Call his bluff. He’s trying to cheat you.
Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
221–230 of 435 posts
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#222> We were 51/49% to them and took a small round of pre-seed funding (~$100k) so our cap table is approx 40% for me and co-founder, 10% option pool and 10% investor. We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff. Could anyone tell me what this means in plain English (preferably, ELI5)? I have no idea what term sheets look like in detail but I would really like to learn.
It's a breakdown of the ownership of the company
Op - 40%
Co-Founder - 40%
Option Pool - 10%
Angel Investor - 10%
- The investor owning 10% of the company means that they think the company is worth $1,000,000 right now. ($100,000 x 10)
- The 4yr vesting with 1 year cliff means the Op gets 1/48th ownership of the company every month over the course of 4 years. BUT BUT BUT they only get the first 1/4 (12/48th) until they have been at the company for at least 1 year. If the Op leave before 1 year, they get nothing.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#223Negotiate up to 6%, get feedback, stay polite, then on to the next venture. If they're acting this way, I don't think the co-founder is worth the massive risk you'd be wasting another few months.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#224You can keep holding the stock and every couple of months demand a dividend payout from the company revenue.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#225Can 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.
Potential worth != real money in the bank.
Also, seen from the other side: They made a contract offering 40% in four years (conditionally) - most importantly only relevant when the company/idea survive that long and are thus profitable/worth something. Why should they suddenly pay this (or a meaningful fraction?) out after one year? Or give an "outsider" 40%, which will most certainly be difficult to explain to future investors?
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#226Sounds like you need legal advice from an experienced business lawyer.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#227Hey.
As a former lawyer, I'm going to echo the many comments in this thread to consult a lawyer. If you find a good one with relevant experience, it should only take a few hours at most to properly understand the exact situation you are in and know your options. Your rights could vary drastically based on the specifics of the company and the employment/equity agreements you entered into, in addition to where you and the other founder are, and where the business was incorporated or registered. If there aren't formal agreements to this, but you have emails or other documentation that's short of a formal contract, that can also be relevant. Regardless, the co-founder and the investor owe you, an equity holder, a fiduciary duty. The threat to tank the business if you don't surrender most of your equity is a pretty cut-and-dry breach of that fiduciary duty, and you are fully within your rights to demand relief, which could be monetary, but could also be equitable, such as requiring your co-founder to relinquish control of the company, or to transfer ownership of the company's source code, domains, and IP to you. Whether any of this relief would be practically available to you would require expert legal advice and would depend highly on the specifics of your situation.
To others in this thread, if you're looking to join a startup as a technical co-founder like this, 'We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff.' is not standard in the same way it is for other early employees. In this situation, your equity should be in real shares from the get-go, not options that vest over time. You should also have a partnership agreement or similar document that outlines how board-level decisions are made, and for a business with a few mostly-equal owners, such decisions should typically require consensus of the owners, even if one person controlls 51+% of the equity. This is the most reliable way to protect your interest in the business, and this is what true co-founder status looks like. If the O.P. had asked for this before signing on, my guess is that the co-founder would have balked, and the O.P. would have known from the get-go what the dynamics would be, and could have walked or insisted on a higher salary to reflect the fact that he's being treated like an employee not a business partner.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#228Can 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.
I’m spitballing here but maybe a middle ground is to convert some percentage of shares to equivalent to the seed investor shares. Assume, for the sake of argument, he was at one year and due 10%. Convert those share to the same terms as the seed investors.
No cash upfront, equity is somewhat preserved and the rest becomes a source of potentially passive income.
Note. He has to leave. The situation is now untenable.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#229Do 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 it really were 40 percent of nothing, the other party wouldn't want it so bad ;-)
>the other party wouldn't want it so bad ;-)
Value to a founder does not imply value to the market.
Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer
#230Earlier quoted context omitted.
The non-technical co-founder is trying to steal the fruits of OPs labor and slash his equity by more than 90%. This isn't sabotage, it's a labor strike until an equitable agreement is found.
> This isn't sabotage, it's a labor strike Exactly. Big difference between breaking something and letting something break .
You can frame it that way if you want but it's just not true.
OP has been doing X for 11 months, for free (well, for equity). Right now - today - he owns that equity, regardless of what his partner is asking him to do. If he stops doing X what is his argument against his partner and the investor - who own 50-60% of shares - saying that he's abdicating his duties?