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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

#211

Post by tptacek »

Alex3917 wrote: post #205
tptacek wrote: post #168

Earlier quoted context omitted.

What "40%"? The entire point of the vesting agreement, bog standard in every competently run startup, is that he doesn't have 40%. In fact, if he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero.

> If he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero. FWIW that's only true if he was being paid at least minimum wage. Otherwise he would be entitled to some equity even if he didn't hit his cliff.

Interesting. Say more? Thanks!

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

#212

Post by tptacek »

CodesInChaos wrote: post #199
tptacek wrote: post #168

Earlier quoted context omitted.

What "40%"? The entire point of the vesting agreement, bog standard in every competently run startup, is that he doesn't have 40%. In fact, if he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero.

Depends on the terms of the agreement. In my case the unvested shares had to be returned if I terminated the employment or the company fired me for cause, but not if the company terminated the employment without cause.

I've had clauses like that too, as part of M&A, but haven't seen them in company formation docs. This seems like a thing you can discover quickly and relatively inexpensively.

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

#213

Post by PragmaticPulp »

cwkoss wrote: post #124
pc86 wrote: post #118

Earlier quoted context omitted.

> Why not let something break Because this is the professional equivalent of shitting in your hand and throwing it at the wall? The fact that an adult would suggest abdicating any professionalism and just letting a site with 60k users and investment backing start to break to prove a point is astounding.

The non-technical co-founder is trying to steal the fruits of OPs labor and slash his equity by more than 90%. This isn't sabotage, it's a labor strike until an equitable agreement is found.

This is very bad advice.

OP definitely should not do anything that might give the impression that they are abandoning their duties or, worse yet, actively sabotaging the company. That would be a dream come true for the other person’s lawyers.

If the OP wants to keep his equity, he needs to continue fulfilling his duties and demonstrate that he is, in fact, still working for the company.

Please don’t follow petty HN comment section advice like this. Not only is it unprofessional, but it can quickly turn into self-sabotage. Play it clean and don’t give the other side ammo to use against you in court.

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

#214

Post by rayiner »

tptacek wrote: post #122
yudlejoza wrote: post #121

Earlier quoted context omitted.

I'm sorry but this is a ridiculous advice.

It's the plot of a movie that nobody on this thread wants to watch, but that doesn't make it bad advice.

I LOL-ed.

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

#215

Post by exacube »

codethief wrote: post #198

> We were 51/49% to them and took a small round of pre-seed funding (~$100k) so our cap table is approx 40% for me and co-founder, 10% option pool and 10% investor. We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff. Could anyone tell me what this means in plain English (preferably, ELI5)? I have no idea what term sheets look like in detail but I would really like to learn.

IIUC:

OP is set to own roughly 40% in 4yrs -- 10% at the end of the 1st year (i.e the "cliff"), and the rest of the 30% across the remaining 3 years (probably more often than once a year). the "reverse vesting" means that everytime OP vests, OP's cofounder has the right to buy off the newly vested shares. this means that OP would get money but lose ownership if their cofounder chose to bought off the shares.

OP has been working 11 months so far and is approaching the 1 year cliff (so set to own 10%), so now their cofounder wants OP to leave the company and take only 3% ownership, and is threatening to leave and abandon the company risking any value at all. Presumably, cofounder also has the right to fire OP though OP hasn't stated anything about this.

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

#216

Post by s1artibartfast »

senko wrote: post #178
tptacek wrote: post #162

Earlier quoted context omitted.

I think negotiation is good, if you're realistic about it, and if you actually value what you're likely to get from it. And I agree, they should quickly find an answer to whether they can be fired by their partner (they probably can, for reasons stated elsewhere on the thread, but it's very much worth getting a solid answer).

Agree completely. It's not me, but if it were, I'd approach the getting fired problem with "look, I build this. You can fire me, but you don't have money for adequate dev and average Joe will run it into the ground in two months. Your greed will make you lose everything", and also approach the investor (if they're hands on) with the same rationale. Also agree with the point you made elsewhere - this can get gut wrenc…

The downside here is what happens after trust is broken... You end up working for another 12 months at the company pro-bono, then get canned 1 month before your next cliff vesting.

I would take 10% for the first year of service and walk with it, not expecting anything. The angel put in 100K for 10%, and you worked for a year for 10%. very simple.

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

#217

Post by Alex3917 »

tptacek wrote: post #211
Alex3917 wrote: post #205

Earlier quoted context omitted.

> If he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero. FWIW that's only true if he was being paid at least minimum wage. Otherwise he would be entitled to some equity even if he didn't hit his cliff.

Interesting. Say more? Thanks!

IANAL, but my understanding is that in order for the company to keep ownership of your designs, code, and other IP, you'd need to get some sort of consideration for that work. If you've been paid at least minimum wage then that counts as consideration, but if you haven't then you need to negotiate something reasonable in situations where a founder leaves the company before their 1-year cliff. 3% is fine, 0% wouldn't be fine though, unless again he had been getting paid. This is the reason why startups are always supposed to pay each founder at least minimum wage, even though normal employment laws usually don't require an owner of a business to pay themselves anything.

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

#218

Post by MartianSquirrel »

Genuine question: Have you considered buying out your co-founder instead? You seem to have a general undestanding of the figures you can make through advertisement. I'd suggest doing more research on that, maybe meeting with a consulting/advisor CFO who could help you make a case for it. Then you could go for a loan to buy your co-founder out, or meet with the investors to have him removed/replaced with someone who's gonna put the business first.

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

#219

Post by tptacek »

tootie wrote: post #194
Aunche wrote: post #187

Earlier quoted context omitted.

Maybe it's just because I'm an outsider, but startup finance is complete nonsense to me. >Same goes for giving you the 40%... there's no way they can build a company when someone not involved owns a huge stake. This actually happened to one of my professors, which represents the opposite end of the absurdity. He started the company with a friend. The company pivoted to a completely different direction and the friend…

Yeah, that is the option. They buy his equity for what it's worth. Currently that's not much, but apparently still more than they can afford.

They only have to buy his vested equity. His unvested equity, for all practical purposes, reverts back to the company. In standard 4/1 vesting, you get 1/4 of your equity on your first anniversary, and then equal-sized chunks every month thereafter for 4 years. Prior to that first anniversary, the idea of 4/1 is that you get nothing; the whole idea is to avoid allocating equity to people who don't last a whole year.

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

#220

Post by nullc »

A stable 5k/month cashflow is worth maybe 1.5 million dollars flat. Ignoring the phenomenally unethical effort to part ways with you one month before the cliff, you rightfully own about 9.16% of that-- or on the order of 137k. You could argue that up and down based on risk and operating cost vs the potential to increase it, but I think that would be a fair starting place for the present realized value that I'd hope to negotiate from.

Have you talked with your investor? They may be more sensitive to the consequences of their reputation being damaged due to ripping you off than your cofounder is...

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