My two cents…
1) They buyout the shares. If they don’t want to do that then…
2) Sell the company.
If either of these can’t happen the company is dead and everyone parts ways. It’s as simple as that. No free rides here.
Co-founder exiting after pivot – what's a fair exit package?
51–60 of 80 posts
Re: Co-founder exiting after pivot – what's a fair exit package?
#52Earlier quoted context omitted.
The juice has to be worth the squeeze. No sense in fighting against fiduciary duty, minority shareholder oppression, etc., etc. unless there is some sort of value there. This usually means a successful exit before taking action.
I think we're saying the same thing --- that none of this matters, just walk away with the vested shares and be a friend to the company. Diluting his founder shares in subsequent rounds is going to be a nonevent, and diluting him to zero in an acquisition --- unless it's a seller's market or a bidding war --- may be as well. It's just not worth worrying about; I think the only real question here might be "do I take a…
Ahhh yes same thing
Re: Co-founder exiting after pivot – what's a fair exit package?
#53My two cents… 1) They buyout the shares. If they don’t want to do that then… 2) Sell the company. If either of these can’t happen the company is dead and everyone parts ways. It’s as simple as that. No free rides here.
What? No. A departing founder doesn't necessitate either a buyout or an immediate sale. This happens all the time.
Re: Co-founder exiting after pivot – what's a fair exit package?
#54Earlier quoted context omitted.
The issue has nothing to do with whether he worked hard, it has to do with the fact that the work the company did ended up being not very valuable, so much so that the company is doing something completely different. Ultimately he created very little value and therefore is entitled to very little value. The company can just go out of business and start fresh! Raising money is not value. 2-5% could be appropriate. 10%…
Bullshit. He helped build a company that could even continue past a year. That's better than literally 80% of the startup market. Look up BLS statistics. Not only that, he helped build a company that could even bother to attract the attention of investors. Prima facia , someone thinks there's value there. The world is full of jokers talking about starting a business and jokers who have "started" a business but are fa…
Attracting investors is hard, but it's still the easiest part of building a company. If the company pivots, then it's pretty likely that the vast majority of the previous work no longer has any (monetary) value.
Re: Co-founder exiting after pivot – what's a fair exit package?
#55Earlier quoted context omitted.
"Yes, I'll put another hundred grand into the company, but I want a pref issue with an attached board seat."
This person isn't an investor, but even an investor can't sell their board seat. This is getting silly. "Hold on to your founder board seat and sell it later" is not real advice.
Depends on why you have the board seat.
Re: Co-founder exiting after pivot – what's a fair exit package?
#56My two cents… 1) They buyout the shares. If they don’t want to do that then… 2) Sell the company. If either of these can’t happen the company is dead and everyone parts ways. It’s as simple as that. No free rides here.
What? No. A departing founder doesn't necessitate either a buyout or an immediate sale. This happens all the time .
Sorry, you’re right. There should be a third option
3) You keep the shares and hope for the best outcome. (If they don’t want you to then go back to 1 or 2)z
Re: Co-founder exiting after pivot – what's a fair exit package?
#57Earlier quoted context omitted.
That theoretically future investors will be reluctant to invest because the founder 10% is crowding out equity that could otherwise be used to attract key performers down the line.
Nah, they can just issue more. He's already giving up 40% -- plenty of head room.
The exact details are unclear from the original post, but he definitely isn't giving up 40%. If they've only raised the pre-seed (a reasonable inference given the low valuation), then 10% ownership after 18 months points to two co-founders and a combined investor and option pool dilution of 20%. Anything is possible, of course, but unless the deal terms were very non-standard, this scenario makes the most sense.
You're right that 10% isn't necessarily a huge deal for investors, though. Early-round investor models target a specific ownership stake, and the company has to issue the same number of shares for that no matter what the composition of existing shareholders is.
The challenge with founders leaving is more psychological, like an early engineer who's vested a quarter of their 1% grant realizing that they still have to work hard for three years just to get a tenth of what the guy leaving already has. That's an easy way to suffocate the remaining team's motivation. Potential investors will (and should) look into it, but most of the time it's fine.
Re: Co-founder exiting after pivot – what's a fair exit package?
#58Earlier quoted context omitted.
What? No. A departing founder doesn't necessitate either a buyout or an immediate sale. This happens all the time .
Sorry, you’re right. There should be a third option 3) You keep the shares and hope for the best outcome. (If they don’t want you to then go back to 1 or 2)z
No, you don't.