[deleted]
Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
281–290 of 435 posts
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#282Why do so many people on this thread not understand how a one-year cliff works?
The OP already has 40% of nothing. He has to earn that 40% over 4 years but if he leaves within the first year he gets nothing. All he has within the first 12 months is the promise of potentially 40% of something if he sticks around for 4 years.
But honestly, as the lawyer in this thread said, this was a crummy deal from the get go. FOUNDERS (rather than employees) should get Founder shares, which are immediately vested. There can be conditions for "claw back" which allow the company to buy back / vest back shares for an early departure, but founders shouldn't have to "earn in" their share into a company that they start. After all, they started it. It's an odd idea indeed if all the founders have a 1-yr cliff because then in the first year no one technically owns anything!
When they say "otherwise you'll own 40% of nothing", it's not even clear what they mean. Do they imply that they will dissolve the company and form a new one without you leaving you to hold an empty shell company?
At best you can argue for your 1 yr cliff value, which is 10%. You're not in the position to negotiate between 40% or 3%. You can only negotiate between 3% and 10% because there's no way you're going to earn the 40% over 4 years.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#283Growth from 2k to 60k is an important tipping point. There should be a buyout at this point. Valuation based on income result in 5k * 12 * 15 * 40% = 360k, which should be a fair price. valuation based on funding would be around 400k, which would be similar. You can have that written down as a contract, not necessarily direct cash payment, but cash payable, and have your co-founder to sign as guarantor, which would n…
PE of 15 is unrealistic; 2 to 3 for an unproven business at that scale is what you would likely receive when pursuing a sale.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#284Can I give you some advice that really sucks? Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that doesn't always work out. Sometimes you find more money and success than you could ever dream of, and other times you waste 11 months. Here's my thought process. You and your cofounder aren't going to be able to work together after this. The company has no money a…
Disagree. Normally I would agree, but this is such an outrageous situation that the OP should just dig in and tell the other side to GFT. Let's not set precedent that a-hole co-founders get to cut out their technical co-founders after almost a year for zero compensation without a fight.
Well, we don't know the other side of the story.
But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?
I get the impression this is all happening because things are going badly, not because things are really about to take off.
My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#285It sounds like you own 40% of something fairly valuable and now that it's 11 months into your contract other founder who needed your help is getting greedy and trying to push you out before you are owed anything. You said it yourself, you've grown hugely, you're dominating SEO since you joined, and built loads of products. This is your 'partner' getting greedy after you've done a lot of hard work. It wouldn't have ha…
Where are you getting the idea that the tech co-founder (TCF) owns "40% of something fairly valuable"? It seems the TCF currently owns 0%, and will go to ~10% (25% of 40%) if they don't get laid off/fired in the next month.
[deleted]
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#286Ask for a fair buyout in the form of an IOU. They can pay it when they have more cash or default when they fold. You've locked them in to sticking with the work that you have done by dint of the SEO juice. If they want to reap the benefits of that, they have to compensate you commensurate to what was agreed.
Debts are usually paid before equity in bankruptcy, maybe even in an acquisition.
but, seriously, get a lawyer.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#287Sorry to hear you're going through this. I went through something similar and it wasn't fun. As much as you have shareholder agreements etc. none of that matters too much if the business fails and so it's basically about what the two of you can negotiate. In my case, I've paid off a former business partner much like a loan. You can negotiate all sorts of parameters on this: monthly payments, grace period, cash trigge…
This seems like the most realistic and likely answer. My co-founder hasn't really been budging so far and I feel like they don't fully understand the situation. They think that because it was their idea that they are entitled to a lot more than me. One issue for me is that I don't have that much faith in them being able to execute on the company vision by themself, e.g. they don't want to monetize right now or do a r…
Take it from me, a negotiated buy-out is the way to go. I had to buy out a former partner and negotiated a payment over 12 months. It worked out for everyone.
Current valuation should be valuation at the time of the investment multiplied by a small growth factor (1.5x perhaps).
Your stake is the amount you would have owned as of the first cliff (and not any sooner), which is 10% after the investment round.
if the company was valued at $1M at investment, then it would be worth maybe $1.5M at time of the 1yr cliff given the growth factor.
Your 10% of that is $150,000. The company should pay you $12,500 per month for 12 months to fully buy you out. And the company should time the payments to reduction in your equity. If they speed up payments, it speeds up the buy out. If they slow it down, it slows down the buy out.
You should also renegotiate any non-compete.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#288Can I give you some advice that really sucks? Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that doesn't always work out. Sometimes you find more money and success than you could ever dream of, and other times you waste 11 months. Here's my thought process. You and your cofounder aren't going to be able to work together after this. The company has no money a…
I know you mean well, but this could not possibly be good advice because there isn’t enough information in that post for even a lawyer to give good advice. You don’t know what’s In his contract. Maybe his cofounder can’t fire him. Maybe He could but that would trigger the vesting. Maybe he could put it to the board and fire his cofounder. Maybe his cofounders threat that it’s 3% or nothing is bluffing. It doesn’t rea…
I agree we don't know the whole story. But this is the version of the story that puts the OP in the best light, and still, my overall impression is it just seems like it's not worth it.
What's the best case scenario they could get out of it? Maybe 6% equity, or maybe a $10k severance. But going after a company with no revenue and only $40k in the bank doesn't really seem like the best use of anyone's time, energy or money.
There's minimal available short-term value, and litigation/fighting will sharply blunt any potential long-term value.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#289Earlier quoted context omitted.
Disagree. Normally I would agree, but this is such an outrageous situation that the OP should just dig in and tell the other side to GFT. Let's not set precedent that a-hole co-founders get to cut out their technical co-founders after almost a year for zero compensation without a fight.
Well, we don't know the other side of the story. But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank? I get the impression this is all happening because things are…
> Well, we don't know the other side of the story.
This is such a tired line. No, we don't know the other side. But the OP is here and asking for advice, so rather than sliding into some kind of false balance you could simply assume that they are telling the truth and basing your advice on that. The obligation to inform is on them, and speculation on your part what the other side may or may not be is pointless.
> But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?
That's all speculative.
> I get the impression this is all happening because things are going badly, not because things are really about to take off.
Alternative point of view: if it was worth nothing the co-founder wouldn't be making such a play to own it all.
> My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
But that's exactly why the OP is here: to ask people if they do see such a path. If you can't see such a path then maybe just stay out of it rather than trying to talk the OP into something that they may regret gravely?
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#290I'm not a lawyer, but depending on where you live it might take more than 1 month for them to actually succeed at firing your. For instance if you live in The Netherlands it would take months to arrange that if you don't agree.