Prenup for a Startup 3 - Money for what!?%!?

Image: Frederica Campanaro

The co-founder in front of me was shaking his head in disbelief as he retold the story. He kept on swearing and kept apologising for his language, but he simply had no other vocabulary to express just how taken aback, sideswiped, incredulous and exasperated he was by the purchase of his co-founder. The "mad person who did't understand the first thing about budgets", bought a painting of several thousands of rands for their new offices... Not chairs, or desks, or a marketing platform, or hardware, or even a new dev person. A f...king painting, he said almost in tears.

Arguments about money, where and how we spend it, how we earn it or take care of it, when we should spend it and on what, are never really about money. Money is just a metaphor for power and meaning and is loaded with our history and our past fears, our dreams and current desires as well as our ability to have the freedom to control the outcomes or feel inadequate because we can't.

Recurring arguments about money are one of the main reasons for divorce. Recurring arguments about where to spend the money accounts for 29% of arguments between founders. If you want to understand arguments about money better, you have to look at what is behind them.

1. What are your money stories?

These are the recurring themes and beliefs you tell yourself and the people around you about money. On the surface they sound like: "Money doesn't grow on trees. Look after the pennies and the pounds will look after itself. You have to save for a rainy day. You can always get more money. The only way to save money is to not spend it. Money is there to be enjoyed. Money makes the world go round. I'm a trust-fund baby, I never have to care about money at all. You have to work hard for your money. Rich people are selfish. Being poor is noble. " You get the idea.

A deeper layer could relate to fear, shame and guilt and generally becomes more pronounced during times of stress. Your parents were really bad with money and you constantly had to move house because they didn't pay the rent, so you are obsessive about owning your own property and knowing where every cent goes. Your dad lost his business because he left the accounting to someone else who systematically cleaned him out, so you trust no one with your money. Your parents always argued about money, so you keep quiet about your partner's spending because you are scared of losing him.

You collect your money stories and beliefs in your childhood and they generally set the tone for your behaviour with money unless you become conscious of them and decide to keep, or change your beliefs. Your money stories have a direct impact on how you interact with money. You and your co-founder might have very different money stories and these unspoken beliefs have an impact on the decisions you make in your business.

2. What is your money personality?

Each of us have a money personality that built up over time; informed by our money stories, beliefs, values and experiences. I like the definitions of Ann Wilson, The Wealth Chef for our money personalities. The four core money personalities can be described as:

• The Spender

• The Saver

• The Avoider

• The Expander

I like to add a fifth one: The Planner. For me the planner is a little more in the present than the expander and has elements of trust, belief and dreams. I think that if founders didn't trust the bigger picture and that funds will flow from somewhere they might as well go and work for mundane money that would be much easier to manage or mismanage.

In my Financial Confidence training sessions (money is a big source of conflict and I believe that if you get a better understanding of the cause you limit the conflict) I often found that Spenders and Savers are in a relationship. Avoiders gravitate towards Expanders or Planners. If you find two Savers in a relationship they agree on how not to spend the money, but often at the cost of themselves.

How and on what you decide to spend on are influenced by your money personality. It doesn't matter if this is in a personal relationship or in a business relationship. If you and your co-founder often argue about where to spend money it might be worth your while to get more insight about your money personalities and how these differ or complement each other.

3. What are your values and priorities?

Defining core personal values is key to your relationship with money. It's not only about integrity, honesty, trust, respect, accountability and responsibility. These values should form the basis of any business relationship. What else is most important to you in life? Freedom, making a difference, joy, beauty, status, experiences, health, mental wellbeing, family and friends? Do you know what is most important in your co-founders' life?

What you value and what you prioritise to spend your resources on can bring co-founders closer or pull them apart. Where and how you spend you money is a clear reflection of what matters most to you and the same things might matter very little to other people. The co-founder who bought the painting values beauty, art, craftsmanship and believes that beautiful spaces enhance creativity and impress customers with style and attention to detail. His "head-in-hands" business partner would happily work from anywhere as long as there is wifi and coffee and couldn't care less about a pretty office space.

4. Which stage of life are you at?

Priorities and values are not static they tend to change as you go through different experiences and as you get older. Where you are at in your life and in your psyche informs what is important to you and how and where you spend your money.

• Being single, working two jobs while trying to raise a series A and thinking about a meal that doesn't come out of a packet is very different from being married with a baby on the way.

• For a co-founder who has the luxury of a stable wealthy family it is almost impossible to deeply understand the circumstances of his co-founder living in a township and taking care of his grandmother.

• If you are a founder in your late sixties and your genealogy is not favourable, you are in a different headspace from your co-founder who has just turned 40 and runs ultra marathons for fun.

• A close to retirement age founder, with a family depending on her, who sees this business venture as her last chance to save money, is much more careful about spending money than her co-founders who are single and in their late thirties.

• You've just had a dark night of the soul and are questioning everything you thought you valued, including our impact on the earth, this has a profound impact on how you choose to live your life from now on, your co-founder is looking at a second property.

Where to from now?

If you and your co-founder are arguing about where to spend money the following suggestions might be helpful to understand each other better and make financial decisions that both of you are comfortable with:

1. Have a discussion about your money stories, personalities and values. This will give you insight into what each of you find important and how that impacts your decisions a.bout spending in the business

2. Jointly decide on the values of the business and how these impact where, how and when you spend the money in the business.

3. Draw up a list of priorities for the business to spend on in order of importance as money come in.

4. A nice exercise to do is to give each founder a pie diagram and they must allocate the percentage spend and on what, without talking to each other. Then compare all the pie diagrams to see how aligned or far apart you are on spending priorities. Use this as the basis for an in-depth discussion on financial expectations.

5. Put financial controls in place so that no unauthorised and irrational spending that leads to frustration and resentment can happen.

6. Understand that money arguments are seldom about money and learn to listen for the underlying reasons.