There are some reasonable defensive ideas in the answers so far, but I want to offer a different perspective. Maybe this cofounder, despite his arrogance and lack of skill as a manager, is not entirely wrong*. As a cofounder, he feels intense pressure to make the company succeed, and he knows your team needs to do a better job in order to make that happen. But maybe he doesn't know how to get your team doing a better job, or even what that better job looks like -- so he's micro-managing. It's something he can do in spite of the nagging feeling that he's ill-equipped to handle the responsibilities placed on him. (And that feeling is common among founders, though the best ones don't radiate it to their teams in such harmful ways.)
So if we accept that there's a real concern here, how can we channel that into something more productive? The best place to start would be engage your manager in a conversation about what he's really hoping to accomplish. What are his top priorities and goals? To what extent could your team be helping to address them? If you're not addressing them now, is it because they're not a match to your team's skills, structure, or process? Is it a lack of awareness or concern? Is it a lack of effort? Insufficient clarity in the goals, strategy, or tactics?
Most likely, it is a mix of all of these. You might feel that the main missing pieces are your manager's responsibility to solve, and that's true. But if you can explore these types of questions in a supportive and optimistic way, you might help him become more aware of what your team needs to be more effective, and stand a chance of salvaging some trust. At the very least, you'll stand out as being unafraid of considering the big, existential challenges that face startups and founders. If you can do that and make it inspiring for your coworkers, maybe you're even cut out to be a founder yourself someday!
* Footnote: If your manager is entirely wrong, and his involvement in your department is not justifiable, then it's an issue the leadership team must address. You can try to bring it up delicately with another cofounder, e.g. by asking them to lunch and requesting their advice on how to work better with your manager. But consider that (1) cofounders are going to generally be more loyal to each other than to employees and (2) major inter-founder strife is common at small startups and you could become a powerful force in accelerating or resolving it, but could also become collateral damage.