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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

#341

Post by nickff »

CyberDildonics wrote: post #334
nickff wrote: post #304

Earlier quoted context omitted.

Non-tech founder (NTF) started it, so I'm guessing NTF is CEO. NTF is probably on similar vesting schedule, but won't fire himself. The fact they're having these conversations means that NTF has probably made up his mind, and decided this is not going to end on mutually amicable terms. It's possible that TCF can hang on until the cliff, but I doubt that'll happen, and it's not going to be pretty if they do. There are…

> There are all kinds of ways NTF can reduce/destroy NTF's equity What are those ways? The only sane thing is to go and talk to lawyers. In what world is it going to be the best option to let yourself be used and abused?

NTF and investor can simply issue more shares under any number of arrangements; cap tables are not written in stone. If they have a hard time, they might also start a new company, and liquidate all the assets from the current company.

Every ongoing business arrangement relies on goodwill and intent to survive, like any other relationship. Consulting a lawyer with expertise in the area may be a good idea, but the best solution is probably the cleanest and easiest one.

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

#342

Post by qbert »

samfisher83 wrote: post #135

Everyone here is saying hire a lawyer. If OP actually has to go into litigation, It seems the cost of a good lawyer > value of the company.

You can often do an initial consultation with a lawyer for free. They can let you know what general options you have if any and then if you need them to execute on any of the options you pay them. They can give you an idea of the costs up front.

I've done this before in regards to a startup project I was working on with 2 others and the information was very useful and totally free.

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

#343

Post by legutierr »

valuearb wrote: post #336
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.

The founder and investor can fire him and easily dilute him down to 3% without violating any agreement. He’s got zero leverage here unless his agreement had anti dilution protections.

I am not a lawyer, but...

Dilution of the sort you seem to be describing would expose the founder and investor to a minority oppression lawsuit from OP which could result in monetary damages, and/or the forced sale of all or part of the company at a price determined by the court.

You can't just dilute people without there being any consequences, unless the new shares are being sold at a justifiable price and at an arm's length. The attempts made so far by the founder to push out the OP would color any future dilution, making it harder to justify that dilution in court, even if on the surface it appears legitimate.

If the shares are not sold to a third-party arms-length investor, OP would have to be given the opportunity to participate in the share issuance on a proportional basis. If the founder and investor conspire to issue shares to themselves with the sole purpose of diluting OP, not only would that dilution possibly be reversed in court, but further sanctions could be imposed on the founder and investor as well.

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

#344

Post by learc83 »

ericd wrote: post #175
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.

The OP said it was a 4yr reverse vesting schedule and that they currently owned 40%.

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

#345

Post by Kim_Bruning »

hvaoc wrote: post #132

You got nothing to lose all on your own (except time wasting with this person), but if that's worst enough. You have two options 1. 40 % of Nothing, other part gets the same deal. 2. You get 40 % of whatever this business is worth for. The other party gets the same. You lose together or gain together. That's a fair game in a Startup as founders. Don't accept anything else, if you do they just managed to bulldoze you…

I was curious, so I tried googling for "Two broccoli or Four broccoli" because I actually hadn't heard of it before. I didn't get any hits.

Now I'm really curious! Can you explain?

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

#346

Post by neosavvy »

I’ve been through this. Twice.

Once it got hostile. Allocate some money to hire a lawyer. Have your lawyer send him an email as a first step with your buy out terms. This would be skipping a step I went through which was the disagreement where we realized we weren’t good for each other in business anymore.

Let your partner sit on that a while. He has no leg to stand on, and if folds and competes with an identical business you can sue him on grounds against his Fiduciary Duties to the current business.

Maybe also google “Fiduciary Duties”.

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

#348

Post by CyberDildonics »

nickff wrote: post #341
CyberDildonics wrote: post #334

Earlier quoted context omitted.

> There are all kinds of ways NTF can reduce/destroy NTF's equity What are those ways? The only sane thing is to go and talk to lawyers. In what world is it going to be the best option to let yourself be used and abused?

NTF and investor can simply issue more shares under any number of arrangements; cap tables are not written in stone. If they have a hard time, they might also start a new company, and liquidate all the assets from the current company. Every ongoing business arrangement relies on goodwill and intent to survive, like any other relationship. Consulting a lawyer with expertise in the area may be a good idea, but the best…

I don't think letting someone steal from you is ever going to be the "best" solution. Doing what you described is not new or inventive. It isn't going to catch an experienced lawyer off guard.

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

#349

Post by Mockapapella »

moomin wrote: post #19
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.

I’ll just add: write down everything. Guy is trying to run a bait and switch on you and there’s a very good chance this ends up in court. Be ready.

OP make sure you do this, it is incredibly important. I was in a similar situation with a real dick of a co-founder who constantly pulled these bait and switch tactics. I would even go so far as to write down behaviors they exhibit and times where they tried to strong arm you in the past. Keep logs of everything, insist on communicating through means by which you can record the conversation. Writing things down may not stop their behavior, but it will seriously help your case should this turn into a legal fight.

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

#350

Post by Blahah »

gkoberger wrote: post #263
thomasahle wrote: post #234

Earlier quoted context omitted.

If the company has already taken investor money, say x dollars, for 10%, doesn't thst mean the company is worth 10x dollars?

It's complicated! I'll do my best to explain it simply, but there's a lot of nuance. There's a few different valuations. There's how investors value it, which can be different between investors. There's also a 409a valuation, which is what the government deems it to be "actually worth". But since the OP hasn't vested, the number that matters here is the strike price at the time the OP got their shares, which is likel…

Can the company in this situation generally force the return sale of the shares for the strike price at the time the shares were issued? And assuming 1/4 of the shares are vested after 1 year, can the company still buy those vested shares? How does valuing those work?
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