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Ask HN: Would you walk away or push onwards?

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Re: Ask HN: Would you walk away or push onwards?

#23

Post by [deleted] »

[deleted] wrote: post #20
ScottBurson wrote: post #12

Earlier quoted context omitted.

Ah, interesting. I was just about to ask you for the details, if only to warn others what not to do. So, in your termination offer to this person, did you specify the amount that would have been vested under the original agreement, or the new one? [Added] I wonder if a counteroffer that clearly satisfied the spirit of the original agreement would be accepted. After all, litigation will cost him money, too, and he mig…

[deleted]

[deleted]

Re: Ask HN: Would you walk away or push onwards?

#26

Post by geobmx540 »

It's great you have a signed vesting schedule - I think everybody here is confused by the problem. Nobody has any insight into what alleged deception you are being accused of, and you didn't share (and that's completely fine).

It sounds like the "don't have that kind of time" is specifically because of "We're in talks with (really) big pockets", but again, we have no insight into what those talks might look like.

Disclosure: IANAL, just an asshole.

Is this an acquisition? If so, be really sure they actually want to acquire you, then maybe it's worth just giving the guy his shares to get your deal done (or attempting to negotiation - always negotiate)

Is this an investment? Again, how sure are you they really want to invest, and how long can you live without it? You should talk to your current team and potential investor about possibly fixing the cap table and how you could achieve that (ie cram down the value of the shares and top up current employees)

When I'm in the right (fuck it, even when I'm not), with a preponderance of evidence, I usually tend to not take kindly to people coming after me - at least for a bit, you have little to lose to start the process of going to court - you can always settle between now and then. This is like any other negotiation, his first salvo is give me everything, you're turn to respond in kind with "go fuck yourself because X,Y and Z, and by the way, we will have to counter file as you are causing irreparable harm to our company because of A, B and C".

You can always borrow money over time - ie 10K to start, and see how it goes, maybe you settle and you have to find a way to pay it back, maybe 10K is enough to get the guy to back off.

Re: Ask HN: Would you walk away or push onwards?

#27

Post by csa »

[deleted] wrote: post #5
hoodoof wrote: post #4

Has it occurred to you that this person is actually entitled to hang on to their shares? You all made the choice to start the business together. You had the opportunity to work out ironclad provision for founders exiting. You all worked to get it to this point. Even if you have lost your respect for this persons contribution, it was part of the deal that they get these shares. I understand totally if you don't like i…

[deleted]

> This person signed a vesting agreement that agrees to a 36 month vesting schedule with a 12 month cliff. This was agreed to in advance by all parties. I have no qualms with him retaining what was earned under the agreement.

I'm curious about how the vesting agreement was written. I think that many people write these assuming that any shares not vested will be due to someone separating voluntarily. In this case, was it specified what happens if the separation was involuntary?

Assuming that involuntary separation was not specified in the vesting schedule, then I think that you should just move on. Maybe talk to him to see if the separation can be on better/nicer terms.

As a thought/empathy exercise, how would you feel if it was you who was being ousted? Keep in mind that you certainly wouldn't think you would deserve to be let go (just like he thinks). What would you think is fair?

On a more constructive note, I suggest you ask your mentors/investors about expanding the share pool (esp. if you get more funding). It is not uncommon for founders who are no longer affiliated to get diluted quite a bit (imho rightly) when compared to the founders who stayed and built the business. This perfectly reasonable dilution can be done in a professional way or a spiteful way -- I suggest taking the high road.

In the event that you reach a liquidity event, I think that you will be very happy with what you get, and you will probably be happy with what the person who left gets (i.e., a relatively small windfall for getting a business off the ground in its most fragile stage).

Re: Ask HN: Would you walk away or push onwards?

#28

Post by rsp1984 »

rsp1984 wrote: post #2

This is a tough situation to be in and you have my empathy. 1) If you have properly set up a vesting schedule in the operating agreement his claims would be pretty baseless and assuming there's no other basis for his claims I'd venture to say you wouldn't need 150k to fight this in court. 2) Even if it turns out to be costly to fight in court, consider this: What would this person's equity be worth if you offered it…

To OP: Not sure why you deleted your reply but anyway:

Here's three more thoughts (I'm not a lawyer so please double-check this with one if you think it's relevant):

5) Could you get a loan to fund this? Do you have any valuable assets in the company you could use as mortgage? I don't know how it is in the US (I assume that's where you are based) but should you be victorious in court you can probably recover any legal fees from the ousted co-founder.

6) Depending on how you've set up the operating agreement there may also be the option of issuing more shares to the active members of management, thereby diluting down the ousted co-founder.

7) Depending on how much was invested so far and by whom and depending on whether the business is based on any jointly owned core IP or not, you may be able to shut down the company and re-incorporate later as a new company without the co-founder.

From experience I can also tell you that whatever you decide to do, you need to have a good gut feeling about it. If you settle it needs to be on terms that still make you feel proud of the business and about what you've achieved and you need to feel motivated to move forward.

Re: Ask HN: Would you walk away or push onwards?

#29

Post by matchagaucho »

100% "shotgun" vesting is common in this situation.

Now, whether those shares are liquid or not depends on the RSU or options structure.

It's common for a Co-Founder to exit with 100% vesting, but the actual payout of those shares is contingent on a liquidation, funding, or revenue event.

Consider 50% cash now and 50% contingent on achieving $1M in ARR (for example).

You also need to consider your reputation in the industry. Framing this as "unfair" does not send a particularly good signal... especially since you terminated this person, who presumably took significant risk to quit a day job and build a company from scratch.

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