You're navigating a dispute between founders and the board on exit strategy. How can you find common ground?

A prime example of achieving alignment is the recent decision by Wiz, the cybersecurity firm, to reject Alphabet’s $23 billion acquisition offer. Instead of accepting a lucrative buyout, Wiz chose to pursue an IPO, reflecting a strategic move to retain control and drive further innovation. The decision illustrates the importance of balancing vision with financial objectives. By acknowledging the founders' attachment to their company and the board’s focus on financial returns, you can find common ground. Highlight shared objectives, such as long-term growth and market leadership, to craft an exit strategy that satisfies both the founders' desire for legacy and the board's need for financial gain.

Navigating a dispute between founders and the board on exit strategy requires a nuanced approach that fosters collaboration and mutual understanding. Start by acknowledging the differing perspectives, as founders may prioritize vision and legacy while the board focuses on financial returns. Facilitating open dialogue is essential, where each party articulates their concerns and goals transparently. Identifying overlapping interests, such as a shared desire for the company’s long-term success, can form the basis for compromise. By focusing on common goals and employing a solution-oriented mindset, you can align both parties towards an exit strategy that satisfies all stakeholders.

Each side needs to start with clear communication of expectations. The first step is finding a shared vision to come to an agreement. Founders are emotionally vested in the company and if they are at this point it is clear the board has a different view and direction. Finding where there is common ground to come to a resolution is key to resolving their differences.

Effective mediation hinges on understanding the different priorities of founders and the board. Founders are often emotionally attached to their company, focusing on legacy and team welfare. The board, in contrast, prioritizes financial returns for investors. To mediate successfully, acknowledge these distinct perspectives. Foster open dialogue to address the founders' concerns about preserving the company’s legacy and the board’s need for financial gain. By finding common ground, such as a shared interest in the company’s long-term success, you can develop an exit strategy that respects both the founders vision and the board’s financial goals. Balancing these priorities requires empathy, creative solutions, and a willingness to compromise.

To resolve a dispute between founders and the board on exit strategy, start by understanding each party's goals and motivations. Initiate open dialogue to ensure all concerns are voiced and acknowledged. Explore various exit options that could potentially satisfy both sides, such as selling, merging, or IPOs. Assess the risks associated with each option to determine the best path forward. Identify any leverage or compromises that could be used to align interests. Finally, work towards building a consensus by finding common ground and crafting a strategy that balances the needs of both founders and the board.

Sometimes brining in a 3rd party professional lowers the temperature of the conversation as the professional can help to remove the emotional element of the conversation and allows the parties to find common ground.

Encouraging open dialogue is essential for resolution. Creating a safe, non-judgmental space allows both founders and the board to express their views and understand each other’s positions better. This transparency helps identify shared goals and dispel misconceptions, bridging gaps in understanding. By focusing on common objectives and addressing misunderstandings, mediators can facilitate a resolution that respects both parties' interests and fosters future collaboration.

One of the most important lessons from the book ' Seven Habits of Highly Effective People ' is Listen to Understand. This principle is the key to navigate any conflict or to tackle different opinions. Listen to the concerns of both the founders and the board first Build your data points Present your data points to all stakeholders with your perspective and pros and cons of all options available. Remember while exit strategy may look good on short term it may not be the best long term option So keep your mind open, listen to all, focus on factual data and then present all options available with your suggestions too.

Sometimes you have to look into the future for options. For example, having the founder give up something today for the promise of a buy-out on the next round of funding.

Exploring all exit options is crucial for reaching a compromise. Each route—be it an IPO, acquisition, or merger—offers distinct benefits and challenges. To support this process, it’s important to present a detailed analysis of each option, considering factors such as financial impact, strategic fit, and long-term implications for the company. By providing a thorough comparison, you enable both founders and the board to make informed decisions that align with their respective goals. This approach not only clarifies the potential outcomes but also helps in finding a balanced solution that addresses the diverse interests of all parties involved.

In getting to a resolution each side needs to determine the risk of taking certain actions. Does removing the founder alienate investors who were brought on by the founder. By staying in a particular role is the founder hurting the company financially? Each side needs to make various assessments of the situation and the consequences of their actions.

Risk assessment is essential in evaluating exit strategies. Each option—IPO, acquisition, or merger—brings unique risks, such as market fluctuations with an IPO or potential cultural mismatches in a merger. It's crucial to assess these risks in relation to the risk tolerance of both the founders and the board. By thoroughly evaluating and communicating these risks, you can guide the discussion towards an exit path that balances risk with reward, ensuring that the chosen strategy aligns with the long-term objectives and comfort levels of all parties involved. This comprehensive approach facilitates a more informed and collaborative decision-making process.

You're navigating a dispute between founders and the board on an exit strategy. How can you find common ground? Different stakeholders hold different priorities. Often, the dispute between exit strategies is not about the methods(IPO, M&A, etc) but the profit, risk, and commitment are different. According to Carta 2024's information, startups get acquired by companies with fewer than 10 people in their 2-3 fundraising rounds from 2022-2023... However, each startup has its own situation and environment. Understanding their priorities from different perspectives could help find common ground. Before successfully exiting, everyone is in the same boat. There is no winner on a sinking Titanic.

Usually when you get to this point the board no longer wants to work with the founder. Unless the founder has built in voting rights or other safeguards for their interest, the board will have the leverage in the negotiations. It is all about who has control and what the other part is willing to pay for that control (this is not always monetary, as there are non-monetary controls like being able to block certain board actions).

Identifying leverage points is key in negotiations. Founders’ deep business knowledge is a strong asset, while the board’s authority to approve or block deals provides them with significant leverage. Understanding these dynamics helps in guiding both sides toward concessions and reaching a mutually beneficial agreement.

The best strategy is to avoid such conflicts and build consensus on exit strategy BEFORE the investment. Too often investors and founders overlook topic assuming that such consensus will be built down the road and the interests of all parties will be perfectly aligned.

I think that alignment of interest is one of the key elements that people should have in mind when drafting contracts. So ideally the discussion about creating a model where all interests are aligned happens at the point where a new management takes over and not at the point where the money for an exit lies on the table.

Building consensus is very heard. There are reasons why the parties are in this position at this time. Ultimately one or both sides are going to be unhappy with the results. The sides need to work together so that the ultimate resolution does not harm the company.

Building consensus on an exit strategy involves aligning the founders' vision with the board’s expectations. Founders should clearly communicate their long-term goals, while the board focuses on maximizing value and balancing risks. Open dialogue and consideration of external factors can help find common ground. By prioritizing long-term benefits over short-term gains, both parties can achieve a successful exit that satisfies everyone involved.