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Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

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Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#291

Post by jacquesm »

mijoharas wrote: post #252
bipson wrote: post #225

Earlier quoted context omitted.

Potential worth != real money in the bank. Also, seen from the other side: They made a contract offering 40% in four years (conditionally) - most importantly only relevant when the company/idea survive that long and are thus profitable/worth something. Why should they suddenly pay this (or a meaningful fraction?) out after one year? Or give an "outsider" 40%, which will most certainly be difficult to explain to futur…

a standard vesting schedules is 4 years with a one year cliff. That means that after one year the person will have vested options worth 10% of the company. they will then accrue more options every month until they've fully vested their 40%. That doesn't mean they'll only get 40% after 4 years.

And typically when you are terminated without cause a good vesting contract will foresee in that and trigger the 'accelerated vesting' portion of the contract. Ditto with an early sale and possibly other trigger conditions.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#292

Post by pdutt111 »

So you have every leverage in this scenario.

> if he fires you that's wrongful termination(there's no performance issue until right before cliff). you can sue in that scenario

> I'm guessing you have a board seat too. he doesn't have 51% voting rights so he probably needs the investors to side with him to oust you for which he needs a legitimate reason. (title of CEO doesn't really matter all that matters is the voting rights you're not an employee).

> if there's a law suit and dispute between founders no investor will touch the company with a 10 foot pole, so if he goes for a fight he loses everything.

> there's no reason to go down to 3% when you own 10% next month. and people think of 10 idea everyday all that matters is execution and if you wrote the code and gave around a year of your life that's worth around 100k for an entry level engineer so I'd say you put in more than the 10k he put in.

> finally you have the code and you can tweak it and make it open-source there's no IP laws protecting code so at that point he owns nothing.

> honestly the company is done, the investor is neutral cause he's already written the company off and I would say this is the point of no return no matter which side this goes the chances of running the company are rather slim.

> the reason he doesn't want to monetize it is because he was probably planning on doing this to you, it'll be much harder to do it if the company is making money if you get out he'll monetize it the next day

I'd stick to my guns and tell them if they don't buy you out then the company is dead. The only scenarios are - 1. he buys you out. 2. lets your equity remain ( he probably can't fire you ). 3. company goes down

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#293

Post by jacquesm »

mikeryan wrote: post #228
isatty wrote: post #173

Earlier quoted context omitted.

I am not a founder but this does not seem like sound advice. In a month, that 3% pittance becomes 10%. Also, it does not seem that the company has no value at all, if it is primed to make money. The extrinsic value on the 40% is worth negotiating over and not giving it up and walking away. Nobody should do that unless there is gross misconduct or negligence involved.

I’m spitballing here but maybe a middle ground is to convert some percentage of shares to equivalent to the seed investor shares. Assume, for the sake of argument, he was at one year and due 10%. Convert those share to the same terms as the seed investors. No cash upfront, equity is somewhat preserved and the rest becomes a source of potentially passive income. Note. He has to leave. The situation is now untenable.

> He has to leave.

Depending on how the investor looks at this that is not a run race, it may very well be the investor that sides with the OP and together they may be able to kick out the aggressor.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#294

Post by chris_wot »

mooreds wrote: post #99
mywittyname wrote: post #88

Earlier quoted context omitted.

Try turning the tables and offering them a buyout.

Unfortunately it doesn't sound like an option: > They will not entertain the idea of me buying them out for cash.

Then they are in lots of trouble, assuming the OP has a rock solid legal agreement...

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#295

Post by jacquesm »

tptacek wrote: post #168
lifeisstillgood wrote: post #158

Earlier quoted context omitted.

I disagree - keep the 40%, this will at least force them to come to you with why they want you to leave. The obvious answers are - they are a jerk to work with and they won't admit it - you are a jerk to work with and they won't tell you - something else If it's something else and there is real money at stake both of you should be able to work something out. Otherwise it's one of the first two - which is much harder…

What "40%"? The entire point of the vesting agreement, bog standard in every competently run startup, is that he doesn't have 40%. In fact, if he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero.

"Accelerated vesting".

Typically: in the case of a liquidity event or if there is a termination without cause in order to gain control of the co-founders shares. Those terms are pretty common, and without having seen the vesting agreement we shouldn't make any guesses as to what is in there. Leaving can be many things, and co-founders typically don't have the authority to fire each other at will without grave consequences.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#296

Post by ohyes »

nickff wrote: post #269
ohyes wrote: post #248

It sounds like you own 40% of something fairly valuable and now that it's 11 months into your contract other founder who needed your help is getting greedy and trying to push you out before you are owed anything. You said it yourself, you've grown hugely, you're dominating SEO since you joined, and built loads of products. This is your 'partner' getting greedy after you've done a lot of hard work. It wouldn't have ha…

Where are you getting the idea that the tech co-founder (TCF) owns "40% of something fairly valuable"? It seems the TCF currently owns 0%, and will go to ~10% (25% of 40%) if they don't get laid off/fired in the next month.

It's not clear the other founder actually owns any more than TCF does. What makes you think TCF can be so easily pushed out or that the other founder has significantly more leverage? It isn't clear to me that they have different deals.

Honestly, if non-technical thought he could fire this guy, he probably would have already. That's why TCF is being bullied into resigning.

What is non-technical going to tell the investors when he fires the guy who keeps everything running, built everything, and did all the SEO?

Think of it this way, take the deal and you get 3% of nothing because it'll get driven into the ground.

Don't take the deal and either you keep working on it, and get 40+% of something decent, or you get N% of nothing because other guy drives it into the ground but you got a better buyout.

There's very little downside for TCF in actually sticking to his guns, and it's not like he's going to look like the asshole here.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#298

Post by mooreds »

jpm_sd wrote: post #108
mooreds wrote: post #101

Earlier quoted context omitted.

Can't emphasize this enough. This is a year of your life. Find someone with a fiduciary duty to you who has seen this before.

A year isn't such a long time, in the grand scheme of things. This company sounds pretty doomed, regardless of the outcome of this conflict. Take lessons learned, cut and run.

I think the OP should investigate how much time and effort it will take them to get the first vest (or an equivalent agreement). Then they can make an informed choice.

I agree that the partnership is wrecked and that he should walk away after determining if they can get the 10% ownership (heck, maybe the right number is 3% or 7% or something else, only the OP knows what feels least wrong).

But it's not clear to me that the company is doomed (from the little we know). In fact, it sounds like it might do great.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#299

Post by idlewords »

newen wrote: post #176
tptacek wrote: post #134

Earlier quoted context omitted.

"I would spend $15,000 of my own money and 8 more months of my life during which I deed control of my adrenal system to this stupid controversy and get little else done, and ultimately reach at best the same outcome as I'd have achieved walking away amicably, less expenses, before I would allow someone to take advantage of 11 months of my work".

People talk about how a startup being successful is 90% luck and you want OP to walk away from a successful startup and try again.

Their main claims to success based on OP's description are that they show up in search engine results and are only $60K in the red. If that's success in 2020 then I can launch a dozen successful startups by January 1.

Re: Ask HN: Co-founder wants me to leave but won't entertain a buy out offer

#300

Post by andy_ppp »

Set up a meeting with the investor Andy UT partner and say you want to be as transparent as possible. Explain the situation and suggest to the investor that you and the Cofounder need to find a way of working together, otherwise one of you is going to have to leave with 40% of the company. This is a great example of where vesting for founders sorts all of this out clearly and makes it more difficult to get greedy. Of course this makes some assumptions about the legal agreements you have with the company. Do these agreements allow cofounders to be sacked usually, because I’m sure as hell writing into any I sign that I can’t be!
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