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Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

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Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#22

Post by andrewmcwatters »

Stories like this make me wonder if there's a form of pre-business counseling much like premarital counseling where you discuss with your cofounder expectations going into the business and talk about worst-case scenarios like this and how each party would handle it at the time of the counseling (considering people change over time).

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#23

Post by gwbas1c »

guytv wrote: post #12

If you're willing to buy out his share, I would approach the investor, explain the current dead lock, and get his support to force your partner to do a BMBY (Buy Me Buy You), where you offer him a price per his shares, which he either accepts or have to pay the same sum to you and buy your part.

I think this works if fourtydegrees has some bucks in the bank.

Reading between the lines, I suspect fourtydegrees is young and doesn't have the kind of money to do this.

(I also suspect that lawyers may be out of fourtydegrees' budget.)

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#24

Post by nashashmi »

Not experienced in this by any means at all, but I still am interested in what are the legal, social, and professional responsibilities here.

Legally, you are entitled even though the market is no longer the same as which you were brought to help in. Professionally you have put in lots of un-tallied TLC. Socially, there seems to be no effort for an amicable resolution.

On the business side it doesn’t make much sense for you to continue with the company if this is not your area of expertise. So you should taper off the position of founder and become a silent investor. Do not budge on percentage. It is your right.

If the other person does not accept this, then the option is to dissolve the company. Keep all assets as is. And license to new entity for royalty or one time debt.

If you want to continue with the company, negotiate a position that is optimized for what you can do. And remain shareholder. And board member.

Either way, assess the true value of the company in terms of current potential revenue, future growth, and future risks. Use that as as premise for negotiation. And set aside a BATNA. A best alternative to negotiated agreement.

Don’t focus on the torch and burn scenario even if the other person insists is a possible outcome.

(All this comes from someone who doesn’t know a single thing about this other than how businesses merge, split, and dissolve.)

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#25

Post by mmastrac »

First of all, in a case like there where you have founders at odds so early on, your company is basically on life support and probably dead already.

You have very little to lose by digging in and waiting for your co-founder to fold. If your co-founder has done this at this point of the business where the stakes are so low, they will absolutely try to screw you out of the 3% through other nefarious means.

It sucks that a single founder can tank a promising startup, but that's how it goes (unless you've already got a shotgun clause or equivalent in your shareholder agreements).

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#26

Post by gwbas1c »

andrewmcwatters wrote: post #22

Stories like this make me wonder if there's a form of pre-business counseling much like premarital counseling where you discuss with your cofounder expectations going into the business and talk about worst-case scenarios like this and how each party would handle it at the time of the counseling (considering people change over time).

I thought that's what involving a lawyer in these kinds of negotiations is supposed to do?

That requires having the bucks in the bank to pay for a lawyer. If fourtydegrees is young with a thin wallet, I don't think lawyers were involved.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#27

Post by dcolkitt »

I would propose structuring the buyout in the form of convertible debt instead of a cash buyout. You give up your equity today, but the LLC gives your a convertible note to cover your valuation conditional on some future funding event.

Set a specific valuation target, at which point the note will pay in cash equivalent to a certain percent of the company's equity. That defers the issue of liquidity until if/when the company gets sufficient funding. But it gets you out of the equity today, particularly with regards to voting shares. Which is probably what your co-founder cares about the most.

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