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The issue is that his ownership only existed as a technicality and he only received a favorable outcome due to to the inflexible nature of the legal system. He

The issue is that his ownership only existed as a technicality and he only received a favorable outcome due to to the inflexible nature of the legal system. He was not a 50% owner or anything near that. However, due to a lack of evidence otherwise, he was able to convince the court he was.

SilasX 10y ago
That depends: when someone approaches YC and lists equity stakes, is there an implicit understanding of a vesting schedule and cliff? If so, the YC submission wouldn't be enough to substantiate an ownership claim, esp if the assumed schedule is the standard 4-year/12-month cliff. In the absence of documentation of how the equity dissipates, it would be assumed not to. In that case, I'm not sure it's dismissable as a technicality: if an early, vital partner has to leave, you have to weigh the costs of buying out their equity stake against current cash demands. When the future of the company is tenuous, the value is small and Guillory surely would have accepted a song for a buyout, just as Walter White took a $5000 buyout for his huge stake in Grey Matter (or the Apple guy); but they may also need that money very much. If you take the approach of "well [in hindsight] OBVIOUSLY they didn't mean to leave him with that equity", you're effectively giving founders a free option on the shares of silent partners, unfair in its own way.
- whamlastxmas 10y ago
  >Guillory never had equity, wrote code, nor invested in the company, although he was listed on the application to Y Combinator They applied together to YC. They got accepted, but Guillory didn't go. Vogt said he didn't want to work together anymore. A business entity was later formed, in which Guillory had zero ownership of because he left the project before it even began and had nothing to do with it. The only basis for Guillory here is that they did at one point agree to work together. This is like me saying to you, "Hey, do you want to go halfsies on a lottery ticket?" and then you responded, "Yes". Later, I tell you I no longer want to go halfsies, then go out to buy a ticket by myself and win. You then later sue me saying you get half of the winnings because we had previously agreed to go halfsies, despite the agreement later being revoked and you having never contributed and never planning to contribute anything to the cost of the ticket. It isn't an issue of assuming a vesting schedule, it's an issue of someone deceitfully claiming ownership of something they never owned.
  - abcampbell 10y ago
    Well, it raises the question of whether it's legitimate to ask applicants to list the equity stakes in the first place. Seems like YC is asking people to hold to that structure when it is in their interests, but ignore it when it is not. To be clear, don't think this is terrible. Just, if you are going to claim the split means nothing, then why force applicants to create one in the first place?
    - whamlastxmas 10y ago
      It's an application, not a legal document for creating a legal entity. They're asking the question because it's valuable to them as an indicator. If you have two do-nothings that own 90% and a PhD researcher who's the brains of the operation who owns 10%, that would be a red flag. Additionally it's important because there's a minimum equity stake required to join them in CA and they don't want you making it up after the fact.

SilasX 10y ago

That depends: when someone approaches YC and lists equity stakes, is there an implicit understanding of a vesting schedule and cliff? If so, the YC submission wouldn't be enough to substantiate an ownership claim, esp if the assumed schedule is the standard 4-year/12-month cliff. In the absence of documentation of how the equity dissipates, it would be assumed not to. In that case, I'm not sure it's dismissable as a technicality: if an early, vital partner has to leave, you have to weigh the costs of buying out their equity stake against current cash demands. When the future of the company is tenuous, the value is small and Guillory surely would have accepted a song for a buyout, just as Walter White took a $5000 buyout for his huge stake in Grey Matter (or the Apple guy); but they may also need that money very much. If you take the approach of "well [in hindsight] OBVIOUSLY they didn't mean to leave him with that equity", you're effectively giving founders a free option on the shares of silent partners, unfair in its own way.

whamlastxmas 10y ago
>Guillory never had equity, wrote code, nor invested in the company, although he was listed on the application to Y Combinator They applied together to YC. They got accepted, but Guillory didn't go. Vogt said he didn't want to work together anymore. A business entity was later formed, in which Guillory had zero ownership of because he left the project before it even began and had nothing to do with it. The only basis for Guillory here is that they did at one point agree to work together. This is like me saying to you, "Hey, do you want to go halfsies on a lottery ticket?" and then you responded, "Yes". Later, I tell you I no longer want to go halfsies, then go out to buy a ticket by myself and win. You then later sue me saying you get half of the winnings because we had previously agreed to go halfsies, despite the agreement later being revoked and you having never contributed and never planning to contribute anything to the cost of the ticket. It isn't an issue of assuming a vesting schedule, it's an issue of someone deceitfully claiming ownership of something they never owned.
- abcampbell 10y ago
  Well, it raises the question of whether it's legitimate to ask applicants to list the equity stakes in the first place. Seems like YC is asking people to hold to that structure when it is in their interests, but ignore it when it is not. To be clear, don't think this is terrible. Just, if you are going to claim the split means nothing, then why force applicants to create one in the first place?
  - whamlastxmas 10y ago
    It's an application, not a legal document for creating a legal entity. They're asking the question because it's valuable to them as an indicator. If you have two do-nothings that own 90% and a PhD researcher who's the brains of the operation who owns 10%, that would be a red flag. Additionally it's important because there's a minimum equity stake required to join them in CA and they don't want you making it up after the fact.