Ask HN: I am a Co-founder looking to leave startup before a raise, how to handle

Feels like this is the most honourable and sensible approach: everyone tightens their belts as you transition out and they clarify the new direction and make a new hire. You’re out of the picture with probably little or no equity as they do the new raise in Q2 or 3. If you’re not a believer in the direction you can’t stick around. At the same time, they can’t raise right then either. You just have to be honest with the current team about lack of personal enthusiasm with the direction even as you suspect it could end up working out.

Optics aside, before a raise is actually the best time to leave because it means that a replacement can be budgeted for in the round (I have a friend raising with the expectation of a new CTO at the moment, although that departure was planned). VCs in later rounds often prefer key roles to be occupied by hires they think are better suited to scaling a company even if the cofounders are willing to retain responsibility; a cofounder who questions their own suitability can achieve the same end with less friction. Provided they're convinced it reflects you doubting yourself rather than your co-founder or the suitability of the solution for the market, which may involves more honesty about how little you want to work on the problem rather than less. A team pursuing an adtech/defense/crypto pivot despite an original founder's visceral dislike of that industry is much less of a negative indication about its potential than a team pursuing it despite a founder's unexplained doubts (especially if you've been the lead on the commercial side).

If your dislike of the new model is not that visceral then staying on as a paper adviser avoids the external appearance of serious discord, and phasing out your involvement avoids an abrupt transition, but you can't be dishonest about no longer doing the day-to-day stuff with investors.

Genuinely curious -- why would OP give away shares to someone else? Those shares were vested in the past as a reward for their contributions so far, and commensurate with the risk OP took in a venture that could pivot into something else. So shouldn't they keep those shares as a reward but cease further vesting? I thought this was the whole point of why founders vest their own ownership. If they want to bring on a CTO they will have to dilute everyone, but this is the consequence of pivoting into a new space that no longer has founder-market fit (i.e. the original idea was risky as it led to a pivot away from a founder's competency, therefore everyone should dilute equally as a consequence).

I do a fair bit of investing and advising (both for startups and venture funds). If you are the founding CEO and you are looking to leave, the most likely outcome for a company that's early, and without any sort of product market fit, is the company will die.

If you don't tell investors you want out, raise money, and leave shortly thereafter, you will burn all of those relationships and damage your reputation - it's a small world. It's also very disingenuous. Investors are betting on a committed team, that will go through hell and high-water to try to make this venture work - you already know you aren't that committed. And no one can be more committed than the CEO.

If you can't get behind the pivot, the only other thing you can do is work with existing investors (at the seed stage this isn't really an option) or find a founder with previous exit, an EIR looking to step into a company, our an early employee / non CEO cofounder who exited and wants to do it again - and see if they'd be interested in the CEO role - It's a find your own replacement scenario.

As far as your equity goes - you'll get diluted a bunch, but that's okay. It's going to be hard to hear, but no real investors will allow a non-participating, former founder, of a company that doesn't have a product or any traction (in your case your starting over with a pivot) to keep 10%. That's just too much of the cap table for not enough of a business / individual contribution. It's sucks, but if you stuck around and made it to a priced round, all of your equity would get clawed back and be subject to vesting again anyway (most likely). It's just the way it goes. You deserve something for your troubles and work, but it's not going to be 10%, not going to be anywhere close.

Good luck.

One question is that is there any financial upside for you if you stay through the raise?

If there isn’t then you can leave anytime. No one will bother you.