Business

Co-Founder Feuds At L.A. Tech Start-Ups Show How Handshake Deals Can Blow Up

By Paresh Dave
Los Angeles Times.

Two Stanford University undergraduates shook hands in their dormitory in early 2011, agreeing to partner on what they hoped would be the next big technology start-up.

But as their dream came true, their simple exercise of trust became a liability when one co-founder was dumped. A flimsy foundation of oral OKs, napkin scribblings and youthful haste, it turns out, is a dangerous mix. And a common one.

Snapchat Inc., the Stanford residence hall creation that later moved to Venice Beach, is on a growing list of hot start-ups that have faced bitter lawsuits or wrenching behind-the-scenes battles over who played an essential role in a company’s birth and how much money and respect they deserve as a result.

Co-founder disputes are common in the business world, whether in television production, restaurants or real estate, lawyers say. But the staggering sums at stake for early employees when a technology company becomes a worldwide hit push the industry’s drama to the top of pop culture.

The blockbuster movie “The Social Network” highlighted Facebook’s internal drama. Twitter’s squabbling inspired a book, “Hatching Twitter.” As the Los Angeles tech economy strives to mirror Silicon Valley’s success, it’s producing its own tales of woe, with strife at Snapchat, Tinder, Maker Studios and Beats Electronics providing early chapters.

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