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Who brought in the investor? Who has that relationship? If you're friendly with them, you could ask for advice or feedback. Do you have business mentors near you who can help you navigate this?
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.)
The investor so far has also been very neutral and I think will remain so.
In 1 month, you've vested 25% of your grant, or 10% of the company. So I would try to get to that mark to strengthen your negotiating position. Any references to 40% are red herrings at this point.
Unless there's a specific buyback clause in your stakeholder agreement, they're under no obligation to buy you out at any time. (They may have the right to do so. That's not uncommon.)
Of course, you're under no obligation to resign, either. So this is a negotiation.
So the way I see it, you have a few options:
1. You take your 10% and leave. You "don't want any equity", but better something you don't want than nothing.
2. You agree to a buyback, potentially at a discount to FMV. If you don't know what FMV is, it's hard to negotiate one way or another. It's v. likely not $1M. Sounds like this is a no-go.
2B. You agree to a non-cash buyback, e.g., in IP. You spent 11 months building the tech: what if you took that with you?
3. You flip the script and buy your co-founder out.
In any case, your relationship is over. You might walk away with nothing.
Do NOT sell. keep 40% of nothing, matter of pride first and for all. Secondly, they are more than likely bluffing. They don't want to put advertising that would generate 5k/mo means they are trying to make things look artificially worse so you leave and keep the rest for themselves. Don't fall for the 40% of nothing once you are close of making money. They just don't want to share the pie.
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.
Earlier quoted context omitted.
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.)
Suppose I did have some bucks in the bank and did get a lawyer - how would they help? So far my co-founder has been pretty unreasonable with regards to compromising and/or negotiaton. The investor so far has also been very neutral and I think will remain so.
Assuming you weren't, it's very strange to force someone out right before their equity vests.
Basically, your lawyer can understand the situation better than an internet message board can. Then, a phone call from your lawyer to your co-founder could help make your co-founder become a lot more reasonable.