Brett Martin – Fix Your Partnership or Quit It

BIO: Brett Martin is co-founder of Kumospace, the virtual HQ for remote teams, and Charge Ventures, a pre/seed VC based in Brooklyn, NY.

STORY: Brett started a company and got just 20% ownership; the rest went to investors who eventually walked away, leaving the business to crumble.

LEARNING: If you’re in a partnership that’s not working, you must push it to a conclusion. Complaining won’t resolve your problems. If you can, bootstrap your company instead of taking money from venture capitalists.

“A good business partnership is like a relationship. You have to like the person, respect and trust them.”

Brett Martin

Guest profile

Brett Martin is co-founder of Kumospace, the virtual HQ for remote teams, and Charge Ventures, a pre/seed VC based in Brooklyn, NY. He also serves as Adjunct Professor at Columbia Business School, where he teaches data analytics. He loves you.

Worst investment ever

Brett had just come off his first failed startup. He moved back to New York City, where his friend connected him with a job at an early-stage venture capital fund. The fund owners said they were looking to turn the fund into a venture studio, where they build and invest in companies. Brett wanted to start his own company, and he figured he might as well do it with the fund.

The fund gave Brett a pretty lousy deal on ownership. He owned just 20% of the company he founded. He got funding of $150,000 for giving up 80% of his company. Brett took the money and got the company up and running. He built a proof of concept and started pitching to venture capitalists. A couple of venture capitalists loved his pitch and had another meeting with them. Brett was able to raise a million dollars in funding. He launched his company, and it was off to a good start. The business received 300 press mentions in six months.

Brett had a problem, though. He had a totally fractured investor base. Some people had put in millions of dollars and owned 10% of the company. Others put in a couple of $100,000 and had 60% ownership. Brett had no control over his company, eventually bringing down the business.

At the time, the company had millions of users, and Brett wanted to keep going and figure out how to make it work. Unfortunately, all the funding dried up, and all the investors walked away. And so Brett was scrambling to raise money just to keep the company afloat. He did that for six months until he finally got someone willing to recapitalize the company and start the whole thing again. All Brett needed to do was get his investors to agree to that deal. They wouldn’t take it, and the entire thing blew up. Brett and everyone who had invested in his company lost all their money.

Lessons learned

• If you’re in a partnership that’s not working, you have to push it to a conclusion.
• Complaining won’t resolve your problems.
• If you can, bootstrap your company instead of taking money from venture capitalists.
• Lean on your legal counsel for advice on the best deal to take when building a partnership.
• As an investor investing in a business owner, always ask yourself if this is this someone you want to work with for the next ten years. If not, don’t give them your money.

Andrew’s takeaways

• Identify your problems and solve them.
• Cash flow is your ultimate source of value.

Actionable advice

Think long-term when forming partnerships. Don’t take the deal just because it’s there or because someone’s dangling money in front of you. Or just because you’re pressured to work with people you’re not excited about. Always hold out for people that you love and respect.<