Ask HN: How to leave a startup when you own a third of it?

If no vesting was set up when ownership was divided, you technically own a third of the company. However if there was some implied agreement, or you want to be fair, it makes sense to give back some of the equity. I think it's reasonable to keep more than a third of your portion though. The biggest risk in working on a startup is before it's raised (significant) funding when it's worth 0$. If you're actually raising another round soon, you've together brought it from a valuation of $0 to $2M. This was the highest risk time, so without a vesting agreement you may 'deserve' more than a third of your third, e.g. half of the third. It would be good to consult a lawyer though.

It sounds like you own a contractually agreed upon amount of shares. Since it's not an employment contract but ownership you can just walk away and keep all your shares until you or the company dies. If they want you out they can buy your shares. But otherwise there is no problem with keeping the shares and walking away.

Before I had to fight for my legal rights a few times I always considered agreement more important than legal state. Don't do that. People will exploit that and give you much less than they owe you or ask much more than you owe them. Focus on your legal right first. You wouldn't give them your car or smartphone as a gift, right? Then don't just gift them your shares.

It sounds like there is no reason to sell your shares before the company gets more funding, which should also increase the value of your shares.

If you don't have a written agreement about the shares take whatever you can as fast as possible.

> Except for one situation...

And the other situations.

If the rest of the founding team think you're holding too much; it may well demotivate them or cause them to leave entirely, damaging growth and ultimately your chances of success.

If incoming investors think an early investor or departed team member is holding too much equity they may be reluctant to come on board unless that situation is rectified.

Thinking about you as an early employee with 16/48 months of vesting, 10% is about right assuming you hit full "good leaver" provisions... but that's a huge proportion of the business to be walking out of the door.

I understand your co-founders' frustration. They now need to use the remaining 23% equity to replace you rapidly without losing critical early momentum. Even aside from no longer actively contributing that distraction will reduce the chance of the business succeeding.

Considering the gambles taken by all parties I don't think there's a right answer here. I guess I'm curious what you think the actual value of the equity is if you're willing to leave so early.

No. Investors are no going to be happy about dead equity having over 10% max (total) and will very likely take steps to dilute you if you try to leave with that much.

With 3 founders, I think the max you can hope for is 3-4%. But get an agreement from the company that neither of the remaining founders can receive additional shares for 2 years.

I've been in this situation before, and that clause is a pretty effective way to protect against dilution.

But mainly, but not sticking out, you avoid a really punitive recap that could make your stake round to zero.

I don't know you any better than your co-founders and in general I would say that those who either 1) continue to finance or 2) continue to work should have much more of the equity than those who quit. If one or both of your co-founders leave, or if an investor doesn't follow up on his investments, you would want that party to have much less as well.

I feel bad for your co-founders that you guys haven't had a vesting schedule in place or similar so that you would lose most of your equity now when you quit. Imagine having to work for free or for low pay in the future just to hand over 1/3 of the result to someone else. I don't know if 10 percent is too much or fair. I

I know you could say that you have worked for 16 months for free or very little but right about now is when it usually gets really tough. Your savings are probably up, maybe you haven't found a product market fit yet, maybe there are no customers yet. Doubts set in, both in you and your partner, family and friends. Now is when it hurts to continue.

So right now, I think the decent thing to do would be to increase the capital by a lot and let the co-founders subscribe for those new shares but have the shares vest gradually as they continue to work.

I also think if would be a decent thing to let the possible investor know that you are quitting before he commits.