3 ms·
IANAL and a lot depends on the type of company, where you incorporated (Delaware C Corp?), and whether you have any type of shareholder agreement. (This scenari
by jonstewart 11y ago
IANAL and a lot depends on the type of company, where you incorporated (Delaware C Corp?), and whether you have any type of shareholder agreement. (This scenario is the #1 reason to have a shareholder agreement.)
That said, you presently own vested shares in the company, and that means you [likely] have minority shareholder rights. If the company does not act in your best interests as a shareholder, then you have cause for a lawsuit. So, they can't play games with your shares without opening themselves up to a lawsuit.
However, you're bailing after only six months, which implies that you believe you'll be able to create more value for yourself by doing something else rather than seeing it through with a startup. It also means that the company must create all the value while you sit back and pursue something else; there was prior work done, but how does that compare to the work that needs to be done to make your shares worth something? Your shares are essentially deadweight that disincentives the remaining teams (and investors).
A typical shareholder's agreement will specify that the company and/or other shareholders will buy back your shares for the present valuation. It is also pretty typical for such a shareholder's agreement to specify a "method valuation", like a penny/share, in case you have not yet taken outside investment.
If you do not have a shareholder's agreement that covers this scenario and you have not yet taken VC and the company still has a substantial way to go (all of which seems like your scenario, since you're asking on HN rather than acting in accordance with a contract), then the honorable thing to do is sell your shares back to the company for a token amount. You're getting off the bus; in exchange, you don't have to ride the bus, and that's worth a great deal to you.
- adamcanady 11y ago> you believe you'll be able to create more value for yourself by doing something else rather than seeing it through with a startup. Just pointing out that there are other reasons to leave aside from rational economic thought about this individual's expected ability to produce higher output elsewhere. They may dislike the team, pivoted idea, or leadership decisions. But they may also want to keep hold of the equity in case it gets big (or they can sell it or a liquidity event occurs).
- jonstewart 11y agoIndeed, those are all other non-monetary ways to create more value for oneself. :-) I understand the desire to want to keep hold of the equity in case the startup gets big, but having dead weight shareholders is a really good way of ensuring a company doesn't get big. It is hard to judge—maybe the company is really on its way to growth and success and the OP has earned the equity—but more likely it's the psychology of not wanting to let something get away "just in case", and that's not what startup sweat equity is about. There probably needs to be some consideration, but if one doesn't believe in the future direction of the startup, hey, you are getting a whole lot of time and hassle back in exchange for surrendered shares.