Help, what should I do when 2 founders have had a falling out?
--- Introduction ---

More than three years back, three of us (all classmates from college) decided to take the plunge and start up. I know one of the founders very well; we did a lot of projects together in college. I was also working with him (in the same company) before we decided to start up. We both worked at a small software development firm. (Let’s call him Jerry) The other co-founder was a very good friend from college and had similar ideas about starting up. He was working for a fairly large software development firm before starting up with us. (Let’s call him Tom)

We decided to put in our own money and initially started out creating our own product, a web based event planning tool. Our initial plan was to create a basic version of the application and depending on the response create a premium (paid) version for event organizers. Unfortunately, at that time, event organizers in India weren't really interested in the idea. We started looking for consulting work and received a few local and overseas projects. This definitely boosted our confidence and our bank balance.

[While working together we noticed that the way me and Jerry worked was different from the way Tom was used to working. Tom wanted a proper document in place which would describe exactly what needed to be done. While me and Jerry didn't have any qualms about having everything in writing before starting on a project. As projects would progress, we would realize that we had missed something and it would require some more effort. This is where we saw things differently, Tom would sometimes flatly refuse to work on the change or be upset because now he would have to work on something that wasn't mentioned earlier on. Me and Jerry would not think much of it and go ahead and get it done. This had caused issues between Jerry and Tom, which eventually led to a discussion in which we tried to make Tom understand that requirements change and we aren't a big software company and following processes which are prevalent in bigger software companies would not be feasible for us]

Over the course of one year we completed couple of more projects. We also managed to sign on a large project which would involve us hiring 3 more developers. The contracts were signed, we finish hiring and had started the initial requirements gathering phase when suddenly the client wanted to put the whole project on hold for a couple of months (this was during the slow down around Q1 '09), the client eventually backed out completely. We were in a very precarious situation as we had hired people and had no projects that were currently running (never put all your eggs in one basket). As this was a recession, getting projects was very hard, and we eventually had to dip into our savings to keep our startup afloat.

After a few very uncertain months we slowly started receiving work. We found a project which would involve us dedicating one person to it continuously (let’s call it the US project). Tom started working as a dedicated resource for this project since he had experience in the technology they were looking for. Simultaneously we started getting couple of small projects which would keep everyone mostly busy.

At this time the project that Tom was working on would make up the significant portion our revenues and is what kept us afloat till things picked up.

Tom (after about 6 months) started training one of our developers (let’s call him Patrick) to work on as the dedicated resource for the project. For quite some time Tom & Patrick would both be working (the knowledge transfer period was quite long) on the US project. Tom still spends at least a couple of hours every day helping Patrick.

Me and Jerry have been working on multiple projects as we have been getting a steady stream of projects and have more than we can currently take up. Most of us have been working at least 12 - 14 hours in a day.

In June this year Jerry and Tom had a heated argument on the direction the company should take. We all had a long discussion on our current situation and future projections and what would be our roles moving forward. We eventually came to the conclusion that Jerry & Tom would start working on sales and marketing while slowly reducing the time they spent writing code, and I would continue handling the development teams. Jerry was already handling most of the client interaction while Tom was mostly handling client interaction for the US project and one other project. We also decided we would hire more people.

--- Current Situation ---

Currently we are a small (8 people) moderately profitable software company.

Tom spends a couple of hours a day on the US project and the other time on another project, he also helps us when we need some database advice (he's the database expert).

Tom had taken up the task to update our website (we haven't updated our website for over a year). He made a list of pages that would need to be updated. He had informed us of the same and had asked us to pick up the pages we wanted to write content for; he would write the content for the rest. As we were really busy completing projects we did not pick any topics and Tom didn't mention the website to us again. Tom was also helping Jerry out on a project and Jerry had already asked him to complete a set of tasks that the client required.

Me, Jerry and Nick are working on about 5 projects, depending on the deadlines and requirements we may work on 3 projects in a day. Jerry is also spending some time in getting our newly hired developers up to speed on the way we work.

A few days back our client during one of our weekly calls mentions that he would like a feature implemented in a different way. Jerry agrees as the newer implementation was more elegant.

Initially Jerry was supposed to complete this phase of the project, but after the requirement change Tom would be the ideal person to implement this (some part of the processing which would happen in the application could be done directly in the database)

After the call Jerry sends an email telling Tom of the requirement change and asking him on how much time it would take him to implement the change given his other commitments.

To which Tom responds he would not be able to make the changes alone and would require Nick to implement the changes.

Jerry responds saying that he and Nick are working on 3 projects together and it would take some time till Nick gets free, and also asks him why he would not be able to implement the changes alone.

Tom responds with an email telling Jerry that he's being unprofessional. Earlier Jerry had mentioned that he would be handling this phase of the project, and now he wants Tom to handle it. Tom accuses Jerry of trying to push tasks down his throat. He also mentions that the last time he worked on implementing something similar was 2 years ago and would require at least 5 days in total to understand their schema and implement the changes alone. He also mentions that other projects were taking up time and he hadn't spent any time writing content for the website and as none of us had volunteered to help, he would have to write all the content on his own. In the end he mentions it would not be possible for him to implement the change and tells Jerry to ask someone else for help.

After which Jerry responds saying that requirements change and he should help out, ending with we all need to have a talk.

Now during the discussion we have
- Tom mentions that we both have not volunteered to write content for the website.
- I respond by saying I am not very good at writing and currently I am swamped with a lot of work. I apologize for not replying to his email about the website content, and also not communicating to him why I cannot take up anything now.
- Jerry responds by saying that he's swamped too, he's working on three different projects simultaneously, and says he’s been working around 12-14hrs and on weekends for the past month.
- Jerry accuses Tom of not putting in as much effort as the rest of us are putting in.
- Tom responds by asking if we consider the website to be important (as it has not been updated for over a year).
- Jerry responds by saying that current projects take a priority, and suggests we could consider updating the website when work is less hectic (once we have transitioned the work to the new developers we hired).
- Tom responds by saying that he envisioned all us founders to be done with writing code by this point, and expected us to all be managing the developers or the sales/marketing side of things.
- I try to explain to Tom that we are still very small, we cannot afford really experienced developers, I can't envision running our startup successfully without all of us coding for at least part of our time every day for at least couple of months more. I explain that we need to focus more on the marketing and sales side of things but we can’t just jump into doing it fulltime right now.
- Tom says that we should use the developers we just hired to complete the projects.
- I explain that they are fresh out of college and need to be trained before we can trust them to handle a project and deliver it successfully.
- Tom disagrees. He says that Jerry is trying to push tasks down his throat.
- Jerry says he can’t work with Tom any longer, and would like to sell his stake.

As of now we have decided to meet on Monday so that everyone has time to think on how we want to take this forward.

The way I see it is either Jerry or Tom would be leaving, I don’t see the startup surviving at this stage without any one of the founders.

Has anyone been in a situation similar to this? I would love some advice.