to figure out before getting into bed with someone who either doesn't work the way you approve of or understand. They may think you are sabotaging the business by being too myopic and focussing on the wrong details. Failing to deliver the load of goods by avoiding buying the truck or the fuel, or attract the right driver, or attract the right customer. Personally the cost of such a retreat wouldn't matter to me at all. What would matter is if the employees consider it just more insufferable work imposed from out of touch bosses, or actually a good thing. What is the stated purpose of the reatreat? Is that purpose valid? Does it actually attain that purpose? It sounds like you have no idea about any of those questions or their answers. Is that because they were never communicated or the cofounder has no idea either, or might it just be that you don't see it and it's really just a limitation of your own? An event like that is not automatically damning, but acting like it is, is actually a bit of a red flag against you, as though you don't recognize any indirect values and only think that spending money is bad. There is always the "in this economy" excuse. It can be said every day forever, and so is actually meaningless. A retreat like that is more likely to be a bad idea if it's some horrible forced-fun work-intruding-on-personal-time thing that only the boss wants, no one else wants, and the boss has no coherent plan and purpose that maybe makes it correct to initially override what everyone says they want.

ralusek 4y ago
> Personally the cost of such a retreat wouldn't matter to me at all It probably should. If your only question is "what is the value of this?" and not also "and what will it cost?" then you aren't doing a particularly useful analysis. > It sounds like you have no idea about any of those questions or their answers This strikes me as needlessly presumptive and rude to OP
- m00x 4y ago
  > This strikes me as needlessly presumptive and rude to OP What's rude is airing your dirty laundry to strangers and not talking about it to your partner. Imagine if OP was talking shit about his wife here. It's incredibly immature.

gumby 4y ago

In my first startup one of my two cofounders was the initial CEO and I wanted to be the one who managed the cash. As it happened we only had to have a couple of those tough conversations because the three of us were all pretty parsimonious, but I slept better having some controls in place and knowing we wouldn’t run out of money.

fxtentacle 4y ago

How much equity do each of you have? If you co-founder put in a lot of money, but you didn't, he/she might be able to out-vote you. Do you have a board or VC oversight? Maybe they instructed him/her to do this? Also, did you mean partner == "business partner" or were you actually dating? Because that would be an entirely different dynamic.

spaceman_2020 4y ago

Is this a one-off thing or are there similar instances of wasteful spending? If its a one time thing, maybe your CEO had a reason - he/she might have felt that the employees had been working too hard and deserved a break, or might have noticed that productivity and morale were flagging.

m00x 4y ago

I'm not sure how the first thing that came to your mind isn't "I better talk to them about it.". Co-founder relationships are like marriages, only losers go vent about their partners on the internet to give their side of the story. Smarten up, go talk to them. Maybe the lack of emotional intelligence on your side is why he didn't tell you ahead of time.

philprx 4y ago

Two things kill a lot/ most startups: * Money problems * Founders alignments You at least have one of these problem, possibly two in the future. Only way to fix this is to re align and make sure you don't run out of money. Re align means discussion and demonstrating what works. A good book on how to conduct these discussions and gather clear data on the company (that shows afterwards if an action was good or not): Traction Good luck my friend, entrepreneurship is hard.

neilv 4y ago

Like others have said, talk with your co-founder, and consult your own lawyer to make sure you actually are a co-founder (and aren't getting pushed aside). You might also want to consider asking HN admins if they'd delete this post, since the ~28 employees will realize which company this is, and maybe you'd prefer they not read about a leadership disagreement/misunderstanding on HN. As we know, a big part of startups is constant learning, and today can be one of many learning moments, for you and CEO. If it turns out one/both of the cofounders has to tell everyone they made a mistake, IMHO that can double as a great culture message, about honesty, humility, psychological safety, and learning.

SQueeeeeL 4y ago
>If it turns out one/both of the cofounders has to tell everyone they made a mistake, IMHO that can double as a great culture message, about honesty, humility, psychological safety, and learning. If this CEO is already dropping thousands of dollars on beach vacations trying to pretend it's client outreach, I have a sense they're probably one of "the bad ones" who don't really have a ton of ability to contextualize their own actions and how they'd be viewed by others. Much more likely they'd double down on their own megalomania (but this is a forum post on a website, so it's obviously hard to say.)

eurasiantiger 4y ago

Honestly, this seems like a play to get rid of all the business partners. One plane crash to kill ’em all.

deleted 4y ago

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0xthrowaway 4y ago

tester756 4y ago

> It is announced that our business partners also will come I think "beaches" and "midnight parties at pubs" may be cheap way to make better&stronger connections with your business partners Alcohol despite all shitty things is good at getting people "closer"(?)

silvestrov 4y ago

> learned [...] on Slack [...] 10% of annual revenue This is a major red flag for me: it is such a huge expense that the CEO should have discussed this with his co-founder and other top-level mgmt before deciding on it and definitely before announcing it. This is not a lack of communication. This is a lack of respect of other people, thinking their input is irrelevant.

ada1981 4y ago

This is a leadership issue (yours) and a culture issue. I’d recommend you discuss this with your leadership coach and address the underlying communication and relational patterns of which this is a symptom so you can get leverage on the culture. If you don’t have that kind of support, happy to gift you a session or two from EarthPilot.org Great opportunity here to take deeper responsibility, to grow, and ultimately take your project to a new level.

r0b05 4y ago

You might need a mediator to bridge the communication gap.

dustingetz 4y ago

hey, you need a psychologist (expensive therapist) to talk to weekly - to process your own feelings as a foundation for communication with co-founder; you can offer couples counseling as well but that is less in your control - impactful communication starts by having your own affairs in order which is in your control.

throwawayacc2 4y ago

I think there might be a miss alignment of values here. It all depends on what you see the purpose of the company to be. Some people are dedicated to the company as an entity of it’s own and the product they build and the people working there. It is a valid and respectable way of looking at things. From your post, I have a sense you might fall into this category. Assuming you subscribe to this point of view, it makes sense to consider the retreat an abuse. Other people do not see companies like this. Instead, they see the company as an means to an end. A tool to use for enhancing financial opportunities and abilities and living a full, luxurious, rich and comfortable life. I believe this too is a valid and respectable way of approaching things. This is how I personally view companies and their purpose. With this point of view, a vacation expensed on the company is not an abuse. It’s the intended purpose. If you would like to see a decent portrait of this different philosophies I would recommend seeing the difference between Dany Crane and Paul Lewiston in Boston Legal. Of course it might also be the case this was a miss alignment of business strategy and not fundamental values. If he invited the business partners perhaps he saw it as a business opportunity to renew contracts, perhaps upsell more services, etc. Whatever the case might be, I think a very frank discussion between the two of you is in order. Business strategy should be aligned, yes, but far more importantly, fundamental outlook on what the company is for. Best advice I can give you is, don’t leave this unaddressed but address it in a professional manner in order to understand where the other co-funder is coming from. Once you understand his position you will be in a position where you can make an informed decision about your future and the future of the company.

nnoitra 4y ago

Come on, live a little. A small vacation of 6 months to Bora Bora never ruined a company! Enjoy. Life is short. Carpe diem.

ajl666 4y ago

Why didn't you sign an operating agreement from the get go? You engineer automatic, axiomatic, algorithmic systems but failed to engineer your most important system for success. You're screwed. This kind of 'partner' isn't.