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Co-founders tried to reduce my equity after company was accepted into YC

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Re: Co-founders tried to reduce my equity after company was accepted into YC

#31

Post by rkk3 »

zug_zug wrote: post #26

Some really emotional comments on here. Definitely an emotional situation but take a step back - If your cofounder fires you and you keep 45%, you're basically getting half the value for none of the work. Aside from the pride, this is actually very favorable. Probably the best way to handle it is to realize you own half of this thing, and offer to write a resignation letter to minimize the drama, swallow your pride,…

> If your cofounder fires you and you keep 45%

This assumes they do not have a vesting schedule.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#33

Post by CogitoCogito »

jollybean wrote: post #29
zug_zug wrote: post #26

Some really emotional comments on here. Definitely an emotional situation but take a step back - If your cofounder fires you and you keep 45%, you're basically getting half the value for none of the work. Aside from the pride, this is actually very favorable. Probably the best way to handle it is to realize you own half of this thing, and offer to write a resignation letter to minimize the drama, swallow your pride,…

There's 0% chance someone who left early on would be able to hold on to 45%. They'd need some very heavy duty protections, and even then. The CEO, given their actions, would find a way to recover that stock later, probably at the behest of other investors.

They might negotiate something like 10-15% for just walking away though.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#34

Post by jdsully »

lumost wrote: post #23
sneak wrote: post #10

I forget where I read it (venture deals, perhaps?) but it has always stuck with me: founder stock should vest! Nobody should get any equity whatsoever until and unless they've been working full time on the project for a year or more, founders included! That wouldn't have solved the problem here, however, where blowing up the whole company is the best outcome, as you don't want to be in business with greedy, dishonest…

This is a pretty bad deal IMO. If I’m the technical cofounder the first months are basically me getting the (software) product to the point where it can be shown to customers. The next few months will see a sales founder get our first deal. Once the product is ready to launch, A bad technically founder could find a cheaper CEO. Once the first deals are in a bad CEO could find a cheaper technical founder. The vesting…

A startup is just so difficult that you really can't get away with stuff like that and survive.

It's very rare you can fire your dev team and get away with it, your product will not be good enough for years on end while you learn and grow. On the flip side customers will wonder why their point of contact is now gone if you fire the main contact they were dealing with. Plus how are you going to get more of these customers now?

Re: Co-founders tried to reduce my equity after company was accepted into YC

#35

Post by rkk3 »

Getting into YC is an accomplishment, but you clearly don't have a real business yet. To paraphrase a saying... the reason that startup politics is so vicious is because the stakes are so small.

It's painful but in general I'd try to move on and be thankful that you were able to end your journey with that CEO early, after only a year and a half! Life is too short.

Still it's worth the effort to do a few legal consults to know your options. Litigation is one, but it's emotionally draining and could drag on for years. How good was your bookkeeping? Did you have a vesting agreement? Did you sign away your IP? Did you sign any non disparage agreements - you could be sued for damages, especially if those communications are written.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#36

Post by specialist »

jVinc wrote: post #9

Sounds a lot like the "CEO" is a just sales rep for your company who did a great sales pitch to get you into YC, but who didn't even commit enough to the company to want to do it fulltime unless the person could get majority ownership. As others have mentioned, you might want to try to pull the business out of the company and get a better sales rep, with a more appropriate single digit or less equity. This kind of eg…

My experiences with Sales in the driver's seat have been pretty bad.

One Sales exec thought it was hilarious to petulantly insist that our products be "zero cost, perfect, and shipping yesterday", dismissing out of hand small stuff like iron triangle, budgets, P&L, schedules, etc.

Another Sales exec, troubled by our excessive salaries (read: below market), denigrated our dev and ops teams by saying "All y'all do is type on the computer all day. How hard could that be?"

Etc.

(I don't know that engineering lead orgs are any better, overall. I've yet to experience the mythical balanced combo Sales, Engineering, and Support org.)

Re: Co-founders tried to reduce my equity after company was accepted into YC

#37

Post by rkk3 »

pedalpete wrote: post #27
lumost wrote: post #23

Earlier quoted context omitted.

This is a pretty bad deal IMO. If I’m the technical cofounder the first months are basically me getting the (software) product to the point where it can be shown to customers. The next few months will see a sales founder get our first deal. Once the product is ready to launch, A bad technically founder could find a cheaper CEO. Once the first deals are in a bad CEO could find a cheaper technical founder. The vesting…

Yes, but think about the other perspective. The CEO decides to leave after 2 months, and they hang on to 50%? The vesting keeps everyone honest and in for the long-haul.

Or in Facebook's case, no vesting agreement for co-founder with 20% of the company that didn't work out after a few months.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#38

Post by londons_explore »

vmception wrote: post #12

Keep the shares, its part of your passive investment portfolio now Check the operating agreement or bylaws, some changes require either unanimous vote or gives all distinct voters equal weighting regardless of percentage of the company

There are all kinds of sneaky ways to make his shares worthless.

For example, issue 100x the existing share base, and distribute them to employees (as compensation) and sell them to existing investors (except him) at way under market rate.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#39

Post by rkk3 »

lumost wrote: post #23
sneak wrote: post #10

I forget where I read it (venture deals, perhaps?) but it has always stuck with me: founder stock should vest! Nobody should get any equity whatsoever until and unless they've been working full time on the project for a year or more, founders included! That wouldn't have solved the problem here, however, where blowing up the whole company is the best outcome, as you don't want to be in business with greedy, dishonest…

This is a pretty bad deal IMO. If I’m the technical cofounder the first months are basically me getting the (software) product to the point where it can be shown to customers. The next few months will see a sales founder get our first deal. Once the product is ready to launch, A bad technically founder could find a cheaper CEO. Once the first deals are in a bad CEO could find a cheaper technical founder. The vesting…

There should be some sort of vesting schedule. If you really don't think a standard one is fair, It doesn't have to be over 4 years. It is also normal to have events that accelerate vesting (like an Acquisition) which in yours case could be the delivery of an MVP.

Also if your co-founder thats doing sales can't close without a product, you should get someone who can that is a very bad sign.

Re: Co-founders tried to reduce my equity after company was accepted into YC

#40

Post by webmaven »

jollybean wrote: post #29
zug_zug wrote: post #26

Some really emotional comments on here. Definitely an emotional situation but take a step back - If your cofounder fires you and you keep 45%, you're basically getting half the value for none of the work. Aside from the pride, this is actually very favorable. Probably the best way to handle it is to realize you own half of this thing, and offer to write a resignation letter to minimize the drama, swallow your pride,…

There's 0% chance someone who left early on would be able to hold on to 45%. They'd need some very heavy duty protections, and even then. The CEO, given their actions, would find a way to recover that stock later, probably at the behest of other investors.

> There's 0% chance someone who left early on would be able to hold on to 45%. They'd need some very heavy duty protections, and even then. The CEO, given their actions, would find a way to recover that stock later, probably at the behest of other investors.

Yeah. If nothing more subtle is possible, they can always take a round that dilutes the heck out of everyone's stake and have an agreement in place to 'make whole' some of the current team with extra stock grants or options.

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