21–30 of 80 posts
Just keep the vested equity. That's why there's vesting.
10% is a large drag on the cap table.
I know the feeling! I left a company some years back in a complicated way, and my instinct was to drill in as well. It seems like a big deal! It really isn't, though.
Cash: You should expect none. If you all documented the unpaid work in the form of contractual deferred compensation (unlikely), then you can insist this be paid out as a requirement of labor laws. If it wasn't documented, then it's a sunk cost. Cash is the company's life blood, so they cannot waste it on employees that are departing or terminated. You shouldn't expect an exit package.
Realistically... If you own 10% in a "new" company (post-pivot), this is a great position for you. Their alternatives are (1) to nuke the cap table in a reset and pivot without you; it's not really worthwhile for anyone to duke it out this way; (2) if they're itching to buy you out (unlikely), you can consider whatever offer they put forward but you have no legal obligation to accept; or (3) everyone just accepts the current state of affairs as sunk costs and parts amicably. (3) is best for everyone involved -- it's mutually non-ideal.
If there's not a ton of cash, they are going to be very hesitant to give much of it to a departing founder.
At the same time, you should be hesitant to just hang onto your equity on the promise that it will be bought out later. If the company isn't successful, you'll get nothing. And if the company is successful, future investors will convince your founder that you don't deserve anything and that they should do shady stuff that will dilute your shares to nothing.
Earlier quoted context omitted.
10% is a large drag on the cap table.
If that actually becomes material, they'll offer to buy shares in the next round. That's the point at which this whole conversation becomes interesting; right now, it's complexity for its own sake. I know the feeling! I left a company some years back in a complicated way, and my instinct was to drill in as well. It seems like a big deal! It really isn't, though.
You can think of your equity in terms of buckets: you get some for having the courage to start, some for the grind, and some for future returns. You're giving back the future returns bucket, not the other two. The vesting mechanism imperfectly maps to this.
Keep the equity. It's not "dead" in any real sense (though people will describe it that way to talk the value down). Dilution will hit it anyway. Again: you are already relinquishing the future value when you stop vesting.
If you have a board seat, consider staying in that capacity. Then at the next round perhaps sell the seat and equity to an incoming investor. Early on, board seats are more valuable than stock and selling that package, perhaps at a discount to the incoming valuation, is fairly compelling. Your exit then fits the playbook for exiting early angels -- it's not weird.
Taking cash is a bad signal in a couple of ways: it signals that you don't believe in the new direction and it signals the remaining founder is making poor financial decisions. Unless the framing is that you took a low buyout to walk, which isn't a great look for anyone.
Message it as what's best for the business, and be firm when they ask you to relinquish the equity. You said it very well in your post: "this is a great idea, but I'm not the right fit. I'll stay on in an advisory and governance capacity, but my last day as an officer and employee will be end of next month." Give the company lots of time and help to move on.
Help the company by setting it up to be so valuable that an incoming investor will want to remediate the situation by sweeping you off the cap table (again, like an early angel).
Depending on your counterparties it might not be possible to preserve relationships. Make sure you can afford litigation. Depending on your financial position this means get a new job or start a new business. When someone says, "relinquish or I'll sue" then you generally want to answer "my counsel will accept service at this address: xyz".
Earlier quoted context omitted.
If that actually becomes material, they'll offer to buy shares in the next round. That's the point at which this whole conversation becomes interesting; right now, it's complexity for its own sake. I know the feeling! I left a company some years back in a complicated way, and my instinct was to drill in as well. It seems like a big deal! It really isn't, though.
Or they'll find a way to dilute the co-founder's shares so they don't have to buy them out.