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

This is a negotiation that's already started. Any communication about what they are or aren't interested in is a negotiating stance, or opening offer, which may be very far from what's possible if you properly understand your position/needs.

Too bad there wasn't a 'shotgun clause' from the beginning. (Then, even if you didn't have cash-on-hand, you could seek other financing/investment to win a fair/orderly divorce process. There are many investors who specialize in SaaS businesses.) Still, insisting on a bilateral agreement that whoever is able to pay more gets to buy the other out might be a reasonable negotiating goal for you, depending on other factors.

Your vesting cliff is very important. After the 1 year, there's zero justification for not delivering a full quarter of your shares (~10% of total equity). So I'd see retaining 10% equity (or at the very least 11/12th prorated if you do them the favor of leaving ASAP) as the absolute baseline you should consider.

It's unclear if your use of 'they is for gender-neutrality or indicates your co-founder & investor share this desire to get you out. But if the investor is neutral, or swayable, or cares about their reputation for treating technical cofounders, they may be all-important to a fair & amicable resolution.

That the co-founder would try this indicates some combination of real difficulties in the working relationship, differences in your perceived values of each other going forward, and/or a willingness to play hardball in grabbing more of a success in contravention of earlier agreements. To the extent it's that last factor, there are other ways you can still be edged-out, via dilution/re-orgs/etc, later on even if you resolved the current negotiation amicably. That's not a reason to run or give up, but something to keep in mind: a seemingly attractive result that's not ironclad could be further reneged. So you might give a little more, with the right protections, so that the result is more aligned/sustainable/enforceable in the future.

Good luck!

>Same goes for giving you the 40%... there's no way they can build a company when someone not involved owns a huge stake.

This actually happened to one of my professors, which represents the opposite end of the absurdity. He started the company with a friend. The company pivoted to a completely different direction and the friend left because it was outside his expertise. My professor wanted to "do the right thing" and preserve their friendship, so he let the friend keep all the equity. In the end, the friend ended up getting millions of dollars despite producing 0 value to the company.

There has to be some middle ground here, like offering options to the company to buy back OP's shares at the current valuation plus interest. If company still can't afford a buyback a few years later, then they didn't grow the company enough to deserve to own those shares anyways.