Love and equity in Silicon Valley
Adding your romantic partner to your cap table comes with lots of implications.
Written by Randa Sakallah
Illustrations by Twisha Patni
When Madison Campbell, the 26-year-old founder of Leda Health, first started her company three years ago, she was dating a fellow startup founder. He helped her conceptualize her ideas and acted as a mentor while she ramped up. But he didn’t do it for free. According to Campbell, her then-boyfriend requested 5 percent of her company in return for his support. And because she felt inexperienced and wanted his help, she obliged.
So Campbell incorporated her company using Gust and immediately allocated 5 percent to her boyfriend. They signed the paperwork and Leda was born.
About two and a half years in, that power dynamic began to shift. Campbell had built relationships with new advisors and mentors and had stopped asking for her boyfriend’s advice. She also accumulated a social media following that she leveraged to build a network that rivaled the one her boyfriend had built after his time spent at Stanford’s Graduate School of Business. She believes at least part of the reason she was able to amass social capital so quickly is due to being an attractive woman on Twitter, which she says became a problem in her relationship.
And so began the slow demise of their romance, poisoned by their increasingly competitive dynamic and the mentor-mentee imbalance that had quietly come with her boyfriend’s original stake in her company.
Like many founders, Campbell was dealing with a novel problem, one that’s only emerged recently with the advent of venture-backed startups — romantic partners can be an easy source to tap for funding.
And Campbell's partner was dealing with a situation that many romantic partners of founders are met with. Access to high quality investment opportunities can be difficult to come across and dating the founder of a hot company can get you into a competitive round.
But deciding to mix love and equity is not always the right choice. There are several factors to consider: how much cash you have, how confident you are in your relationship’s longevity, and how well you can set work and life boundaries, to name a few. And taking funding from your partner comes with lots of implications.
Some, like Megan Fenner, 26, the founder of on-demand styling site Farloe, handle the potential issues by refusing to raise money from their significant others altogether. Fenner explains that it’s difficult to differentiate between the expectations of romantic relationships and those of investor relationships. “I think there's a really small group of people who can truly separate personal and professional lives,” she says.
Fenner started Farloe six months ago, intent on bootstrapping. At the time, Fenner’s boyfriend of two years, a 28-year-old software engineer, offered to give her seed money without taking any equity at all. She turned him down.
Fenner says that even though her boyfriend offers her emotional support to handle the rough parts of entrepreneurship, she wasn’t interested in formalizing this support. Emotional support is part of their relationship, and she’s there for him too, doing things like taking on more of the housework when his work gets busy.
“He’s never actually executed anything for me,” she adds. Fenner’s boyfriend might help her talk through a decision, but at the end of the day he’s her boyfriend, not her company’s advisor. “My equity is his equity, his equity is mine.” Their focus is on their relationship and any upside they see from work will be an upside for both of them.
Like Fenner’s boyfriend, Scott*, 29, a freelance software engineer, chose not to invest in his partner’s startup. He had been dating her for five years when she started her SaaS company. He says he spent a few hours a week talking to her about the business. When Scott’s partner was raising a friends and family round, she offered him an allocation.
Scott had many reasons not to jump at the offer. The company didn’t need the money. It was a hot round and his partner was making room for people on the cap table in accordance with Valley social norms. And he believed that investing money into his partner’s startup wouldn’t diversify their combined portfolio enough.
Though the two don’t combine their finances, they consider lifestyle goals, like buying a house, to be collective expenses. And if his partner were to make it big, they’ve agreed that more of her money might go to their expenses, like paying a larger chunk of the house.
After much deliberation, Scott decided not to invest.
According to Campbell, the “nail in the coffin” for her relationship happened when her boyfriend dismissed her health problems. After experiencing a constellation of troubling symptoms, she tried getting an appointment with an endocrinologist only to be told the first appointment was months out.
So she told her boyfriend she was going to drive herself to the emergency room. “And, you know, he went upstairs and continued working on his company,” she remembers.
Campbell was subsequently diagnosed with an autoimmune disorder called Grave’s Disease. She broke up with her boyfriend last October after almost four years together.
It was the overcorrection of professional support and lack of emotional support that made the relationship imbalanced, says Campbell. Though she needed support as a founder, it didn’t always have to be professional support.
Abena Anim-Soumah, founder of The Eden Place, explains that emotional support is a quiet, integral thing for founders to look for while dating. Anim-Soumah feels guilty relying on friends and family too much for startup-related emotional support. “But I can rant about some stupid thing that happened with my boyfriend,” she explains.
“I think there's a really small group of people who can truly separate personal and professional lives," says Fenner
After her breakup, Campbell immediately started dating again. She met people on apps, over social media, and in person. This past February, she met a fellow founder at dinner. They lingered for hours after most others had left.
While she had “vowed” to never date another founder after her last relationship, she explains that it’s been different this time. According to Campbell, her new boyfriend is much more understanding of her healthcare issues — and his devotion to his company doesn’t get in the way of caring for her. It actually helps him better understand the emotional struggles of being a founder.
“Being a founder is not just about creating your board deck or having to figure out a marketing problem or an HR problem,” Campbell says. “There’s also the emotional stuff that can make your life a living hell.”
Campbell and her ex-boyfriend remain friends, and they talk every week. She’s raised more money since his initial investment and has publicly announced $2.2M in funding. But while his ownership has been diluted, he still owns a sizable two percent of the company. She recently raised a priced round. “And I had to go and get his fucking signature.”
In Campbell’s situation, the issues of raising venture capital from a partner linger on long after raising a round; for Tom,* a 25-year-old San Francisco-based founder of an identity infrastructure startup, the risk of a breakup is actually even more reason to invest.
Six months into dating, Tom’s girlfriend was closing a new round of financing and Tom asked if he could invest. His girlfriend agreed. He’d raised funding in the past with an old startup and understood the dynamics of Silicon Valley. He didn’t want to squander the rare investment opportunity just to keep his personal and professional life separate.
She was happy to take a small check from him and sent him the documents without much discussion. Tom was initially worried about the breakup scenario, but figured that future interaction would be minimal anyway considering his small check size.
“More than half of our conversations are about tech stuff and startups anyway,” he says. “And it was normal for us to invest in friends’ companies,”
Plus, he adds, a small stake in a company can lead to big rewards, even if it comes with a breakup. “When you break up, you feel less bitter when they do really well,” he says. He cites a friend who never took equity in their significant other’s company, which is now valued at over $1B. “It eats at them that they didn't ask for something or get anything out of it.”
Eventually, Tom and his girlfriend agreed to trade equity in each other’s companies. “We honestly see trading equity as insurance against us eventually breaking up and one of us having an outsize outcome,” he says.
Campbell’s current boyfriend hasn’t yet invested in Leda. But she’s not ruling it out.
“That’s fourth base,” she says. Maybe this time, love and equity will mix well for Campbell.
*All asterisk-ed sources are anonymous
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