In this episode, Steli and Hiten discuss “what to do when people screw you over.” Partners, investors, clients—there is always an opportunity for misunderstandings and conflict.  The important question to ask is: how do you respond when you feel like someone is taking advantage of you?  Steli and Hiten offer up tips and solutions based from real-life experiences.  They discuss the importance of knowing and owning your side of the conflict, understanding the other’s point of view, and how to take action.  

Time Stamped Show Notes:

  • 00:30 – “What to do when people screw you over?” in the business sense
  • 00:42 – Steli got an email from someone who was being screwed over by an investor and wanted Steli and Hiten’s take on it
  • 01:00 – Should we take revenge or turn the other cheek?
  • 01:30 – Hiten stresses the importance of making sure YOU KNOW that you are being screwed with in the first place, check in with the other person—they may just not be mindful of you
  • 02:35 – ASSESS and OWN your own role and responsibility in the conflict. Did I trust too soon? Did I give them too much access (in the event they stole from me)?
  • 03:05 – Choosing to be a victim is very disempowering
  • 04:12 – “Did you let them screw you over?” You enabled them somehow—own your side and how you contributed to it
  • 05:19 – “Everyone is doing the best that they can”—this will help you empathize with the other person and understand people have different moral compasses
  • 07:11 – Go to Episode 134 “How to Do Due Diligence on People”; this explains the importance of doing the groundwork of getting to know who you are working with and trusting
  • 07:50 – Steli sets up the scenario—someone is stealing from you for personal use
  • 08:18 – TAKE immediate action but, DON’T react in the the heat of the moment; take a step back, assess the situation, and get outside help from a lawyer or advisor
  • 09:22 – Think through the worst case scenarios—will I need a lawyer, could this get physical, etc.
  • 10:13 – Think through the best case scenarios—the person may surprise and humble you.  This helps you to be prepared and stay balanced in your approach
  • 10:52 – After all the preparation, you need to TAKE ACTION
  • 11:24 – What do you do in worst case scenario? Hiten responds
  • 11:58 – A lawyer will help you assess your RIGHTS and your OPTIONS based on the physical evidence of your contracts
  • 13:05 – If lawyer is involved, it’s lawyer to lawyer dealings and you’re not even involved unless it leads to a mediation
  • 13:32 – Go to a lawyer to understand what the issues are and what your options are legally
  • 14:35 – The investor could be “aggressive about something that optimizes for themselves and not for you and definitely not for your business”
  • 14:45 – Potential of a misalignment of expectations on behalf of you and the investor in regards to each other
  • 15:30 – Sometimes you need to “recalibrate” with your investor and work out the misalignment of expectations
  • 15:54 – Decide to have a conversation that is “honest and real” rather than argumentative
  • 16:11 – How Hiten handles these misalignments—write down what you think is happening and you may realize your thinking is wrong
  • 16:22 – This leads to really good communication
  • 16:26 – Hiten’s example of how to communicate well in the middle of miscommunication
  • 16:50 – Say “I’d love to understand a lot more about where you’re coming from”
  • 17:11 – Ask “Can you please help me understand why you’re doing this?”—when you don’t understand someone’s actions
  • 17:35 – You may not like the answer, but at least you understand where they’re coming from
  • 19:01 – Steli states the choice—FIGHT or LET IT GO and come to peace with whatever the consequences are
  • 19:53 – If you’re going to fight—fight to WIN and make sure you CAN WIN
  • 20:31 – On the flip side, know when to LET IT GO.  Steli explains a story of a bad hire and how he dealt with the frustrating situation
  • 22:11 – CUT YOUR LOSSES—sometimes fighting is not worth your effort, time, and resources
  • 23:14 – Tune in next time where we talk about “how to NOT get screwed” in the first place

3 Key Points:

  1. Beware of the “victim mentality”—assess, first, how YOU contributed to the conflict.
  2. Get legal help, know your options, make peace with the consequences BEFORE you take action.
  3. Accept that there’s a “negative cost of business” where you have to cut your losses to win in the long run.  

Resources Mentioned:

Steli: Why don’t you start?

Hiten: Sure. Hi, this is Hiten Shah.

Steli: And this Steli Efti. And today on the Startup Chat, we’re going to talk about what to do when somebody is trying to screw you over, or is screwing you over, right. An investor, a business partner, a cofounder, an employee, somebody is trying to steal from you, they’re lying to you, they’re trying to harm you in one way or another in the business sense. The reason why we want to talk about this is that I got an email just recently with somebody describing how some investors kind of screwed them over, and he was wondering how you and I would deal with the situation?

And then even more broadly how we think about this is general in business. There’s the people out there that are like you need to destroy everybody, whatever people to do to you, you need to come back twice as hard and destroy them, destroy them completely. There’s people that are like, you know, show them the other cheek, like what is our approach to people trying to harm us or screw us over in business and in life? And I thought that it’s an interesting question. I don’t think about this that often, so often, so I wanted to explore that with you.

Hiten: Yeah, I think it’s definitely a topic that a lot of people struggle with. I’m going to jump right in though and start with something pretty simple, which is if you feel like someone’s screwing you over, make sure they’re actually screwing you over. Because like a lot of this stuff is subjective, right? Like, I’ve had people who I think are screwing me over, but if you ask them what do they think, obviously in most cases they’re probably not going to think they’re screwing you over, because they’re no thinking about you.

Steli: Right.

Hiten: That’s, I think a really, really key insight for me over time as I’ve learned. I’ve felt screwed over by a number of people; probably just like everybody else, you know sometimes you’re just like: damn, I did that. I got screwed over. Let’s go talk about some scenarios though, you know, just to back up for a second. So one scenario would be that you are doing business with someone and they literally are stealing money from you. You’re pretty sure that they’re screwing you over and you’re getting screwed, so yeah, that one, I can tell you what I would do, which is I’d go straight for my lawyers. I don’t care.

And more importantly than that, before I go to the lawyers, I go figure out what the hell was my part in enabling somebody to do this to me? Did I trust them too much? Did I give them too much access to something? What did I do? and I’m not doing that so that I don’t do it again, or I prevent in the future, which is always great, but I’m doing that to really calibrate myself on what my responsibility is for the situation? Because when you say someone is screwing you over, you’re essentially basically giving up the responsibility that you have over it.

Steli: You are turning yourself into victim in that dynamic, right? You are saying I am placing myself fully as a victim and somebody else is the whatever, the aggressor, or the person that’s doing things to me, which is a very disempowering position to be in. if you think you’re the victim, there’s very little you can do usually, it’s very disempowering.

Hiten: Yeah. I have a double edge sword on the word victim, and this is the reason, I don’t think anyone wants to think of themselves as victims. And I’ve found it very difficult for myself and people I talk to, to say that word to them and them go: oh, I get it. Because instantly you’re like I’m not a victim, what do you mean? They’re just screwing me over, they’re a villain, or they’re bad. So I really like the language, I think you’re accurate in that word, it’s like your victimizing yourself and making it so that, oh, they did that to me.

I think it’s very hard to empathize with that when you’re in it with yourself. So for me it’s just simply like where was my responsibility, like what was I responsible for? And it might just be that you were too trusting and you gave them a lot of responsibility, or gave them a lot of access, or excessively let them screw you over would be one of the kind of phrases that I would use.

Like, it’s almost like someone said: oh, I got screwed. I’m like wait, wait, wait, did you let them screw you over? No, of course not. Well, what do you mean, they screwed you over, you let them, otherwise you couldn’t even say it like that.

Steli: Yeah.

Hiten: There’s some situation you got in, something you gave them, something like that that enabled it. It’s never that someone took something from you; it’s always that you gave them the opportunity to do that. So when you really are in that situation you want to think about it like what was my ownership over it? What was my responsibility around letting this happen? I think that’s really important. And I just wanted to get that out of the way because for me it’s like, it’s pretty simple.

It’s like if you think someone’s screwing you over and they actually did, start by understanding what your responsibilities were, and what you contributed to it. And like you said, don’t be a villain about it – I’m sorry, don’t be a victim. Don’t turn into the victim.

Steli: Yeah.

Hiten: And I wouldn’t even think of the other person as evil or a villain. And this is my issue too with the word victim, I feel like everyone literally is – and this is what I was told by a friend a long time ago – but it’s literally like you have to just believe that everyone is trying to do the best that they can. And trying is not even, I wouldn’t even use that word. I would just say everyone’s doing the best that they can. And the emphasis is on they. So if you think about these people that you think are screwing you over, or this person, just realize that they’re doing the best that they possibly can.

And that will help you empathize with them because it’s like everyone’s different, nobody has the same exact moral compass, it’s very rare. And so they treat people differently based on so many factors that are not your responsibility, and honestly not even the other person’s. It’s essentially in a lot of ways, when people screw you over, it’s just how they are.

Steli: Yep. So there’s a lot to unpack here. So this is a really cool topic. So I think that number one, I think that the best way to deal with this is to obviously not get into the situation, right? And I want to talk about that a little bit later because to me this is all about making sure you do your due diligence on the people you’re doing business with. And making sure that you have full alignment and you truly understand what drives them? How they think about things, so that when you place your trust somewhere, it doesn’t mean that it can never be broken, but you want to minimize those chances by doing the homework before you make yourself, or allow yourself to be vulnerable to be quote-unquote screwed over.

And the reason why I use the word victim is because I think it’s important when somebody is screwing me, what they’re doing, if they like it or not, and if it’s the language they would use or not, they are making themselves a victim. And that means they’re taking away responsibility and power from themselves and then placing it with the other person. And they’re saying this person is a bad human, and he or she is doing something bad to me. But just like you said there’s no somebody’s doing something bad to you, you allow it. You put yourself in a position and allowed somebody to do something bad or good, you know like it or not.

And now the question is what are you going to do about it? What are you going to do about it? So I want to focus a little bit on that, but I want to encourage people to go and listen to episode 134: How to Do Due Diligence on People. Because I really think 90 percent of the time you can avoid being in these situations by just making sure that you are doing your homework on people, making sure that you find alignment, making sure that you spent a good amount of time trying to understand who you’re dealing with before giving them all your trust or, you know, opening yourself up to being taken advantage of potentially.

But let’s say that’s too late, and you’re in this situation and you feel like – your example is great. You noticed that anybody is stealing money from the business let’s say, for personal use. So you said two things I would do. Number one, call my lawyer straight away, let’s get a lawyer involved in this. And number two is asking myself what did I do to participate in this, to allow this? What was my responsibility or what was my place in this situation? So I love those two questions. I think taking immediate action is important, but immediate action in the sense of not necessarily – I don’t think it’s always the best thing to instantly confront the person.

That is usually how many people will deal with this; they’re just going to confront the person because they’re angry in the moment. I like what you suggest much better, which is take a step back and try to really understand the situation first. Go and find an advisor, somebody from a legal perspective that can help you and protect you, and has seen certain situations before. To be like here’s what I’m seeing, what do you advise I do? And then a lawyer can tell you we need more proof, are you really certain? They can ask the questions and help you think clearly through the entire scenario, so that’s a really great thing.

You could reach out to an advisor, somebody that’s very experienced in business, and kind of again, get outside advice. Get somebody to help you think clearly through the situation, ask the right questions, gather all the right data. You can be introspective and ask yourself how did this happen? What did I do? What’s my responsibility in this? I think the other thing is to think through all worst case scenarios, right? So think through – a lot of time people don’t – people will take some kind of an action, even let’s say the lawyer says let’s confront this person with some kind of a legal letter, let’s sue them, whatever let’s do something, let’s call the police, whatever it is.

Let’s do some drastic – let’s take some drastic action. I think what people – people will follow and take that action in these situations without having anticipated the response, and then they are shaken by the response, or the response might really push them off balance. So what I would typically do or advise in this situation is to really think through all scenarios and go what’s the worst thing that could happen here? What if I confront this person, what’s the worst reaction I could have? Maybe this person gets physical, maybe this person whatever; you know has already talked to the board and is pushing me out of the business.

What are all the worst case scenarios, and then what are the best case scenarios? What are the situations where this person might surprise me, and they might have a really amazing explanation, and might humble me because I totally misjudged the situation. I find the exercise of thinking through the reaction of the other person, and the other person’s perspective, and what might happen kind of thinking through all scenarios is a very worthwhile exercise. Just to be able to be prepared and stay balanced, not be surprised by anything that can happen once you start taking action or start trying to do something about it.

So these would be the things, but then eventually sooner or later, you usually have to take some kind of an action, right? So you run a little bit of homework, a little bit of analyzing making sure you really have thought it through, making sure you’re really sure about the claims you’re making, making sure you get legal advice, and get advisor advice, and thinking what worst case scenarios could happen. But then sooner or later you have to take some action, you can’t just sit on this forever. You will have to do something. So let’s say you’ve done all of this.

You know, so there’s a best case scenario in which the situation can be explained or you were partially wrong in one way or another and it kind of resolves itself and everything is good, right? What do you do in the worst case scenario when there’s real confrontation coming? You know, you approach them with a lawyer or something else and they just – they oppose you very strongly right or wrong. What do you do usually then in that scenario because I think that’s what people are really afraid of is like the confrontation that will ensue if they do something about the quote-unquote being screwed over.

Hiten: Okay, so I think there’s levels of being screwed over, so let’s just talk about the lawyer one. Where you’re screwed over and you go talk to a lawyer – I mean, there’s just a bunch of things. The reason I mentioned a lawyer is not to get a lawyer involved. The reason I mentioned a lawyer very specifically is like if you’re in a business situation, and you think you’re being screwed over, you need to understand from a lawyer what your – essentially the equivalent of what your right’s are? What can you do? Like, what’s your – do you have repercussions for the other person?

Is there something where you can send – you know, usually a lot of times it’s like, if the other person’s acting badly, in a way where they’re financially screwing you over, and you’ve signed a contract or something, or even if you haven’t and you have evidence that something had to happen, and one of the most common ones there are like a client not paying you, for example. You just go to a lawyer. And a lawyer will be able to look over whatever you have, or whatever material you have, whatever evidence you have, I guess, and be able to help you determine what a logical next step would be, whether it’s using them, or the fact that you have no options, which commonly happens to, and that you’re just going to have to take it.

So for me it’s just like I need to know legally what I’m going to do, if I really believe that I’m being screwed over in business. And from there I can determine whether to get the lawyer involved or not. Now that’s a whole other sensitivity. Typically in a lot of these situations, if it does get to the point where the lawyer should get involved, you’re basically having lawyer to lawyer dealings. And you’re dealing with it yourself, until you go into something like a mediation, where you’re trying to compromise basically. And that usually doesn’t even happen, usually something stops it earlier on because someone was truly in the wrong and they back off.

That’s usually in my experience how it works out, but again this is not legal advice or anything like that obviously. So I go to the lawyer just to understand what the issues are and what I’m dealing with, and whether i have any legal – if there’s anything I can do legally. And then after that let’s say I can, I describe kind of what that looks like, usually it starts with a letter, and then you’re having the lawyers deal with the lawyers, and that’s a process in itself. I’ve been to mediation before and it was like that as well, so this is – yeah, I’m not just speaking from like making it up. I’ve had a lot of experience with this kind of stuff, unfortunately.

And it is actually because someone thought they were getting screwed over and they weren’t, so that’s a whole different scenario. Some people will just push it really hard because they think they’re getting screwed when they have no evidence. And that’s when you have to defend yourself, and that’s not fun either, but that’s a whole different sort of scenario. And then there’s that scenario where like there is no legal thing, and it might not be that serious of a situation where it’s financial, but you still feel like you’ve been screwed over, let’s say you’re being screwed over by an investor or whatever.

And I keep using that word, even though I think we should not be using the word that they screwed me over. I just think it’s a bad word. It doesn’t really tell me anything about what really happened. And you know when it comes to an investor usually it’s like the investor is just being aggressive about something that optimizes for themselves and not for you, and definitely not for your business. And it might be the other way; it might be like there is a misalignment.

And I go back to that word because usually when you think an investor is screwing you over there’s some misalignment there, like some expectation you had from them that they’re not meeting, or which is more commonly the case some expectation they had of you and your business that you’re not meeting. And on your end you’re probably like: well, things change, this is a startup, or this is an early stage company, or this is the business and things change. And an investor should be in on it for whatever change happens, they should be invested in you, but that’s not always the case.

Often times investors invest in a company because they’re super excited about the space, not necessarily as excited about the team, if you were really to push them and ask them. And so in those scenarios, like you probably have to recalibrate and be like: well, you know, I got in bed with this person, so to speak. I took their money. And maybe I didn’t know what I was getting into, which goes back to the topic you wanted to talk about, which is how do you prevent these issues, which I think we can give a lot of tips to, but in that scenario it’s like step back and look at it and be like: oh, am I really getting screwed or is this just misalignment, or an expectation mismatch and how can I have a conversation with them that’s honest and real, instead of like argumentative?

And I try to go for honest and real, and that usually take me some amount of effort to really do it. And so my tip on that real quick would be when I think someone is screwing ’em over, I think an investor is doing something harmful to me, I just write it down to really understand what I think is happening. And then often times I realize that I’m wrong, and from their perspective something else is happening. And then that helps me empathize with where they’re coming from, and then I can have a really good conversation with them. And sometimes it’s just as simple as sending them a really, really, really good email.

And what that looks like is more like: hey, I know that we’ve been having trouble communicating and sorting out this situation. I’d like to talk. And – or I’d like to talk about these few point because I’ve stepped back from it and I understand – I believe I understand where you’re coming from. Or you could even say something like I’d love to understand a lot more about where you’re coming from. Another tactic I’ve used, which really helps a lot, is let’s say they’re trying to make decisions for you, or you’re in a situation where they’re sitting there and are saying a bunch of stuff.

The simple trick you can use to like calm yourself, but also get what you want out of them, which is more context, is basically ask them: can you please help me understand why you’re doing this? Or can you please help me understand why you suggest that we shutdown the company, if that’s the scenario? And that will instantly make them actually feel like: oh, the other side doesn’t actually understand what I’m trying to say, or doesn’t know where I’m coming from. And then every time I’ve done that, they actually sit there and try to explain it to me, whether I like the explanation or not is totally a different story.

And this is a true story. I had a point at Kissmetrics, where we were raising money. There’s an investor that gave us certain valuation. And all of – and I was not happy. I instantly thought they’re going to screw us over, this is not cool. But then I did something simple and I just said help me understand why you chose that valuation? And they gave me an honest real answer that I hated, but they gave me an honest real answer Steli, like what am I going to do?

Like, I didn’t like it. I have a choice, take your money or not take your money. You did not lie to me. They did not lie to me. They did not try to sugarcoat it. I asked them a simple question, which is help me understand why you chose that valuation, and they gave me an answer. Again, didn’t like it, hated it, but I didn’t hate them for it anymore.

Steli: I love it. This is really powerful stuff. Alright, so let me roundup this episode with a tip on my end. I think that once you’ve done some of the things that we’ve suggested so far, sometimes you’ll be in a situation where you just have to decide basically, you know, even after you’ve tried to attempt to analyze what your responsibility is to see if there’s any chance to get more aligned, understand them, maybe they have a totally different perspective that once you really uncover, you think about this situation totally differently.

Once you get through all these exercises, let’s say there’s still stark misalignment, and you feel like there’s real conflict and costs and associated to it, you have to decide if you want to fight or if you want to just let it go? Basically, you just let them get away with it, quote-unquote whatever that it is, or you fight. It doesn’t matter if it’s legally or in other ways. And I think a lot of times people have a difficult with their decision because – and they are usually I find that alto of founders don’t make a clear enough distinction between the two things, so this would be my tip.

My tip is when you’re at the edge and you have to decide if you’re going to fight or flight, you know if you’re going to let it go or not, make sure that you’re willing to take – that you’re okay and capable of being at peace with whatever the consequences are. So for me, when I – if I had to decide to fight, then I’ll decide to really fight. And I’ll be – I’ll think through that this is going to become a priority, which means a lot of other things will not be getting done. I realize that this is going to take energy and time and focus.

And I realize that if I’m going to get into this, I’m going to go all in. I’m going to fight to win. I’m not just fighting to fight. I’m fighting to win.

Hiten: Yeah. Yeah, don’t pick a fight you can’t win.

Steli: And don’t show up at a knife fight with your fists, or at a gun fight with a knife, right?

Hiten: Yeah, hell no.

Steli: Make sure that you can win, that you really can win. But on the flipside, and this has happened once or twice in very small scenarios, but still scenarios that bugged us a lot. At times, like there was time for instance where somebody that we hired, a new hire, basically lied in the way that we had valued this person’s work. And then he came to the office and he was designing things, but in hindsight it turned out he wasn’t really designing them, and we were really impressed about his work. And then he was a remote person and he was like pretending to work, but not really working.

And then he was promising to show mockups to show his work and was always late, and had all these excuses of sickness and family issues, and this and that. And eventually we realized that there’s something really wrong here. This person wasted a ton of time, lied to us, and had gotten a sign on bonus from us earlier, so we were pretty pissed off about this. But after we evaluated all the situations, after we talked to him and how he thought about all of this, after we went r all that exercise, we decided to let it go.

We just decided to part ways and learn from the experience and let it go because it was not worth – it was a fight we didn’t want to fight to win, and we didn’t want to invest our energy and time in. and there’s a big bracket, which is cost of doing business. Sometimes you lose and you need to be okay with cutting your losses and moving on with life, versus hanging on to them. And I think that that’s something a lot of people have a really difficult time with.

And not to say that I enjoy it, but I’ve learned to kind of be an adult about it and go you know what, no matter how much I want to publically shame this person, no matter how much I want to get all my money back from this person because I feel betrayed and lied to, I’m just going to cut my losses. It’s not worth – this is not a big enough amount, this is not an important enough person, this is not worthy of my energy and time. I need to invest it in finding the next better person and learning from this experience, rather than trying to like make this person quote-unquote pay for this.

So sometimes you have to fight, but sometimes you need to realize it’s not worth it, so you just cut your losses and move on with life. And this is something people have a difficult time with, but I feel like in business there’s a thing called cost of doing business. This means the negative cost of doing business, sometimes you have to take some losses in order to be able to win in the long term, and really accomplish what you want to. So my tip is make sure when you fight, you fight to win, and you’re capable of winning, and you give it all you got, but also make sure that when it’s not worth it, you just cut your losses and move on, and you just find a way to be at peace with it.

Hiten: Yeah, so I’m going to summarize this by saying, I think we got into the what to do when you do get screwed. I don’t think we got into how to not screwed.

Steli: That’s true.

Hiten: So I’m going to tell everyone that’s listening to stay tuned for the how not to get screwed episode because we did talk about what to do when you do get screwed, but we didn’t talk about the other part.

Steli: Yeah, that episode will come probably a week later.

Hiten: Yep.

Steli: That’s it from us.

Hiten: Bye.

[End of Audio]

Duration: 25 minutes