101–110 of 435 posts
Get a lawyer or at least someone who deals (talks) with them, asap, you are in a war. Important question: If they gave notice today would the notice period "help" with staying longer than 1 year and hence, not falling into the 1 year cliff? All further advice depends on above question, so once we know the answer we can give proper advice.
Find someone with a fiduciary duty to you who has seen this before.
Since you have a 1-year cliff and have only been there 11 months, sounds like as of today you have 0% equity. So the immediate question may be whether your co-founder can fire you. 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…
10% might be a good target from another perspective -- the investor put in 100k to get to 10% -- is that about how much "sweat-equity" that the OP has put in? Alternatively, just pretend the vesting was happening monthly.. how much is that 9.16%? The surviving founder does need enough incentive to continue. The OP should make sure it is hard equity of the same class as the investor's shares, where there are tax liabi…
(a) You need a lawyer who deals with this kind of stuff regularly and has a realistic and well-informed view of what the outcomes are going to be. Most lawyers aren't like this.
(b) Legal gets expensive very fast, especially as it transitions from advice to negotiation and document review. At this scale of opportunity (the way the company is described), I'd stick to get getting advice!
(c) Past the "can I be fired" question, which I agree is urgent (and probably predictable), a lot of the negotiation here isn't going to be about the law so much as it's going to be about what both sides are willing to accept. If you have friends who have been in founder disputes like this, their input is going to be just as valuable as the lawyer's.
Tell them to shove it. Something tells me your 40% is worth a hell of a lot more, otherwise they wouldn't be trying to screw you out of it. Lawyer up.
That's the controlling factor here, and of course HN has no insight into those docs. Depending on what legal jurisdiction you are in, you might have some other rights/obligations.
Either way, please consult a lawyer who has helped clients through this kind of situation before. Preferably a local one.
After doing so, you may want to reach out to the investor and make sure that your co-founder isn't controlling the narrative with them. Again, the lawyer probably has some advice on this approach.
If they're a neutral party, it might make sense to get them involved, or at least threaten to get them involved. You and your investor could potentially vote out your other cofounder, and knowing that might make your cofounder change their tune.
On the flip side, if the investor is a friend of your cofounder, be aware that they have a lot of leverage here and could vote you out.
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 OP keeps 40% and doesn't do work for the company, the company is highly unlikely to succeed. The company needs to be able to dish out equity to future employees and likely investors to succeed, and having 40% locked up in an entity that doesn't do anything for the company is not going to be attractive to those future participants.
- If OP keeps any equity, they should be doing it with the hope that the company succeeds, so that the equity will be worth something. Don't keep equity to spite your co-founder. It's not going to benefit you in any way if that causes the company to fail and your equity ends up being worth $0.
- If OP wants a fully cash deal, it's not realistic if the other co-founder doesn't have a ton of personal cash (most don't). Raising a round to buy out a co-founder at 40% of valuation isn't something ANY investor is going to want to do. That's almost half of an investment thrown in the trash, from their perspective, and they'd probably rather invest in a less complicated competitor.
- It sounds like the human relationship between OP and co-founder is broken and it is not worth pursuing working together, as that alone would likely lead to the failure of the company even if everything else works out.
That said, my thoughts would be:
(a) Stall for a month to get to the cliff so you have slightly more leverage.
(b) Work out a deal where you're not keeping that much equity, but you're keeping an amount such that the company is still bound for success, and that your smaller amount will actually be worth something. Owning 40% of $0 is still $0. Owning maybe 5% of $1 billion is something.
Talk to a lawyer.
Get a lawyer or at least someone who deals (talks) with them, asap, you are in a war. Important question: If they gave notice today would the notice period "help" with staying longer than 1 year and hence, not falling into the 1 year cliff? All further advice depends on above question, so once we know the answer we can give proper advice.
Can't emphasize this enough. This is a year of your life. Find someone with a fiduciary duty to you who has seen this before.
This company sounds pretty doomed, regardless of the outcome of this conflict. Take lessons learned, cut and run.
I'd say first things first. You have 11 months and a one year cliff. Find a way to stall for a month and your position gets much stronger. This is a great environment to find a way to stall. Tell your co-founder to write up a proposal so that you can have a lawyer look at it. That's easy to turn into a month of stalling.
I can't imagine (but would be very impressed with tech co-founder) if a year old system could run without any maintenance for a month. Seems also unlikely that tech co-founder could be replaced fast enough to continue reliable service seamlessly. I don't think non-tech co-founder realizes that if tech disappears, it will kill the baby.