Before You Pick a Business Partner, Read This: – “I know it’s messed up, but you’re out, and we’re doing this anyway."

Before you pick a business partner, read this: – “I know it’s messed up, but you’re out, and we’re doing this anyway."

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‍That sentence is branded in my memory.

This is my 100% true story, but names have been changed.

Years ago my wife made a new friend, and she asked what her husband Jason did for a living.

“Depends on the day! He’s addicted to startups and is always doing something entrepreneurial.”

“Sounds a lot like my husband,” my wife said. So they introduced us, and a month later Jason and I formed a company together.

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We hit it off immediately.

With an operating agreement in place, we were off to the races.

He wanted to bring on his long time friend Omar as an equal thirds partner, and I suggested we give it a trial run first.

We did, and Omar didn’t add much value, and Jason agreed.

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Omar’s resume was solid, but that was about it. He rarely came to the office or did things proactively.

Jason was embarrassed by this, but promised that things would change.

It was my mistake to not push back more, so Omar joined as a third partner anyway.

Things with Omar didn’t improve, but we continued on regardless.

All three of us invested the same amount of money, but time was unequally split, and it wasn't even close.

It didn't matter as much before there were distributions to go around.

We were busy building.

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Jason and I were in the office together daily, side by side.

Sales calls, hiring, firing, building, failing, fixing, winning and losing.

We had lunch together daily and our families became close.

Our oldest sons shared a birthday and became best friends.

We went on family vacations together.

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We were acting as 50/50 partners, but Omar the elephant in the room was always there.

It was awkward, because Jason was proactively upset that he was wrong about Omar, and would even confront Omar about this, but nothing changed.

Jason and Omar owned real estate together and worked out together, but cracks were forming.

They’d been friends for a decade.

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Despite my shorter history with Jason, I felt secure in that we were on the same page with regards to Omar’s lack of value.

I had assumed the value I was adding to the company offset the other relationship.

More on that later…

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Revenues were growing every month, and work was a blast.

Jason and I saw eye to eye on almost everything.

He was raising capital and providing experience and expertise I didn’t have, and I was managing the team, marketing and operating the business.

We were almost to break even - $80k/month.

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Omar would show up occasionally to check in.

Jason then landed a big fish. A major investor that wanted to invest $50m - about 10x more than we had raised all time.

By nature of our business, raising capital was a must.

They flew out from California to spend a week with us.

Omar played the role that his resume suggested, and the investors loved him.

Jason wasn’t forthright that Omar had been doing nothing, but had a “come to Jesus” talk with Omar that that had to change with this life-changing deal on the line.

Omar saw this capital injection as an opportunity to finally start doing something. Would it actually happen? I was doubtful.

I was uncomfortable with how some meetings with these investors were going. If Omar was about to start working on the biz full time, we could salvage this and I’d be happy.

If this was all a show, I wasn’t ok with the deal. The problem is, I wasn’t sure what the true intent was.

We had dinner with the investors on Friday and Jason went golfing with them the next day before their flight back.

The feedback? This deal was a lock, and $50m was 30 days away. We were all stoked. It was literally a life-changing opportunity.

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Monday was labor day, so we didn’t make it in to the office.

On Tuesday Jason didn’t show up and wasn’t answering my texts. This was very unusual, considering we spoke 10x/day and he was very responsive.

On Wednesday I showed up at the office and Jason wasn’t there again. He texted me “Meet me at Starbucks across the street.”

My mind raced.

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This either meant:

1) We were to discuss a plan to buy Omar out. With this new deal on the line, it’s time to crap or get off the pot.

or

2) I was out. There wasn’t room for all 3 of us in this new deal, and Omar won the investor dog and pony show.

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In my head, #2 was extremely unlikely. Remember as a kid when your parents were late to come home and you worried that they got in a car wreck, but also knew the chance of this was tiny? That’s how I felt about #2.

There’s no way I get pushed out, when I added all that value over the last 18 months.

Jason raised the money and I ran and grew the business. Omar did nothing. No way that happens.

But the feeling in my gut told me otherwise.

I crossed the street and saw Jason and Omar sitting outside Starbucks. Arms crossed, stern look on their faces.

My stomach dropped. It was like seeing my wife with another man. I knew that nothing good would come from this meeting. Why was he there?

I sat down on the opposite side of the table, both literally and figuratively.

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Jason gets straight to the point.

“Listen, we have this deal, it’s going to happen, and you’re out. There’s no room on the cap table. We are dissolving our company and forming a new one.

Your equity will go from 33 to 3%, you’ll play no active role, and will have to sign a noncompete. I know it’s messed up, I know you’ll hate me, but this is what we’re doing.”

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I sat for a while just staring.

Blank faces. Sunglasses. Emotionless, yet ashamed. I can’t describe it.

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The first thing I asked,

“What equity are you guys getting?”

“We don’t even know yet.”

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Lies. All lies.

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I didn’t swear, yell or scream. Dead inside, I pushed that metal chair away from the table, surrounded by millennials talking about expense reports and promotions, and walked back to my Tundra, literally speechless.

I drove back to the office and loaded up my stuff, not saying a word to my team, and walked out to never return.

“Who gets fired from their own company for no good reason?”

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I drove home in silence, staring at I-75.

My wife met me in the garage, a look of bewilderment on her face.

“What are you doing home so early?”

“Jason pushed me out of the company.”

I’ll never, ever forget that look. Like I had just told her our kid just got hit by a car.

I couldn’t talk. I went to my room, turned on the fan and stayed in a pretty dark place for a while.

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What happened next?

I called my lawyer, sued them and everything fell apart.

The company that we had built and just got to profitability days prior? It was liquidated for pennies on the dollar. Jason stopped showing up to the office. There was no operator.

The $50m deal with the investors? Dead.

Jason and Omar? Their friendship fell apart after an entirely different deal went bad between them.

Jason ultimately lost his own and investor’s money in the crypto crash when he went hard on a trading strategy.

And me? I thought my career and life was over, but time is very forgiving.

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I was depressed for a while, but got right back to work on other startup projects.

I took what I learned from this company and experience and leveraged it into cool opportunities.

In the end I made $-30k from this company and 18 months of my life. The opportunity cost was the most expensive.

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The night this happened I tucked my 8 year old daughter into bed and she asked

“What’s wrong?”

“It’s depressing thinking that I just wasted 18 months of my life, when I could have been doing anything.”

“Why does it matter, dad? Didn’t you tell me we are going to live again after this life? If so, why do 18 months matter so much?”

I had taught her that, but we forget, don’t we? That sentence changed my life.

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Believe it or not, Jason and I are friends again, but we won’t do another deal together.

He apologized and told me he knew it was wrong. He’s very impulsive, but a good person. Good people do dumb things sometimes.

I haven’t spoken to Omar since.

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I had to forgive them, but for selfish reasons. My life would have been consumed by that Starbucks meeting had I not. I also believe that we are punished more than the offender when we don’t forgive.

I made so many mistakes that could have prevented this, but this gave me a massive chip on my shoulder that still drives me today.

A business partnership is like a marriage, so treat it as such. You can get ironclad contracts, but they won’t prevent depression and lawsuits.

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Elon Musk once said "Running a start-up is like chewing glass and staring into the abyss."

I felt that.

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Running a solo startup is hard enough, don't make it even harder by partnering with someone you don't fully know and trust. Learn from my mistakes.

I've known my current business partner for 17 years, and it works perfectly.

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If this story helps 1 person avoid a similar fate, the time and energy it took to lay this all bare will have been worth it.

Thanks for reading.

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The Starbucks where it all happened.

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