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Ask HN: My startup has concealed from me that it raised funding. What to do?

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Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#91
Looks like there is plenty of good what-to-do advice already, so I'll just give some how-to-do advice:

Use the Teddy Roosevelt tactic of speak softly but carry a big stick (you already have one, since you're the engineer and the product is on your shoulders). As in, hint to them that you have sought legal counsel and that, if worse comes to worse, you wouldn't mind sudo rm -rf the entire code base. Be sure to be in the passive tone and say things like, "I had no choice but to be forced to seek advice from counsel", "this project means more to me than my life, and it saddens me greatly to see you guys do this to me", "please don't force me to take all time and effort I've put into this and go away forever", "I want to be working on fixing this and building a future, than crying at home and writing bitter memoirs", etc.

In general when speaking to them, highlight the fact you're the victim and (in the words of 4chan) the betafag. This is because you people are already in a highly emotional confrontation, and if everyone gets their backs up, chances are everyone except the lawyers will lose money (also, lawyers don't do anything except charge and tell you to settle, so you can't depend on them). The point is to act nice, but hint between the lines the lifeline of this business as well as the reputations of everyone involved is in your hands.

If the founders give in or compromise to your demands (which they should if you act like a reasonable human being who they have hurt and not an aggressive asshole out for revenge), let it all be water under the bridge - the founders have, no doubt, learned their lesson from this also and will improve in the future. But if they don't, don't sudo rm -rf the entire repo, instead, just write up your story, publish on HN, and go find work elsewhere (there is no sense in throwing good money after bad).

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#92
Offtopic:

First time I read this topic. I didn't read the pastebin, just the comment and was wondering how someone was a founder and not be included in the valuations/investment side of things, or at least informed.

Then I read the link. How is this consider a 'founding engineer'? Are people looking so much to be founders that they call themselves that even they are obviously employees (first one but still employee). He got a salary and generous (aha) stock options, that doesn't make him a founder one bit. Heck, I was offered equivalent equity at a start up just to serve as technical director and shape up their initial development team, so how in god's name is 3% something a 'founder' has?

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#93
post #89
post #82

Earlier quoted context omitted.

>Not only does it create bad blood, which could only be bad for you in the long run, it may also leave you open to a lawsuit. Don't buy this fud. There's nothing illegal about walking away from a shitty deal. Whatever your motives just plainly state "this deal no longer makes sense for me". If you're a great engineer, then have some self respect, and walk away from a shitty deal. Go somewhere else where they respect…

First, I was against doing intentional harm. I absolutely think s/he should walk away, but making enemies doesn't solve any problems and certainly could create some. Second, you seem not to understand the difference between "breaking the law" and "getting sued". Intentionally screwing over a company can be both legal and lead to a lawsuit that you end up losing.

1) You are critical to the company's success yet..

2) They don't want to compensate you to your liking..

3) So you walk. Yes, this is meant to intentionally hurt the company with the only lever that you have (your skill set and institutional knowledge).

You working for this company costs you opportunities elsewhere.

You're convincing yourself to stay because it "doesn't solve any problems and certainly could create some." Your vague fears are holding you back.

But if we get rid of these vague fears, here's what we know is certain:

1) You're critical to the success of the company.

2) But you're not going to be compensated to your liking

3) And you're costing yourself other opportunities by sticking around.

Quit being scared, look them straight in the eye, and say "I am walking unless I get X,Y,Z." If they say no, then kindly resign and don't look back. Bring on the lawsuit (highly doubtful).

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#94
post #89
post #82

Earlier quoted context omitted.

>Not only does it create bad blood, which could only be bad for you in the long run, it may also leave you open to a lawsuit. Don't buy this fud. There's nothing illegal about walking away from a shitty deal. Whatever your motives just plainly state "this deal no longer makes sense for me". If you're a great engineer, then have some self respect, and walk away from a shitty deal. Go somewhere else where they respect…

First, I was against doing intentional harm. I absolutely think s/he should walk away, but making enemies doesn't solve any problems and certainly could create some. Second, you seem not to understand the difference between "breaking the law" and "getting sued". Intentionally screwing over a company can be both legal and lead to a lawsuit that you end up losing.

There is no way you're going to end up getting sued for leaving, intentionally or not, regardless of your intentions if employment is at-will (and most likely it is).

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#96

You shouldn't be in bad shape tax-wise. I don't know Canadian tax law - but in the US, you only get taxed when you sell the shares. Capital gains would not be recognized if you exercised the options and held onto the shares. Since you have been exercising your options - you are a shareholder in the company (or a member depending on the structure) and I would imagine that the company's operating agreement would requir…

> Capital gains would not be recognized if you exercised the options and held onto the shares. That's not exactly accurate in the US. You need to pay income tax - not capital gains - on the spread between the strike price and the fair market value. Since the company is not publicly traded, the fair market value needs to be assessed. The IRS has rules on how to do this, but many companies use independent third party a…

he can't pay income tax if he's never received the income.

"I will be left with a tax bill on $10,000s of additional "income" that I never received"

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#97
post #11

I'm hung up on the fact that you are exercising your options. Why? If the options are set to expire that quickly then something else is amiss as well. Generally you exercise options only when you intend to sell or leave the company and would lose those options. From what you described, you gave no reason for exercising the options. I'd speak with the founders and enquire why they never executed the agreement, that is…

Your assumption is incorrect regarding the reasons for exercising options. Early exercise of options often garners positive tax benefits for the optionee.

I believe this is different in Canada. i.e. The "clock" starts when the options are granted and not when the options are exercised.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#98
post #35

You shouldn't be in bad shape tax-wise. I don't know Canadian tax law - but in the US, you only get taxed when you sell the shares. Capital gains would not be recognized if you exercised the options and held onto the shares. Since you have been exercising your options - you are a shareholder in the company (or a member depending on the structure) and I would imagine that the company's operating agreement would requir…

This is correct for Canada too - Please seek advice of a tax professional and not on the internet however: In a private corporation where an employee is issued stock options, a taxable benefit exists ONLY when you sell the shares for a profit. Unless this is a public company or a non-Canadian controlled company, you will not face a tax liability. Just make sure both owners and any majority investor is a Canadian resi…

> In a private corporation where an employee is issued stock options, a taxable benefit exists ONLY when you sell the shares for a profit.

I really don't think so. There are many cases in Canada of people getting screwed by buying and selling at the wrong time.

If you buy options and immediately sell them, you have the cash to pay the taxes.

If you buy and hold, you are likely to have tax owing. i.e. buy a share at $0.01, where it's FMV is $1.00. You have $9.99 of either capital gains or income, and you have to pay taxes on that.

If the shares later go to $0.00 in value, well, you might have a non-refundable tax credit. But that doesn't matter when you've paid taxes on value which is valueless.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#99
post #91

Looks like there is plenty of good what-to-do advice already, so I'll just give some how-to-do advice: Use the Teddy Roosevelt tactic of speak softly but carry a big stick (you already have one, since you're the engineer and the product is on your shoulders). As in, hint to them that you have sought legal counsel and that, if worse comes to worse, you wouldn't mind sudo rm -rf the entire code base. Be sure to be in t…

Threatening to ruin the business is not 'seaking softly', nor is it likely to end in the best outcome.

Re: Ask HN: My startup has concealed from me that it raised funding. What to do?

#100
post #34

Well despite the fact that this is very stressful, I would start with the maxim that one should employ Hanlon's Razor[0] and not ascribe to malice what can adequately be explained by stupidity. It's quite possible, nee probable, that they are just disorganized and genuinely thought you already knew, or that it didn't matter, or otherwise were clueless or inexperienced enough to not really understand what had happened…

Is there even a reason the co-founders would do this with malicious intent? Is there possibly any financial gain they could realize out of not telling the other co-founder? Could it be an attempt to make him leave (he only owns 3%) before fully vested?

I very much agree with you, likely not malicious.

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