The divorce dilemma

It’s not a bad idea to see how married co-founders will keep the company strong and robust even if they split up


Co-founders should not allow even a breakdown of their marriage to affect the functioning and stability of their company. Photo: iStockphoto
Co-founders should not allow even a breakdown of their marriage to affect the functioning and stability of their company. Photo: iStockphoto

The news late last month that the founders of Bengaluru-based decision analytics firm Mu Sigma had got divorced generated much conversation among the married couples I know who run businesses together.

Starting out with your spouse is becoming a popular model for co-founding teams. The benefits are many: Shared purpose, passion and priorities can make for an enriching, fulfilling life.

But, as divorce rates spiral up, there can as easily be trouble in paradise. Few couples, however, say that they talk frankly about how they would handle the messiness of a divorce, not just as spouses or parents but as business partners. Most of them confess, though, that this is their worst fear: an unfortunate outcome that is not only a painful personal trauma but a massive professional challenge as well. Yet they rarely voice these concerns openly—and hardly ever to each other.

An entrepreneur who runs a technology venture with her husband recalls that while interviewing senior candidates last year, one person did ask them about the future of the company if the co-founders were to get divorced. “With great confidence, we told him not to worry because that would never happen. We ran a company together because we not only loved but respected each other professionally immensely. Honestly, it was a cop-out of an answer,” she tells me.

At the time, she says, they were determined to attack the question head on; to talk about it and lay out a road map. But 11 months after the interview, she confesses they still haven’t got around to having this conversation.

The unhappy possibility of a divorce isn’t pleasant dinner-table conversation. It doesn’t make for a great boardroom strategy session either. In any case, this businesswoman adds, entrepreneurs are more likely than not to be optimists. To think that the business might not survive is in itself a no-go zone. For a couple who are bonded and aligned enough to be partners in business too, confronting the possibility of an end to their marriage is near blasphemy.

Yet divorces happen, and the impact is felt beyond the home. It can spook investors and employees alike.

A Mumbai-based venture capitalist, whose portfolio includes two firms with married spouses as co-founders, says his investees might be surprised at how often he worries about the health of their marriages. In high-growth companies, tremors and cracks in the leadership team—whether spouses or not—can be cataclysmic. If they are married, it’s like having two people of the company leadership battling each other instead of the competition.

With married co-founders, the hope is that they will avoid the path of mutual destruction and not sabotage the functioning of the company. If they have built a thriving business together, chances are that pragmatic, wise entrepreneurs would do their best to do right by the company.

Even if the issue of ownership gets resolved, it can be an emotional landmine not just for the couple but also employees, investors and other stakeholders. It can fracture or, at the very least, test work dynamics, especially if the company isn’t very large and the leadership team works out of a single location.

Aditya Tiwari, a partner at the legal firm New Delhi Law Offices, says couples who own businesses together should have a “pre-nuptial” agreement on separation in place before they set up a company. It might be considered intrusive and paranoid, in much the way many people baulk when asked to think about making a will, but this is important, he says.

Various scenarios can come up. For example, the separation may or may not be amicable. It could land the couple in long-drawn litigation—how do they think about alimony, or the value of their personal assets, for instance? These aspects should be covered in the agreement drafted, says Tiwari.

As lawyers or wealth advisers often say, it’s better to envisage a situation, however unlikely it may seem, than to be caught unawares. Smart spouses who work together might want to listen carefully to that advice. Even as they build a life—and business—together, it’s not a bad idea to see how they’ll keep the company strong and robust even if they split up.

Surviving Start-ups focuses on the stories of the people (parents, siblings, spouses and friends) who make up an entrepreneur’s world.

More From Livemint