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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

#41
post #2

Did they really pose it to you that way of take the 3% or they'll torch the company? Was it just a bluff because they'll own nothing too? I would talk to a lawyer and possibly the seed investor, but the lawyer first.

The seed investor is remaining neutral. It's not so much that they'll torch the company. They're just saying they don't have the cash so need to reduce my stake. They will budge on the 3% I'm sure, but I don't value the equity much if I'm not involved. I'm not too sure what a lawyer would recommend at this point? I also can't really afford one personally - especially as I may be out of work soon haha..

Don't give up a cent.

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

#42
post #2

Did they really pose it to you that way of take the 3% or they'll torch the company? Was it just a bluff because they'll own nothing too? I would talk to a lawyer and possibly the seed investor, but the lawyer first.

The seed investor is remaining neutral. It's not so much that they'll torch the company. They're just saying they don't have the cash so need to reduce my stake. They will budge on the 3% I'm sure, but I don't value the equity much if I'm not involved. I'm not too sure what a lawyer would recommend at this point? I also can't really afford one personally - especially as I may be out of work soon haha..

I don’t understand how “the need for cash” and “reducing your stake” are connected. If they need cash, they can raise another round and everyone gets diluted like normal.

If you don’t value the equity, offer to sell it to the seed investor at a discount.

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

#43

Can you expand on why they want you out and what happens if you stay?

We've spoken a fair bit and they don't have anything specific to say. It's mainly that they don't like or want the stress of working on a startup, and want to run it more as a lifestyle business.

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

#44

Why does your co-founder want you to leave?

They're not enjoying working on the company together. It's mainly that they don't like or want the stress of working on a startup, and want to run it more as a lifestyle business.

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

#45
Bad news: If the CEO wants you out, by default, you should leave. It won't work to stay wrt high-pressure collaboration & trust, and is a warning sign against continued growth. Worse, they are likely about to fire you over the equity + performance, and unless you have single-trigger, you get 0 equity. Even if you keep equity after you leave, 40% equity is too much 'dead weight' for professional investors to not pressure them to wipe you out after you leave.

Question is how replaceable are you. (Sadly, most people are.) If the plan is a funding round, they'll need you or a new technical cofounder (they may be replacing you anyway?), they'll need equity to represent that. good news there is they want someone proven or harder to raise. The founder may also be wanting to keep > 50% after funding dilution.

I'd stretch it out 1mo till you got your cliff, so you get your 5% or whatever vested locked in. Then I'd try to figure out why the reln is broken, and if you truly want to stay / can fix it. Negotiation wise, I'd assume you are leaving, and maybe they are playing hardball. Asking for a buyout doesn't work as they are cash poor, and keeping too much equity doesnt bc they can just fire you. they may also decide to wipe you out after you leave by issuing more stock to remove dead weight on cap table.

Maybe: Offer to stay on until you help get a good replacement at 90% efficacy, and keep vesting at high rate, then leave. Say you are good for partial buyouts during the next rounds.

if you have single trigger, you have way more leverage. if a success 10yrs / 1000 employees / $1B from now and you leave now, you'd have contributed little of the ultimate work, and your equity & departure more of a hindrance during fundraising, so leave it w even 5-10% now is fairish.

edit: I would discuss w a startup lawyer. if you break the reln now w money still in trust of the untrustworthy ceo, like equity to sell at next rounds, you may want extra protections on it, like conversion dates to something more liquid.

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

#46

Just because your co-founder just now feels like "working on it alone" doesn't give him/her the right to force you out, specially if he or she doesn't have any leverage (as you say, the investor is remaining neutral). So what is preventing you from just saying "no, thanks, I'll keep my 40% and keep working on this". What would he/she do, then?

What keeps the OP from saying they'd rather work alone on it and the other cofounder leave instead, then see what the co-founder want to leave. If they come with some amazing demands, the same demands can be used by the OP to leave.

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

#47

Hold out. Keep working and keep proof you are working and do what is required to keep your stake. Don't give them anything that could be used to justify firing you or the upper hand in any legal battle. Keep any evidence of them violating the contract. Try to get the upper hand in any negotiations. You'll get a better deal at the very least

Sorry you had this happen to you. I had something similar just when the startup looked like it was going to take off the other co-founders tried to shake me down for my shares, threaded me with complete theft of my shares if I didn't accept some insulting, contract breaking amount. The company went on to do unsuccessful ICO scam and things worked out well for me getting out

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

#48
Definitely do not sell / give away that shareholding. It may well become 40$ of nothing, but it could also become 3% of nothing or almost-nothing, and the co-founder will have been paying himself a return when the company gets revenue.

I suspect there may be other personal/personality issues here and he may well like the idea of hacking alone on this, now that it appears to be viable. However, he has an agreement with you, and you made commitment, put in effort too. That's why you have a shareholding.

Do not just give that up, unless he makes it worth your while 'now'.

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

#49
post #2

Did they really pose it to you that way of take the 3% or they'll torch the company? Was it just a bluff because they'll own nothing too? I would talk to a lawyer and possibly the seed investor, but the lawyer first.

The seed investor is remaining neutral. It's not so much that they'll torch the company. They're just saying they don't have the cash so need to reduce my stake. They will budge on the 3% I'm sure, but I don't value the equity much if I'm not involved. I'm not too sure what a lawyer would recommend at this point? I also can't really afford one personally - especially as I may be out of work soon haha..

You need a lawyer, not internet advice.
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