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

#351

Post by _0ffh » Wed, Dec 23, 2020, 1:37 AM UTC

digitaltrees wrote: post #313

gonehome wrote: post #251

Earlier quoted context omitted.

Yeah - I don't see how people can tell them to just give up. Go scorched earth - what do you have to lose? Know the other guy is hostile and don't trust them to do the right thing. Consider your options outside of that and talk it over with the other investor. If you're the technical cofounder here you're probably in a stronger position to negotiate. If you can get the other investor to see what's happening here (you…

This advice will almost certainly result in no deal and leave all parties worse off. Instead, I would have an open, honest conversation, listen from a place of empathy and generosity and seek a compromise. The truth is, unless your cofounder has the right to terminate your employment, then continue working and try to create as much harmony as possible. Co-founder disputes are awful and usually result in the death of…

Well no, fuck them. If the choice is to get some crumbs of a cake I was vital in baking or to throw the whole cake, I'd throw it unless I was starving otherwise! It is not a good move to let someone get away with something like this. Also, it will mark you as a pushover in future endeavors with other people, should they get wind of what happened there. Do not let anyone get away with that kind of antisocial behavior, if you can help it, is my two cents.

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

#352

Post by valuearb » Wed, Dec 23, 2020, 1:38 AM UTC

legutierr wrote: post #343

valuearb wrote: post #336

Earlier quoted context omitted.

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 ar…

I’m not a lawyer either, but these risks are easy to skirt.

First they have time to just fire him, and without contractual protections she/he’s out before vesting a single share. Most US states are At Will employment, meaning they don’t need a reason. If the CTO wants to contest the firing, where will they get $30K+ to pay a lawyer sue over a nearly worthless business?

If he/she is able to vest their first year before getting fired, but they then dilute the CTO further, where is the CTO going to get $30K+ to pay their lawyer sue over 10% of a nearly worthless business?

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

#353

Post by gkoberger » Wed, Dec 23, 2020, 1:39 AM UTC

Blahah wrote: post #350

gkoberger wrote: post #263

Earlier quoted context omitted.

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?

Basically, since the OP didn’t vest. It’s only worth anything if it vests, so in this case it’s less about forcing and more about just tidying up the paperwork from a legal place.

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

#354

Post by newbie789 » Wed, Dec 23, 2020, 1:41 AM UTC

I hope this works out for you! I am not sure how I could contribute much insight without quite a bit more detail, this strikes me as "Should I hire a lawyer?" to which I'd say "yes."

Without knowing how your partner is inclined to act or respond to negotiations, or what your negotiation strategy is and how likely it'll be effective in this dynamic it's all a giant question mark.

Essentially it's like asking a website "How do I win a fistfight?" except unlike actual fistfights, there's an entire profession and industry dedicated to people that can (hopefully) act effectively as your proxy.

If you're genuinely dead-set on not getting a lawyer, then you've got a fistfight scenario on your hands. If that's what you're looking for, make sure that you've taken stock of your capabilities and those of your adversary and form a strategy accordingly. This answer is basically as vague as the question though.

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

#355

Post by bodegajed » Wed, Dec 23, 2020, 1:41 AM UTC

I'd say take the 3% and continue. Current price has little or no value anyway. If you take 3% and just chill for 2 years you get a higher price per share. Don't let the emotions run over you right now

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

#356

Post by mooreds » Wed, Dec 23, 2020, 1:51 AM UTC

ohyes wrote: post #248

It sounds like you own 40% of something fairly valuable and now that it's 11 months into your contract other founder who needed your help is getting greedy and trying to push you out before you are owed anything. You said it yourself, you've grown hugely, you're dominating SEO since you joined, and built loads of products. This is your 'partner' getting greedy after you've done a lot of hard work. It wouldn't have ha…

> Your 40% is worth $400k based on that initial funding valuation, right?

One quibble. That is typically not how it works, since his shares are likely common stock and investors get preferred stock. In my experience, the range of value for common stock in private firms varies widely, but it is never one to one with preferred stock (the golden rule being, of course, "who has the money makes the rules").

I have seen values ranging from 10% to 30% of the preferred stock price. Now, of course, I only have a few data points, so ymmv, but founders shouldn't delude themselves that their sweat equity is valued the same as preferred stock.

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

#357

Post by theptip » Wed, Dec 23, 2020, 1:59 AM UTC

nickff wrote: post #310

theptip wrote: post #308

Earlier quoted context omitted.

> I'm the technical co-founder of a pre-revenue startup. 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. Note the “reverse vesting” bit, this caught me out too. This is not the standard employee “you have zero until your…

The non-tech founder is likely CEO (as they started in, and likely got the investor on-board), so they can likely fire the TCF without a vote. The board, likely made up of NTF, TCF, and investor could then fire the NTF. In any case, this is not going to end nicely, and I would recommend walking away with whatever equity can be had without setting the counter-parties against TCF. If NTF and investor get really mad, th…

Wouldn’t firing the TCF (or any key staffing decision) require a board vote at this stage? Not to mention potentially being a breach of the NTF’s duty of loyalty to the shareholders if they don’t have a good business reason for firing them? In other words the NTF would need to have the investor on board to make that move.

IANAL so interested to know how folks with more experience have seen this fact pattern play out.

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

#358

Post by thothamon » Wed, Dec 23, 2020, 2:00 AM UTC

Talanes wrote: post #335

mattmaroon wrote: post #266

Earlier quoted context omitted.

I know you mean well, but this could not possibly be good advice because there isn’t enough information in that post for even a lawyer to give good advice. You don’t know what’s In his contract. Maybe his cofounder can’t fire him. Maybe He could but that would trigger the vesting. Maybe he could put it to the board and fire his cofounder. Maybe his cofounders threat that it’s 3% or nothing is bluffing. It doesn’t rea…

>Internet advice about things like this is always bad even when it is meant well Even if it's telling you to get a lawyer?

It's difficult to account for every possible case while still remaining brief.

Seeking expert knowledge is good advice in most situations. If you have the time, and the issue is potentially costly or valuable to you, then you should almost always gather the best information before deciding.

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

#359

Post by phkahler » Wed, Dec 23, 2020, 2:01 AM UTC

gabereiser wrote: post #307

phkahler wrote: post #231

Earlier quoted context omitted.

Then they have established a lower bound on the value of their shares.

Bingo! Now you know it’s BS. This really sucks. It’s not a good place to be. The fact that they won’t take a buyout from you means they are pulling a fast one and someone probably said “You know, it would look better if it was just you” somewhere down the road. Don’t sell, don’t give, don’t walk away. Stand firm. This was a binding agreement they can’t get out of. You have all the power here. You know you have someth…

>> It will pay off in the long run.

For both of them if partner can separate head and ass.

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

#360

Post by jiveturkey » Wed, Dec 23, 2020, 2:07 AM UTC

andjd wrote: post #227

Hey. 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…

> If the O.P. had asked for this before signing on, my guess is that the co-founder would have balked,

disagree. If the OP didn't already have this standard type of cofounder arrangement, the other guy wouldn't be asking him to leave. He'd be telling him.