If one of your resolutions for 2022 is to start that business you’ve always dreamed of, don’t think that you can avoid the big question of titles. When you’re starting out, it might feel difficult to be so formal to decide who is the founder or CEO. Unfortunately, some of the biggest disputes occur over money and/or power. As you grow, the less distinction your organization has between people’s duties and roles, the more conflict you’ll have. Working through these decisions before you bring more people into the business can help you avoid many problems.
Titles aren’t about ego
When you work for a large organization, the structure of each position is already built in. In a startup, you have to create that structure. Your engineer shouldn’t be responsible for bookkeeping, nor do you want two people handling the same duties. It just creates confusion and resentment. By defining people’s roles, everyone is on the same page and knows what they are responsible for.
Titles can prevent legal issues
Conflicts over titles can cost a startup a lot in legal fees when someone sues. Remember the Winklevoss twins and Zuckerberg? They settled for $65 million, a mix of Facebook shares and cash. Snapchat ended up settling with Reggie Brown for $157.5 million in a lawsuit against the co-founders. These may be high-profile cases, but one search of co-founder lawsuits brings up hundreds, if not thousands, of other cases. Pinterest was accused of not paying one of its co-creators. Square was sued by Robert Morley, who alleged he should be a co-founder of the company because he invented the card reader but was not included on the patent. Win or lose, the costs of defending legal actions goes far deeper than finances.
Titles are confidence
When presenting to investors, having clear titles shows the investors that you and your co-founders can have tough conversations about who owns the company and its intellectual property. It demonstrates that you have a solid foundation for your business. Even if you never need investors, titles give your business structure.