There’s a stat that gets thrown around in founder circles so often it’s started to lose its teeth: 65% of high-potential startups fail because of problems between the people at the top. Not the product. Not the market. Not the fundraising environment. The founders.
Harvard Business School professor Noam Wasserman spent years documenting it. Most founders nod along when they hear it and then immediately assume it applies to someone else.
It applied to Jawbone.
And the painful part is that it didn’t have to.
Jawbone started in 1999 as Aliph, founded by Hosain Rahman and Alexander Asseily in Stanford’s dorms. The company initially focused on noise-canceling Bluetooth headsets, targeting military and consumer markets with breakthrough audio technology.
This wasn’t a dorm-room fantasy. Asseily’s senior thesis included a diagram of a wrist-worn communicator connecting to a headset, a diagram he would later incorporate into a business plan for the company that became Jawbone. These guys had a real technical foundation, a DARPA contract, and complementary backgrounds. Asseily was the design and product brain. Rahman was the relentless commercial operator.
For a while, that worked.
The JAMBOX speaker launched in 2010, transforming Jawbone into a lifestyle brand. Revenue skyrocketed from $50 million in 2009 to over $300 million by 2013. By 2014, the company was valued north of $3 billion. Backers included Sequoia, Andreessen Horowitz, Kleiner Perkins, BlackRock. Jawbone pioneered wearable technology with UP, the first wrist-worn fitness tracker, and revolutionized sound with the first smart Bluetooth headset and then with Jambox, the first smart wireless speaker.
Three categories. First in all three.
And then it died anyway. Jawbone raised around $950 million in total funding, making it arguably the second-largest VC-backed bust of all time, only behind solar panel maker Solyndra. Axios
So what happened?
Here’s what the postmortems tend to underweight: the co-founder relationship didn’t hold.
Asseily was CEO of Jawbone until 2007, executive chairman until 2011, and non-executive chairman until his departure in January 2015. Each step was a ratchet down. By 2010, he had moved back to London and started raising money for a new company, State, a social opinion network. He was still technically attached to Jawbone, but his energy and identity were clearly elsewhere. A fresh cash raise kicked off in February 2014 with Jawbone adding another $250 million to its bankroll, and at the same time, Asseily resigned as both Chairman and from its board of directors.
That timing matters. 2014 was when Fitbit was accelerating, when Apple was about to announce the Watch, and when Jawbone’s UP line was in desperate need of strategic clarity. The co-founder walked out the door exactly when the company needed its two architects pulling in the same direction.
What Rahman inherited, or perhaps built, in Asseily’s absence was not a unified leadership team. Behind the scenes, Jawbone was hampered by internal divisions. Employees described an environment plagued by departmental silos and clashing personalities among the executive team. A lack of collaboration meant sales teams were disconnected from engineering, and individual departments often had misaligned goals. Rahman also frequently overruled or disputed recommendations from his staff.
This toxic culture severely restricted Jawbone’s agility, wasting resources as teams pulled in different directions. When the UP bracelet began faltering, managers pointed fingers rather than working together toward solutions.
One former executive described the internal situation as “a new company every six months.” That kind of churn in direction, product strategy, and senior talent is almost always downstream of something broken at the top.
The recall of the original UP band cost the company approximately $100 million. While orders for the re-released UP continued to roll in, the company faced a massive cash crunch and didn’t have enough working capital to fulfill the orders piling up. That’s a company under enormous operational pressure trying to manage it without two co-founders in the same room.
By 2017, Jawbone was liquidating. In one of the most dramatic turns in Silicon Valley history, the company went from a nearly $4 billion valuation to liquidation.
Two other cases worth knowing.
Snapchat and Reggie Brown. Reggie Brown, one of Snapchat’s original creators, conceived the idea but failed to protect his rights. When the platform took off, his co-founders removed him, leading to a legal battle that resulted in a substantial settlement. The company survived because Evan Spiegel had the capital and momentum to weather it, but the legal distraction and reputational questions about ethics in the founding team followed Snap for years. When your founding story has a villain chapter, it shadows everything that comes after.
Spinback and Josh Wald. This one is less famous but more instructive. Spinback’s co-founder issues gave way to contentious legal disputes that caused the company to collapse and forced Wald to reach into his own pocket to pay back investors. “I felt that our investors, some of whom were my friends, didn’t make an investment accepting the risk that we couldn’t play well in the sandbox together,” he said. He paid them back out of personal funds. The company was eventually reformed and acquired, but Wald spent years refusing to talk about the failure at all. The shame buried the lesson.
What makes Spinback worth putting next to Jawbone is the scale differential. One was a $950M implosion. The other was a small startup most people have never heard of. The mechanism was identical: two founders who couldn’t stay aligned, and a company that paid the price for it.
Most organizational problems have a hierarchy to resolve them. Someone has authority, or at least more authority. Founder conflict doesn’t work that way. Between founders, there is neither a clear hierarchy nor an established decision-making procedure. No one can force moving on or let the other person go. You are forced to “figure it out.”
And the longer you don’t figure it out, the more damage compounds. Startup stress acts as a magnifying glass to founders’ differing behavior and expectations of each other. What felt like a philosophical difference in year one becomes a cold war by year three. By then, the rest of the company has taken sides, or worse, stopped trusting anyone at the top.
There’s also a particularly insidious dynamic that Jawbone illustrates: the slow exit. Asseily didn’t blow up the partnership in a dramatic fight. He just gradually moved on. He went to London. He started a new company. He stayed on as a non-exec for years. That kind of ambiguous presence, where one co-founder is technically there but spiritually gone, is in some ways more corrosive than a clean break. It creates confusion about who owns decisions, ambiguity about strategic direction, and a culture of deference to the CEO that, in Rahman’s case, meant nobody pushed back when the strategy badly needed pushing back on.
Angel investor Josh Wald, who went through his own co-founder collapse, now asks founders pitching him a specific question: “Have you had a fight yet? And if they say ‘No,’ I’m pretty hesitant to invest. We’re all different people and we bring different perspectives. If you’re having healthy conflict, you’re going to get to a better answer, because everybody’s pushing each other.”
Healthy conflict early prevents catastrophic conflict later. The absence of it usually just means the pressure is building somewhere neither founder can see.
Most advice on this topic is either too abstract or too lawyerly. Here’s what I’d tell any co-founding team right now.
Have the ugly conversation before you need to. What happens if one of us wants out? What if we fundamentally disagree on whether to raise a Series B? What if one of us stops performing? These conversations feel premature when things are good. That’s exactly when to have them, before the answer has any personal stakes attached.
Don’t treat a slow exit as a clean one. Asseily’s multi-year wind-down from CEO to exec chair to non-exec to departure wasn’t a graceful transition. It was ambiguity institutionalized. If a co-founder is moving on, move on. A company needs to know who’s actually in the room.
Build conflict resolution into the operating model. Founder coaches exist. Mediators exist. Board structures exist. Co-founder agreements exist that spell out each co-founder’s rights and duties, helping protect everyone’s interests if conflicts arise or somebody leaves the business. Use them before you’re underwater, not after.
Vesting schedules are not optional. This is table stakes, but it still gets skipped. Equal equity from day one with no vesting schedule is a recipe for a co-founder who checks out and still owns half the company. Don’t do it.
Watch for culture leaking from the top. Jawbone’s internal divisions, the silos, the finger-pointing, the misaligned departments, didn’t materialize from nowhere. They reflected what was happening between the founders, and then between the CEO and his leadership team. Culture flows downhill. If the top is fractured, that fracture spreads into every layer of the org, usually faster than you expect.
Not all of that 65% is preventable. Some founding teams will always hit irreconcilable differences. Some people turn out to be different under pressure than they seemed in early conversations.
But a lot of it is. The version where two founders never talk about what “moving fast” actually means. The version where one person is grinding weekends and the other keeps normal hours and neither has a framework to surface it. The version where the slow exit gets treated as business as usual until suddenly it isn’t. That version is preventable every time.
Jawbone invented three product categories. They had DARPA credibility, Stanford pedigree, and nearly a billion dollars. They had a product that hundreds of millions of people were willing to buy.
They didn’t fail for lack of opportunity. They failed because the people running the company stopped functioning as a team, and then built an internal culture that couldn’t compensate for it.
The company was worth saving. It wasn’t saved.