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When a co-founder dies
41–46 of 46 posts
Re: When a co-founder dies
#42Earlier quoted context omitted.
It might be a good idea to make a break and restart the idea with just you. That's not ethical. Whatever equity Greg had belongs to his estate.
This is a very very hard problem. The fact is that in a startup you own 50% because you are there working. Once one founder is no longer present it's very hard to claim the 50% is still valid.
It's hard, but necessary. My cofounder and I just hammered out our Operating Agreement, which contains special language for exactly this scenario. Amid such tragedy, it's best to have the legal framework 'on rails' so that you don't really have to think about it. Anybody dealing with the death of a friend and business partner has enough on their plate already.
Here's our solution, in case other people are interested:
In event of the death of a member (we're an LLC), that member's economic interests revert to their estate, but the inheritors lose all power to vote or make decisions.
Within 180 days, the surviving member can elect to buy out the deceased member's interest at a reasonable valuation. There's some legalese in determining "reasonable valuation", but the upshot is that the surviving members may take complete control of the company so long as the inheritors of the deceased are properly compensated.
If a buyout doesn't occur, then the inheritors of the estate become silent partners unless there's a mutual agreement to instate them as a full partner.
Despite what some people say, vesting is not always the answer. A lot of vesting mechanisms leave the door open for somebody to get screwed out of their rightful share. Personally, I'd rather see someone undeserving get rewarded, rather than see a deserving person get shafted.
One more thing: To Rex (the OP), my sincerest condolences. Losing a business partner is hard, losing a close friend is orders of magnitude harder. I think I can speak for the whole HN community in saying that you have our sympathy and understanding.
Re: When a co-founder dies
#43Earlier quoted context omitted.
This is a very very hard problem. The fact is that in a startup you own 50% because you are there working. Once one founder is no longer present it's very hard to claim the 50% is still valid.
It's hard, but necessary. My cofounder and I just hammered out our Operating Agreement, which contains special language for exactly this scenario. Amid such tragedy, it's best to have the legal framework 'on rails' so that you don't really have to think about it. Anybody dealing with the death of a friend and business partner has enough on their plate already. Here's our solution, in case other people are interested:…
First to Rex, my condolences.
I just wanted to add a suggestion over the reasonable evaluation and the option to buy. In our startup, the company has taken life insurance on both founders and half of the insurance amount almost match a valuation we as founder agree on at the start of each year. This is mostly for the first year(s) where the company is not getting that much revenues.
So what happens if one of us dies is that their family will get half of the life insurance for their equity. The other half is to help the company cope with the fact one of us is gone. This may sound expensive, but in fact for guys in their thirties and in good shape it is quite cheap.
Re: When a co-founder dies
#44Earlier quoted context omitted.
That depends on what stage you were at. If you both had an idea to 'do search' and had only got as far as picking a name. Then after another 10years of work by you alone you are ready to take on Google, does your late partner's partner get half? If you need to bring in investment or new people and give them options who has to agree to that dilution? If in a few years there is a row in the family about who owns your l…
That depends on what stage you were at. No it doesn't. If a person owns property (in this case, equity), that property passes to his estate when he dies. If you both had an idea to 'do search' and had only got as far as picking a name. Then after another 10years of work by you alone you are ready to take on Google, does your late partner's partner get half? And if someone has written most or all of the code for a sta…
I think a restart is usually ethical provided you don't use any assets from the previous company (besides perhaps your personal expertise).
In the former situation (just a name picked), after a restart you need a new name.
In your situation (dead guy wrote lots of code), after a restart you have to throw away the code.
Re: When a co-founder dies
#45Press on. Make him proud
Re: When a co-founder dies
#46It is said "You'll never get over it, you'll only get used to it."
You don't want to forget, and you shouldn't forget, someone as close as that. You will, however, learn to go on. You'll become accustomed to having the memories, you'll get used to it, and move forward.
Even though I don't know you - thank you for sharing, and my thoughts and best wishes are with you.