In a startup, the death of a cofounder is unthinkable. Those of us who belong to the startup world know that team members are like family. Sometimes they are family.
Like a backpacking trip in the wilderness or a whitewater adventure, the startup expedition brings people together. In a startup, everyone counts. Each success and each failure is shared.
This is why the death of a co-founder ripples throughout a startup team, blurring the imaginary line we draw between ‘work’ and ‘life’. When a friend and co-founder is facing death, the work-life distinction doesn’t hold up. The tragedy can ruin a team—or transform it.
I met Ari Ramezani, my cofounder at Phone Power, in 1987 while we were undergraduates at California State University in Northridge. We built our first business together in 1994 as the cell phone and pager boom began. Afterwards, we built a series of successful companies. And finally in 2006, we started Phone Power.
Together, we felt like an unstoppable force. Chemistry is sometimes underrated, but it can mean the difference between a startup with a multi-thousand percent growth rate and a startup that crashes before takeoff. In startup partners, we look for tenacity, grit and vision, and Ari Ramezani had all three.
In July of 2012, at the age of 44, Ari was diagnosed with stomach cancer.
In crises, all businesses—mom and pop startups and Fortune 500 companies alike—seem paralyzed. People want to see how a problem "plays out." But when your cofounder is terminally ill, that doesn’t work.
I brought in a group of 5 managers and broke the news to them. From then on, we kept them up-to-date on every piece of news. We did not formally notify employees yet.
We wanted our managers to take on Ari’s responsibilities and learn from him. We didn’t know if his cancer was terminal yet, but we treated it that way. Even in sickness, Ari’s heart was still in the business and he wanted it to succeed. From his hospital bed, he was more than willing to mentor those who would take over his duties, despite what that suggested about his own mortality.
At the time of Ari’s diagnosis, there was no buy-sell agreement in place. We’re relatively young and weren’t expecting this. I can’t tell you whether you should or should not have one. That’s a personal decision.
By fall of 2012, Ari’s prognosis was looking bad. We put a succession plan in place. With our board of directors, we decided that our Chief Operating Officer would succeed Ari as a Managing Member. It was also in Q4 that we announced to all 95 of our employees that Ari was terminally ill.
We could announce his illness because we were ready for one of the tougher conversations: telling our bankers and lenders. In a series of meetings, we notified them of the diagnosis and impending change in leadership, and our plans to make sure that Phone Power continued on its strong growth trajectory. We knew what Phone Power meant to all 95 of our employees and their families, and we were determined to preserve it for them.
Our lenders expressed continued confidence in the business, which was a relief.
We brought people into the know in a measured way. Such conversations are not easy. The sadness of death juxtaposed with the immediate concerns of business is a volatile cocktail of emotion. It can spook employees, investors and lenders. Under such conditions, people feel guilty for not believing in a business. Death simply makes it hard to see business as business.
Preparation for this type of event does not begin when a cofounder gets sick—it begins on the first day of a startup’s existence. The best succession and financial planning is nothing compared to the power of values and company culture. As startup founders, we like to think of ourselves as vital to our own businesses. Yet, to build such a strong culture and management team that we become unnecessary is a far better testament to our leadership than building a company that falls apart without us.
Towards the end, while Ari was stuck in the hospital, we learned as much as we could from him. We also purchased a "key man" insurance policy on me to insure that investors and lenders would be compensated should I die too. We had to be humanly and financially responsible all at once.
On January 11, 2013, Ari passed.
For Ari, for his family and friends and for our company, this was a rough episode. But with all tragedies, there was also a silver lining.
Our desire to learn all that we could from Ari motivated us to really listen. And when you truly listen, you ask critical questions about everything. We were pushed to evaluate how we handled all aspects of the business and ask if there was a better way to do things, because once Ari passed, we wouldn’t be able to ask anymore. Ari’s death made learning and change urgent.
Ari’s death brought our entire team together. By sharing in this tragedy, our managers developed a stronger bond than what you might normally see at startups. Over eight months after Ari’s death, our employees have still preserved his writing on white boards throughout the office.
Ari is a rallying for our organization and a constant reminder of just how precious time is. When Ari’s name comes up, he reminds us that we choose to be at work each day—we want to do what we are doing. We strive to honor Ari by showing that through our actions.
You cannot prepare yourself for a tragedy that takes your co-founder, but you can build a company and culture with the strength and balance to handle any crisis. You can, despite the sense of crisis, take measured steps to be accountable to your employees, investors and lenders. And ultimately, you can learn what there is to learn from dealing with death and business at the same time.
—Jim Murphy is Co-founder and CEO of Phone Power, a VoIP phone service provider based in the United States.
[Image: Flickr user Jimi Lanham]