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Ask HN: Waiving my voting rights as part of employment termination?
I'm a co-founder of company that has had a small seed round. My other co-founders now want me out because now that I've finished the product for them they want a much bigger team and to raise more money. Getting 2/3 of my equity back as part of the clawback is a perfect way to do that without diluting the original investors and themselves.
However, they would like me to sign a release including waiving my voting rights that I would have as someone with significant interest given I have >10% in the company vested so far.
In return to signing this they would give me a modest severance covering a couple of months pay and also releasing my IP as open source. They also said they would facilitate selling my shares at the next round which could be worth half a million at that point.
I'm not so sure about this last point. The most important thing is that I secure a way for me to procure an exit. I know the investors would naturally want to buy me out to get rid of dead wood, but maybe by taking my voting rights away my 2 co-founders are ensuring that I don't get notified when they are investing and therefore won't be in touch to negotiate an exit at the next round. Since I would likely have to offer these shares at a discount to the investors it would essentially undercut any offer they would have. Since I would not have any voting rights maybe the investors would be less interested in buying me out in the first place.
Why do you think they want me to not have my voting rights? I'm considering continuing negotiations on that basis but insisting that we agree on stipulations that ensure I am notified of all investment, and perhaps even a stipulation ensuring that any investment round should include an x percentage of my shares - forcing them to include me but also conceding to them protection I guess they want to ensure the investors are not scared off by any eagerness on my part to sell.
- charlesdm 8y agoAre you OK with this? I would not, and any decent vesting schedule would generally have an "acceleration upon termination without cause" clause that would make this impossible. Do you want to leave? I would assume your shares will not get bought the way you propose. Personally I would bind it all together into one agreement -- you can quit and forfeit 2/3rds of your unvested equity only IF and WHEN your remaining vested shares are purchased for $500k.
- wenicks 8y agoThat's pretty much exactly what another friend of mine said. I was really excited about our future, and then they did this to me and it of course you can't really take this kind of action back. Really regretting not asking before signing for that clause you mentioned. The other 2 co-founders were always closer, so I could of anticipated this better. Unfortunately for trying to get one agreement - they 6+ months out until they raise and they want me out now.
- trcollinson 8y agoI'd suggest getting a good attorney to take a look at your current agreement (if you'd like, email me at username over at gmail, I have a good one). From what you have said so far, I would suggest to you that the fact that "they are 6+ months out until they raise and they want you out now" is their problem, not yours. If they fire you now, without cause, don't sign anything and keep the negotiation documents as proof that there is no cause. You keep your current stock and most importantly, your voting rights. Go find another job while you settle this whole matter. Talk to a lawyer and start to negotiate for what you want, not what will help them. If they don't fire you, tell them what you want and see if they will give it to you. Let them know you are willing to align your goals with theirs but that you want to be appropriately compensated for your prior risk. Keep it pretty business like. If you get into a sticky situation, don't be ashamed to call in the attorneys to help. It's what they are there for.
- charlesdm 8y agoAgree with this. DO NOT SIGN AWAY YOUR STOCK, even if they fire you. And talk to a lawyer. In fact, I wouldn't even communicate with them anymore past the initial stage without going through a lawyer (i.e. let him communicate for you). I also wouldn't quit, unless they fired me. Depending on the jurisdiction you are in, and the equity percentage you own, you might have certain rights they can't ignore (or you could enforce / make their life hell). Investors generally don't like a murky balance sheet.
- gus_massa 8y ago> now that I've finished the product for them they want a much bigger team and to raise more money Why they need to "fire" you to get more people? > They also said they would facilitate selling my shares at the next round which could be worth half a million at that point. Just assume that this will never happen. When they give you the money, you give them your shares.
- codeonfire 8y agoWhat do you mean "in return." Sounds like they want something for nothing. Your equity and voting rights are already yours. You are negotiating to stop working as an employee? You could do that tomorrow for signing nothing.
- segmondy 8y agoWhy can't they raise more money and get a bigger team with you in the picture. What's the complete story?
- siegel 8y agoI don't see why you would waive your voting rights. It's not even necessarily a good thing for your co-founders, as they get diluted as compared to future investors (i.e. they might WANT your vote later). Investors care about deadweight on the cap table from an economic perspective, much more than from a voting perspective. This does nothing to help that. Yes, future investors will want you to sign a drag-along with respect to a future M&A transaction, but that might be perfectly fine. Maybe you can offer some form of agreement to a weak drag-along? Is the company a Delaware corp? If so, maybe suggest the company agree to exchange your common stock for something like Series FF Preferred (or sometimes called Founder Preferred). If an investor may be willing to buy you out in a future round, this would be the best way for you and the company.