Ask HN: Co-founder wants me to leave but won't entertain a buy out offer • Hacker News Board

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

#171

Post by bravura » Tue, Dec 22, 2020, 8:01 PM UTC

fortydegrees wrote: post #53

dcolkitt wrote: post #27

I would propose structuring the buyout in the form of convertible debt instead of a cash buyout. You give up your equity today, but the LLC gives your a convertible note to cover your valuation conditional on some future funding event. Set a specific valuation target, at which point the note will pay in cash equivalent to a certain percent of the company's equity. That defers the issue of liquidity until if/when the…

This makes a lot of sense. An issue I have with this is that one reason my co-founder wants to split is that they don't really want the pressure of running a startup, and so are unlikely to go on to raise additional money. Could a situation where I get a cash payout, say $20k from the company to sell a certain %, and then the convertible debt to sell more in the future work?

"An issue I have with this is that one reason my co-founder wants to split is that they don't really want the pressure of running a startup"

Whereas it sounds like you have a solid plan to grow the business and generate revenue. As @jedberg says, this makes your interests aligned with the (neutral) investor, and the other founder at odds with the investor.

a) You and your cofounder can't work together

b) One must leave

The investor and one founder can push out the other founder. Who do you think the investor thinks should leave if you reread your quote above?

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

#172

Post by tptacek » Tue, Dec 22, 2020, 8:02 PM UTC

xwdv wrote: post #153

gkoberger wrote: post #117

Can 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…

Wish I had downvote powers to downvote this because it's horrible advice. You literally have nothing to lose by just waiting for the equity to vest and keeping your 40%. Fuck the co-founder. Fuck 3%. Worst case you end up with 40% of nothing. Walking away you end up with 0% of nothing. If you don't stand up for your equity no one will. And if you let him get away with this, down the line he'll do the same shit to som…

Your theory of the case here being that this company has managed to find a set of contracts that establishes 4/1 vesting and enabled a seed funder to invest $100k, but somehow didn't designate any officers of the company or any authority to terminate members of the company.

It could happen! They might reasonably spend $400-$500 figuring that out.

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

#173

Post by isatty » Tue, Dec 22, 2020, 8:03 PM UTC

gkoberger wrote: post #117

Can 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 am not a founder but this does not seem like sound advice. In a month, that 3% pittance becomes 10%. Also, it does not seem that the company has no value at all, if it is primed to make money. The extrinsic value on the 40% is worth negotiating over and not giving it up and walking away. Nobody should do that unless there is gross misconduct or negligence involved.

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

#174

Post by spottybanana » Tue, Dec 22, 2020, 8:03 PM UTC

gkoberger wrote: post #164

lifeisstillgood wrote: post #158

Earlier quoted context omitted.

I disagree - keep the 40%, this will at least force them to come to you with why they want you to leave. The obvious answers are - they are a jerk to work with and they won't admit it - you are a jerk to work with and they won't tell you - something else If it's something else and there is real money at stake both of you should be able to work something out. Otherwise it's one of the first two - which is much harder…

Just to clarify, this person doesn't have 40%. They currently have 0%, and their agreement states they only get 40% if they work there for 4 years. Also, I don't know for sure, but I imagine they know the reason (even if they don't agree with it).

The OP however didn't say who has the power to fire and on what kind of terms. If the other founder can fire him, the 3% was offer for him to leave on good terms. Because they could just fire and OP would get actually 0% and no discussions or negotiations needed.

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

#175

Post by ericd » Tue, Dec 22, 2020, 8:03 PM UTC

rat9988 wrote: post #14

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.

Vesting schedule means he has 0% right now, 10% in a month, and then 1/48th of 40% every month thereafter.

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

#176

Post by newen » Tue, Dec 22, 2020, 8:04 PM UTC

tptacek wrote: post #134

MisterBastahrd wrote: post #125

Earlier quoted context omitted.

I would burn the entire thing to the ground and piss on its smoldering ashes before I would allow someone to take advantage of 11 months of my work just because he thinks he can make more money for himself if he positions himself as a solo founder.

"I would spend $15,000 of my own money and 8 more months of my life during which I deed control of my adrenal system to this stupid controversy and get little else done, and ultimately reach at best the same outcome as I'd have achieved walking away amicably, less expenses, before I would allow someone to take advantage of 11 months of my work".

People talk about how a startup being successful is 90% luck and you want OP to walk away from a successful startup and try again.

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

#177

Post by gkoberger » Tue, Dec 22, 2020, 8:04 PM UTC

stale2002 wrote: post #165

gkoberger wrote: post #147

Earlier quoted context omitted.

From a purely legal perspective, this is incorrect. He's on a vesting schedule, and currently has 0% (his cofounder also has 0% currently, assuming they started at the sam time). They both entered this agreement to only get ~40% if they work there for 4 years (and at that point, they'll likely have to revest). Vesting schedules were created for this exact situation.

I mean, maybe. But that is not a reason to follow your advice and just "give up". If the choice is between "giving up" or getting as much equity as possible, for example by stalling for a month until he vests, but also causing those other problems that you mentioned, then the choice should be clear. Stall, and get the larger amount of equity. He's got nothing to lose, right? If you have nothing to lose, then there is…

They can't stall; that's now how this works. There's no such thing as squatters rights when you're terminated.

Like tptacek said a few times in this thread, they should read the contracts and see if they can be fired, but it's very likely they can be.

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

#178

Post by senko » Tue, Dec 22, 2020, 8:04 PM UTC

tptacek wrote: post #162

senko wrote: post #151

Earlier quoted context omitted.

Advising to give up while there's still room to negotiate sounds like bad advice. At the worst, OP could turn this into a learning excercise on how to negotiate in a tough situation, with zero downside compared to the advice given here. This doesn't have to be a protracted legal battle, but reading up on documents they signed, figuring out their proiories (continue in biz? get at least some value out? etc) and negoti…

I think negotiation is good, if you're realistic about it, and if you actually value what you're likely to get from it. And I agree, they should quickly find an answer to whether they can be fired by their partner (they probably can, for reasons stated elsewhere on the thread, but it's very much worth getting a solid answer).

Agree completely.

It's not me, but if it were, I'd approach the getting fired problem with "look, I build this. You can fire me, but you don't have money for adequate dev and average Joe will run it into the ground in two months. Your greed will make you lose everything", and also approach the investor (if they're hands on) with the same rationale.

Also agree with the point you made elsewhere - this can get gut wrenching (even without any lawyers getting involved) and if you're prone to dwell on negative thoughts, pretty damaging to your morale through the duration. Money spent fighting is not the only downside.

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

#179

Post by tptacek » Tue, Dec 22, 2020, 8:05 PM UTC

stale2002 wrote: post #165

gkoberger wrote: post #147

Earlier quoted context omitted.

From a purely legal perspective, this is incorrect. He's on a vesting schedule, and currently has 0% (his cofounder also has 0% currently, assuming they started at the sam time). They both entered this agreement to only get ~40% if they work there for 4 years (and at that point, they'll likely have to revest). Vesting schedules were created for this exact situation.

I mean, maybe. But that is not a reason to follow your advice and just "give up". If the choice is between "giving up" or getting as much equity as possible, for example by stalling for a month until he vests, but also causing those other problems that you mentioned, then the choice should be clear. Stall, and get the larger amount of equity. He's got nothing to lose, right? If you have nothing to lose, then there is…

This is a partner we all agree is ruthless enough to terminate a productive partner prior to a cliff, but somehow either lacks enough clue or holds on to just enough ruth not to be able to simply fire the partner before the cliff elapses. They probably don't have to accept a deal in order to be terminated.

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

#180

Post by jxm262 » Tue, Dec 22, 2020, 8:05 PM UTC

This is pretty interesting to read through. I'm aware of a thing called "ERISA" , where (I think) there's law forbidding termination before vesting (retirement funds though).

Are there any similar legal protections in place to prevent termination based _solely_ on equity vesting?

And to all the comments here saying to just walk away and keep your peace; ie - just take it as a learning lesson. Which learning lesson is that exactly? Sounds to me like this is a pretty typical situation we engineers can get ourselves into. What other protections (learning lessons) could they have done to mitigate what's happening here?