One luxury of being your own boss is choosing the people you work with. Just ask the folks at Google, Yahoo! and Boston Scientific. These are but a few large companies launched by friends who took a chance on working together.
But the adage "Don't go into business with friends" exists for good reason: Great friendships often do not make for great business partnerships. In many cases, both bonds end up in tatters.
For those still willing to make this bet, the best course is to hammer out the sticky ownership issues early on, when times are good and the friendship is strong.
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Robert Wyman and Salim Ismail should have followed that advice. The star-crossed business partners began their friendship as roommates on Manhattan's Upper West Side. Both were experienced computer jocks who had never truly cashed in: Wyman had a hand in designing the Lotus Notes spreadsheet program, now owned by IBM; Ismail was a mid-level technology consultant and frustrated entrepreneur.
In 2002, a year into their living arrangement, Ismail convinced Wyman to launch a new business--called PubSub--based on an idea that Wyman says he had been mulling for two decades: a Web search engine that would flag future references to certain search criteria, such as earthquake notifications or Securities and Exchange Commission filings.
The key selling point was immediacy: While Google Alerts and other systems ran periodic checks for new related content, Wyman's program notified users the instant a reference appeared. In theory, PubSub would make money by running searches on behalf of companies, or by licensing its technology for private use.
Wyman, now 53, and Ismail, 41, kicked in a combined $250,000 (Ismail's $200,000 represented his entire net worth). Wyman, the brains behind the code, initially received 60% of the equity, while Ismail got 40%.
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Then came the conflict. Wyman says Ismail wasn't willing to dilute his ownership stake to raise more capital, while Ismail says that Wyman was too prickly and impetuous for investors to work with.
Things really got messy when a well-funded company called KnowNow, which sells information-tracking services, inquired about a potential merger. Ismail thought the company's weak cash position would lead to a lowball offer; Wyman, on the other hand, thought the two companies would be a good fit.
The big problem: Although Wyman began the venture as controlling shareholder (and even after some dilution still owned the largest single chunk of the company), when the time came to make a decision on the merger, his hands were tied.
A small clause in the company's shareholder agreement gave each shareholder one vote, so Wyman's 38% stake didn't mean much when 28 out of 35 shareholders (many of them Ismail's friends and family members) voted down the merger. The situation blew up in public view this summer when Wyman wrote a blog post about the spoiled merger.
Don't wait for the happy ending. That $4 million is down the drain, and PubSub can't even afford to file for bankruptcy. No one has filed suit--yet.
Meanwhile, Ismail, who resigned from PubSub's board last March, says he is in the process of starting up three Internet companies, and that recruiters are knocking down his door.
Wyman says he is looking for work but would like to keep PubSub alive. "This is one of the most painful experiences I've gone through in my life," he says. "Second only to my divorce."
