They launched a $1 billion startup together. Then they broke up. How the relationship between Modern Health’s cofounders died.

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Summary List Placement

In September 2019, Erica Johnson was called into a meeting at Kleiner Perkins. Inside, Mamoon Hamid booked a conference room and prepared to have an uncomfortable conversation.

Hamid is one of Kleiner’s partners and was the only outside board member in Johnson’s mental health startup, Modern Health.  

That day, he found himself wedged between Johnson and her business partner, Alyson Watson. The young cofounders had been drifting apart for months, and their disagreements had begun to threaten the promising but fledgling two-year-old startup.

Watson wanted a higher stake and felt Johnson wasn’t pulling her weight. Johnson wrote Hamid a five-page letter that questioned Watson’s leadership style.

As Johnson recalled to Insider, Hamid glanced at his watch, looked up, then told her there was someone outside she needed to meet: Modern Health’s new corporate lawyer.

Johnson felt she was about to be fired from the company she helped create. She refused to see the lawyer and instead stood up, shook Hamid’s hand goodbye, and said, “I’m incredibly disappointed by this outcome,” she told Insider.

Within a few hours, Johnson says she was locked out of her company email.

Seventeen months later, dismissing Johnson has had no apparent effect on Modern Health. The company closed a $74 million round of financing in February at a $1.17 billion valuation. It sells mental health services as an employee benefit, a business that has boomed in the pandemic as employers look for ways to help workers cope. Modern Health tripled its headcount to 180 people in 2020, and the company says it has grown revenue 25 times since Johnson left.

But Watson, who is CEO, faces a peculiar liability: a cofounder who has spent the last year and a half trying to get her fired. Following her termination, Johnson sued Watson, Modern Health, and Hamid for wrongful termination, retaliation, defamation, and breach of fiduciary duty.

From Snap to Tesla, some of the world’s most successful tech companies have survived messy cofounder breakups. Facebook’s infamous founding and resulting lawsuits became the central plot of a movie.

Still, a cofounder split doesn’t usually end in litigation, executive coaches tell Insider.

In this case, Modern Health has momentum going for it. The startup took in $170 million from the who’s who of Silicon Valley, including Kleiner, Founders Fund, Battery Ventures, actor Jared Leto, and the founders of Okta and StitchFix. Former Twitter CEO Dick Costolo is a board director. And the company was recently named a great place to work by Fortune.

All of which makes Modern Health a compelling case study in how founder relationships die.

Insider spoke to Johnson as well as six former employees, contractors, and advisors to Modern Health who asked not to be identified because they did not want to hurt their industry reputations. It also reviewed internal documents, including Slack messages, emails, sales pitches, and a 102-page internal investigation into Johnson’s claims. John Jersin, who is Johnson’s husband and a Modern Health investor and former advisor, also spoke on the record.

Modern Health declined to make Watson or current employees …read more

Source:: Business Insider


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