“How my cofounder robbed me of half the cash of our startup”
Relationships between startup cofounders aren’t always harmonious, but this story goes well beyond that.
Tor Gronsund is an Norwegian enterpreneur who just wrote a gut wrenching account about the time his startup was robbed of half its cash – by his cofounder. He confirmed to us on Twitter that it was based on his own experiences.
The “robbery” started when his cofounder resigned from the board, he writes. The cofounder had never been an employee of the startup, instead preferring to be paid as a consultant by the company: “Despite several attempts at formally hiring him, he had insisted on not being employed. Rather, he wanted to function as a board member and a contractor. Obviously that earned him more money and flexibility.”
After he resigned, writes Gronsund, he proceeded to demand half the cash on the company’s accounts:
Leaving that meeting, on the way out, in the parking lot, my co-founder loudly left the rest of the board with an off-the-record, oral preposition: “Pay me 30 per cent of the company’s liquid cash by midnight, or else I want 50 per cent.”
Seriously? It was just sad, and I kind of felt sorry for him. Even though he had resigned at free will.
A member of the board then proceeded to give the cofounder access to the company’s bank account, without informing the board, the CEO or the owners. After which the cofounder transferred half the cash of the company out.
WTF!?, I cried as I discovered that half of all the company’s cash equivalents suddenly had been withdrawn from its bank account.
But when I found out who had made the withdrawal, I realized. We had not been screwed. We had been robbed. Investors’ money, my face. It was gone.
After the withdrawal I received a fictitious invoice pulling out administrative and managerial hours far beyond my knowledge.
After careful deliberation, Gronsund’s company decided not to pursue the matter in the courts, because it would be just too expensive to try to reclaim the money: “We simply couldn’t afford it.”
Lessons learned, says Gronsund:
- Follow your gut. “Why didn’t I listen to people hinting that something wasn’t right with this guy, when I kind of already knew that?”
- Get the administrative and legal stuff straight. “When founding a company it often seems convenient to focus on product development and marketing over administrative and legal. When things get tougher, these “trivial things” backfire.”
What’s your worst co-founder story? Tell us in the comments or send us mail.
Read the whole story on Tor Gronsund’s blog.
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