9 Traits to Avoid in a Startup Partner or Investor
Every startup partnership starts with good intentions and ideally everyone works for a common goal that benefits all parties and engages your customer base to drive engagement, a loyal tribe of customer evangelists that spreads the product benefits by word of mouth marketing.
However, in reality this is the abominably verse reality. Many times, partnerships go south due to a multiplied of factors, not limited to the 9 traits listed below.
1. You don’t want a partner whom your employees hate
Someone lacking patience or social skills you have to pull the brakes on when it results in people hating your partner. That’s a big red flag. You are building a team of superstars with a startup that will form your key management group, not a team of hot shots driven by ego or good cop/bad cop roles.
Its pretty easy to spot a person your employees will dislike if you give them the opportunity to spend some time with a potential partner. Allow the prospective partner to spend some time and talk to your current employees, spend casual time in the break room with your employees, and at the end of the day ask your employees for their feedback.
Why do this, because happiness in the workplace is crucial! Unhappy employees are a waste of valuable talent and will not stay.
You are better off cutting a potential bad partner than losing valuable employees. A bad partner will slowly derail the company’s culture.
2. You don’t want a partner who has a lot of side projects
It is understandable that skilled entrepreneurs will have at least a couple of projects going on at the same time, but if your prospect partner is not willing to sacrifice or loosen their leash on some of their projects to give more time to yours, take that as a sign that they are just treating you as another side objective.
Look for a startup partner who can dedicate a majority of their time working with you towards the same common goals. In the same sense, you need to ask yourself what you are looking for a partner. Is it to bring in a new talent who will manage and cultivate a specific area in your company while you are busy on other parts of it?
Or is it so that you’ll have more time for yourself and other projects? If it’s the latter, then you might actually be the problem you are trying to avoid.
3. You don’t want a partner who has a big ego
Every partnership starts with a tamed attitude. Both sides will be measuring up the others ego, trying not to force an idea too much, trying to be careful. And that is natural. It’s part of the process of becoming a team. But the problem lies when a big decision needs to be made, and both of you are on the opposing sides of the decision.
For example, you may want to lower your product pricing in order to get more customers, who would otherwise look for cheaper, offshore solutions, but your partner is against the idea because that would include lowering the company’s standards and even its image.
4. You don’t want a partner who wants a 50–50 partnership
There are different kinds of partnerships. There’s the “money partner” who finances everything while the “working partner” acts on everything, but the control and assets in the company is divided. Then there’s the “equal” partnership where both sides pitch in their money and time and work. It doesn’t matter what kind of partnership you form, the 50–50 kind is a bad idea. This kills businesses daily.
60/40 is good, maybe even 52/48, but never go for 50–50. Being on the same “rank” is a recipe for disaster in the long run. There needs to be someone at the top who is at the very point of control and accountability, someone who has the final decision in everything. Even in sports there is a bigger authority aside from the teams that are playing, and that’s the referee. Without this, you’ll end up fighting if no one wants to compromise in order to reach a decision. There needs to be someone at the top, and there’s room for only one.
Here’s an example, a heartbreaking one, of a failed partnership. Having survived an all out assault by a Board of Directors member and Investor in a startup that was turning the corner that literally intentionally destroyed a business for his personal greed and narcissism. From experience there are traits that anyone looking to form a partnership or take on investors should be on the look out for. You can read more here: He stole my company, can he steal yours
5. You don’t want a partner who is all talk
I had a partner who was all talk, he would say how he was going to get the company a meeting with retail “C” stores, with his other business partners in Singapore and other and nothing ever happened. He would have us ship product samples to his office by the case load, to international locations and again, the business never saw any results, meetings or others.
What it did see what as it was turning the corner, this partner set out to take full control of the company by any and all means. Including, but not limited trying to force the managing member in my opinion to commit shareholder, bankruptcy and credit fraud including to using his law firm and personal lawyer to, in my opinion, breech their fiduciary duty and ethics.
Lawyers take an oath to uphold the law, not help clients break the law; they are the last stop. An attorney’s duty to a client can never outweigh their responsibility to see that our system of justice functions smoothly, the integrity of our justice system depends on it. Counsel who become obsessively preoccupied with attaining a goal at any cost and who allow the ends to justify the means, flirt with disaster.
The judicial system requires a moral brake to curb their competitive urges and that moral brake is the recognition that they are “officers of the court”. When this fails, we, collective as a society lose.
6. You don’t want a partner who is driven by greed
greed noun \ˈgrēd\ : a selfish and excessive desire for more of something (as money) than is needed
kill verb \ˈkil\
1 : to deprive of life : cause the death of
2 a : to put an end to
b : defeat, veto
c : to mark for omission
d : annihilate, destroy
3 : to cause extreme pain to
4 : to consume totally
Despite the mythical words of Gordon Gecko, greed kills.
Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction. — Erich Fromm, Escape From Freedom
A partner that is motivated by greed begins to get dollar signs for eyeballs is one to avoid at any and all costs. Their greed will be their sole motivation and with such, they lose all sight of what is right for the business, the employees, the customers and eventually themselves.
The man who has won millions at the cost of his conscience is a failure. — B.C. Forbes
Brian Tracy stated it best, “Successful people are always looking for opportunities to help others. Unsuccessful people are always asking, What’s in it for me?”
7. You don’t want a partner who is inconsistent
Startups are always on the line. No time or resources can afford to be wasted. If your partner decides on doing one thing today, and another the next day, you should be worried. It’s okay if you have enough resources to “waste”, sometimes it is inevitable, particularly if you are aiming for innovation. But while you’re still in the process of figuring things out, you need to be hyper-laser focused.
That’s also probably the reason why you are looking for a partner, so that two people can focus on two important and bigger things at the same time. This drives efficiencies.
Its not always easy to spot an inconsistent person. However, there are signs to be on guard for:
- Have they jumped from one project to another?
- Have they ever worked with a team and grown a business, a business unit or a sales district or production or marketing team?
It would also be prudent to ask for character references that you can contact and talk to. Think of it as a feedback gathering exercise. If your would-be partner is consistent, things will check out.
8. You don’t want a partner who is bad at dealing with people
It’s a big world out there and there are plenty of people who have no idea what is culturally acceptable and what is not when dealing with other people. For example, a friend of mine told me how their company’s new partner shouted at him while they were at a public place. Being of a religious faith that its obvious he definitely stood out and people were looking at him strangely. This made him very uncomfortable.
The point here is, if your prospective partner doesn’t know how to deal with people, that’s a big red flag. If he can’t treat people right, it’s going to hard to get people to like him. If you are the only person this person respects, but he doesn’t extend that courtesy to people who work with or under you, that’s a warning sign to go find another partner.
9. You don’t want the person who falsely believes that their title should be CEO without contributing to the daily business effort
Mr. CEO feels compelled to tell everyone that he is a CEO within 30 seconds of meeting him — even if his company is worth less than the paper on which his business card is printed. He loves bragging that he sits on “x” number of boards, he relishes that his name written in fancy fonts, and stacks of luxury car magazines neatly piled on a coffee table in plain sight of customers in his office. He drive a car worth several hundred thousand dollars, live in a Park Ave condo and brags about how his father set himself up in a business that pays him several million dollars a year with no effort. The only thing he doesn’t seem to like: real work.
Successful companies are not built on titles, talking and toys. Keep away from selfish, egotistical, narcissist individuals who want to talk the talk versus walk the walk.
My 1 minute introduction: I spent he last 20+ years in sales and marketing with consumer products, pharmaceuticals and health technology. My career began with Hasbro, and moved to the pharmaceutical titans Bristol Myers Squibb, Novartis, Abbott Labs, Astra Zeneca, and then to the Health Tech industry with First Data Bank and American Express. In 2009, after a traumatic freak accident I founded a company in my garage, that would become Arctic Ease, US based manufacturing company of A consumer product. I resigned in September, 2013, after William Cohen of Dillon Yarn — Board Member and Investor in Arctic Ease lead the effort and attempted to in my opinion and supported by documentation to force the company into a bankruptcy with him as the staking horse. When this was rebuffed (outright refused), through his attorney, Alan Rubin, Cole Schotz, I was offered a bribe to put the company into a bankruptcy for 7% of his newco to rid the company of a shareholder that Cohen had offered $1.8 million for his family shares and apparently did not want to pay, to not pay trade and other creditors. Again, rebuffed, Cohen and Rubin then proceeded to force the company down where Cohen then bought the assets for $3 million at an Article 9 sale and operates the former company under the trade name Arctic Ease operated by Gawi, LLC. You can read the details here: He stole my company, can he steal yours?