Pretty interesting article in the way that you explain some really diplomatic way to handle these kind of situation. But I really think the best way to avoid these kind of problem is to set each founder role in the company. I just wrote an article about that as a reaction to your article: http://news.ycombinator.com/item?id=5029029
How To Fire A Co-Founder
21–29 of 29 posts
Re: How To Fire A Co-Founder
#22I think oftentimes "firing" is the wrong way to look at this. I founded my startup with two cofounders. We all agreed, with the benefit of hindsight about eight months in, that we were the wrong guys to be working on this together and that we should step back and look at the situation. I started that process but they could see it too. We analysed the problem (their skills were more ephemeral than executional… network…
>they had both invested cash and time
I have a question - when calculating % of shares for founders, do you calculate the time put in on top of cash, or only the cash being put in?
Say you have three founders, one who puts up a larger portion of cash but doesn't do any work, and two others who actually do consistent work and put in some cash. Should the ownership be divided by cash alone?
Re: How To Fire A Co-Founder
#23Quick question. Let's say you both own equity on a 35-35 basis (with the investors owning the remaining 30%). I don't know if this is the exact right number. Anyway, your cofounder decides to can you and the board is on his side. You still own 35% of the company, right? Is there any way for the other founder to screw you out of that without screwing himself too?
Re: How To Fire A Co-Founder
#24Quick question. Let's say you both own equity on a 35-35 basis (with the investors owning the remaining 30%). I don't know if this is the exact right number. Anyway, your cofounder decides to can you and the board is on his side. You still own 35% of the company, right? Is there any way for the other founder to screw you out of that without screwing himself too?
That depends on vesting. You own whatever portion of the 35% that has vested based on your contract and have legal rights to it, although your contract could have repurchase clauses that allow the company to buy back shares at a price you may not like. Vesting clauses are common for cofounders as well as employees, and this is usually a good thing to avoid the possibility of a cofounder working for a couple of months and then leaving with full ownership.
Re: How To Fire A Co-Founder
#25Quick question. Let's say you both own equity on a 35-35 basis (with the investors owning the remaining 30%). I don't know if this is the exact right number. Anyway, your cofounder decides to can you and the board is on his side. You still own 35% of the company, right? Is there any way for the other founder to screw you out of that without screwing himself too?
That depends on vesting. You own whatever portion of the 35% that has vested based on your contract and have legal rights to it, although your contract could have repurchase clauses that allow the company to buy back shares at a price you may not like. Vesting clauses are common for cofounders as well as employees, and this is usually a good thing to avoid the possibility of a cofounder working for a couple of months…
Sure, I guess the circumstance that would concern me is if I worked for years.
Re: How To Fire A Co-Founder
#26I think oftentimes "firing" is the wrong way to look at this. I founded my startup with two cofounders. We all agreed, with the benefit of hindsight about eight months in, that we were the wrong guys to be working on this together and that we should step back and look at the situation. I started that process but they could see it too. We analysed the problem (their skills were more ephemeral than executional… network…
>they had both invested cash and time I have a question - when calculating % of shares for founders, do you calculate the time put in on top of cash, or only the cash being put in? Say you have three founders, one who puts up a larger portion of cash but doesn't do any work, and two others who actually do consistent work and put in some cash. Should the ownership be divided by cash alone?
Of course not. Time investment is also a factor to consider.
Re: How To Fire A Co-Founder
#27Earlier quoted context omitted.
That depends on vesting. You own whatever portion of the 35% that has vested based on your contract and have legal rights to it, although your contract could have repurchase clauses that allow the company to buy back shares at a price you may not like. Vesting clauses are common for cofounders as well as employees, and this is usually a good thing to avoid the possibility of a cofounder working for a couple of months…
Sure, I guess the circumstance that would concern me is if I worked for years.
Then there's nothing to worry about (if proper vesting clauses are in place), since you'll have vested (and thus, would keep on your way out) the proper amount of your 35%.
Re: How To Fire A Co-Founder
#28Earlier quoted context omitted.
I think the first step is having a series of frank conversations about the issues. If nothing changes / get fixed, then I think you need to move to a mode where you take action. In some cases, your co-founder will decide to part ways or resign as they will know things are not working and may be quite unhappy themselves. If it gets to the point where you are actually firing someone, it should not be a surprise to them…
It helps if before there is a problem you accuse them of mental instability and create a culture of bias and ostracism and lighten their workload. Prevent them from participating in any way with the running of the company. Send them on wild goose chases. Assign them things that do very little and will never see the light of day. This has the double effect of giving them more time to worry about the immense workload t…
> If they weren't crazy before they sure will be in a few months
And you want to consciously cause that to happen to a person?
Woa. Considered a career as a Sith Lord?
Re: How To Fire A Co-Founder
#29I think oftentimes "firing" is the wrong way to look at this. I founded my startup with two cofounders. We all agreed, with the benefit of hindsight about eight months in, that we were the wrong guys to be working on this together and that we should step back and look at the situation. I started that process but they could see it too. We analysed the problem (their skills were more ephemeral than executional… network…
>they had both invested cash and time I have a question - when calculating % of shares for founders, do you calculate the time put in on top of cash, or only the cash being put in? Say you have three founders, one who puts up a larger portion of cash but doesn't do any work, and two others who actually do consistent work and put in some cash. Should the ownership be divided by cash alone?
Work it out this way: founder's round is the first round. That's before any cash goes in. Who is going to be quitting their job is usually the best indicator. If everyone is quitting their job, and everyone has technical skills to offer, and everyone is 100% focused then presumably it's a 33/33/33 split. After that has been done, money goes in either as a loan or for equity at a price agreed by the company. So if a founder put in $100,000 for 10% of the company, all the founder's round equity would be diluted (33*0.9=29.7%).