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Can I give you some advice that really sucks? Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that do

Can I give you some advice that really sucks? Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that doesn't always work out. Sometimes you find more money and success than you could ever dream of, and other times you waste 11 months. Here's my thought process. You and your cofounder aren't going to be able to work together after this. The company has no money and no value, so you're trying to get your portion of something that doesn't exist. Them raising money to pay you just kills their chance at ever being successful... plus, who would give a company money just to pay someone out? Same goes for accelerating vesting on the 40%... there's no way they can build a company when someone not involved owns a huge stake. You could spend time and money trying to right this injustice. And yeah, it is an injustice. But the worst thing you can do is tie your identity to this. There's not much upside to fighting it; all you'll do is spend more time, money and energy you could be using to start something new. I've had this happen to me before, so I completely understand what it's like. You feel helpless and shitty and like you wasted a ton of time. Rather, do your best to put it behind you, and focus on what benefits you got out of it. Did you learn about a new space that will make you extra valuable to another company? Even just having a founder mentality will raise your value to a startup. Did you learn things you would do differently? You can start another company, and do it better this time. I know it sucks. But I'm 99% confident you won't get anything out of this, so it's best to just walk away. It's cheesy, but "success is the best revenge." Your relationship with this company failed, but you haven't. Don't tie your personal journey to this one company. Good luck, and my emails in my profile if you want to talk! (Also, a few years ago I wrote about going through it: https://medium.com/@gkoberger/five-years-time-6a6ae1157a66 https://medium.com/@gkoberger/five-years-time-6a6ae1157a66)

yudlejoza 6y ago
I'm sorry but this is a ridiculous advice.
- tptacek 6y ago
  It's the plot of a movie that nobody on this thread wants to watch, but that doesn't make it bad advice.
  - senko 6y ago
    Advising to give up while there's still room to negotiate sounds like bad advice. At the worst, OP could turn this into a learning excercise on how to negotiate in a tough situation, with zero downside compared to the advice given here. This doesn't have to be a protracted legal battle, but reading up on documents they signed, figuring out their proiories (continue in biz? get at least some value out? etc) and negotiating in good faith is something that might come very handy later, in another startup, with much more to lose.
    - tptacek 6y ago
      I think negotiation is good, if you're realistic about it, and if you actually value what you're likely to get from it. And I agree, they should quickly find an answer to whether they can be fired by their partner (they probably can, for reasons stated elsewhere on the thread, but it's very much worth getting a solid answer).
      - senko 6y ago
        Agree completely. It's not me, but if it were, I'd approach the getting fired problem with "look, I build this. You can fire me, but you don't have money for adequate dev and average Joe will run it into the ground in two months. Your greed will make you lose everything", and also approach the investor (if they're hands on) with the same rationale. Also agree with the point you made elsewhere - this can get gut wrenching (even without any lawyers getting involved) and if you're prone to dwell on negative thoughts, pretty damaging to your morale through the duration. Money spent fighting is not the only downside.
        s1artibartfast 6y ago
        The downside here is what happens after trust is broken... You end up working for another 12 months at the company pro-bono, then get canned 1 month before your next cliff vesting. I would take 10% for the first year of service and walk with it, not expecting anything. The angel put in 100K for 10%, and you worked for a year for 10%. very simple.
- MisterBastahrd 6y ago
  I would burn the entire thing to the ground and piss on its smoldering ashes before I would allow someone to take advantage of 11 months of my work just because he thinks he can make more money for himself if he positions himself as a solo founder.
  - tptacek 6y ago
    "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".
    - newen 6y ago
      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.
      - idlewords 6y ago
        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.
        ZephyrBlu 6y ago
        They said they have 60k users. If you can acquire 12 * 60,000 = 720,000 users for 720k in less than a week I think you'll have a lot of people beating down your door.
      - valuearb 6y ago
        Successful??? They don’t have the revenues to hire a single employee!
    - ownagefool 6y ago
- artemonster 6y ago
  on a side note: what is the amount of karma required to be able to downvote on HN?
  - TenJack 6y ago
    500 I believe.
  - jxm262 6y ago
    Think I got mine around 500, iirc
  - ayewo 6y ago
    It’s a karma of 501 not 500 to downvote. https://github.com/minimaxir/hacker-news-undocumented/blob/master/README.md#downvoting-comments https://github.com/minimaxir/hacker-news-undocumented/blob/m...
    - artemonster 6y ago
      Thanks for the link. Genuinely confused about the downvotes for the parent comment, because such info should be present somewher on the YC site, IMHO.
- dbnoch 6y ago
  the sad part is that they are right. I was in a similar situation and there really is nothing you can do. They don't own the majority share of the company to make the decision. It's honestly a terrible situation
- elpatoisthebest 6y ago
  Why do you say that?
bryanrasmussen 6y ago
I think the idea that they will not be able to work with the co-founder again really depends on the type of person that co-founder is. If the co-founder is just doing this as a strategic move, expecting things are going to become quite valuable soon and considering the 10% cliff it may be that if their strategy does not work they will not have any problem continuing the partnership - although if that is the case I would (when things became profitable/ much improved) negotiate for some kind of exit because obviously the co-founder is not trustworthy.
okokwhatever 6y ago
You know, I like your position here dude. Keeping out of discussion the money (everyone of us work to pay bills) I think sometimes to give up maintaining a high profile is better. Anyway, the personal situation of the founders is unknown to me and dont want to talk too fast. But i get your point here.
lostsoul8282 6y ago
I agree. They can fight this and drain energy but they will only get what they deserve up to this point. Which might be worth fighting for but if you believe that that you can do better, I would walk away - no agreement/liability to the company and if they are passionate about the idea rebuild it with a stronger team quicker. The difference this time is they is more knowledge, clearer path and knowledge of what a competitor is doing. Consider it draft 2..if that's a direction you want to go.
- silexia 6y ago
  This comment and the parent comment are absolutely right, but they are not decisions I would have ever thought of myself. Kudos to both of you!
jelliclesfarm 6y ago
i agree. you are not left with a lot of options. walk away. having been in somewhat similar position, i can tell you that it's not worth it. good luck. having said that, you can walk away. and still piss on their cake. but this a toxic partner. you cannot work with them. that's for certain. you will have to walk away.
stale2002 6y ago
> Them raising money to pay you just kills their chance at ever being successful > there's no way they can build a company when someone not involved owns a huge stake. So what? That sounds like their problem, not his. > But I'm 99% confident you won't get anything out of this, so it's best to just walk away. Possibly. But is that is the case, why not just keep the 40%? He's got nothing to loose. So in that case, there is no need to give in to someone else being unreasonable.
- gkoberger 6y ago
  From a purely legal perspective, this is incorrect. He's on a vesting schedule, and currently has 0% (his cofounder also has 0% currently, assuming they started at the sam time). They both entered this agreement to only get ~40% if they work there for 4 years (and at that point, they'll likely have to revest). Vesting schedules were created for this exact situation.
  - stale2002 6y ago
    I mean, maybe. But that is not a reason to follow your advice and just "give up". If the choice is between "giving up" or getting as much equity as possible, for example by stalling for a month until he vests, but also causing those other problems that you mentioned, then the choice should be clear. Stall, and get the larger amount of equity. He's got nothing to lose, right? If you have nothing to lose, then there is no reason to not take as much as you can. I don't think it is some costly effort to simply stall for a month, and refuse any deal. He doesn't need a lawyer or anything. He can simply refuse a deal, and continue "negotiating" until he vests and gets his guaranteed 10%.
    - gkoberger 6y ago
      They can't stall; that's now how this works. There's no such thing as squatters rights when you're terminated. Like tptacek said a few times in this thread, they should read the contracts and see if they can be fired, but it's very likely they can be.
    - 6y ago
chuckus 6y ago
Agree with this, 3% of something is better than 40% of nothing. I was a technical co-founder was that left a startup early on, and because we didn't have a vesting agreement from the very beginning, I was entitled to my 40%, even when I left the company. While it was to my advantage, I didn't want my co-founder to give up when I left, so I gave most of it up. For my next startup, I'll make sure to have a goals-based vesting agreement from the very beginning i.e. co-founder gets x% on first sale, x% on first raise
- itronitron 6y ago
  I don't have any confidence that the other founder would ever honor the 3% arrangement in any form given their past behavior.
xwdv 6y ago
Wish I had downvote powers to downvote this because it's horrible advice. You literally have nothing to lose by just waiting for the equity to vest and keeping your 40%. Fuck the co-founder. Fuck 3%. Worst case you end up with 40% of nothing. Walking away you end up with 0% of nothing. If you don't stand up for your equity no one will. And if you let him get away with this, down the line he'll do the same shit to someone else. Stop this guy now in his tracks, don't let him swindle you and everyone else. Don't be an idiot.
- cm2012 6y ago
  Exactly this. You don't let bad actors walk all over you.
- tptacek 6y ago
  Your theory of the case here being that this company has managed to find a set of contracts that establishes 4/1 vesting and enabled a seed funder to invest $100k, but somehow didn't designate any officers of the company or any authority to terminate members of the company. It could happen! They might reasonably spend $400-$500 figuring that out.
  - xwdv 6y ago
    Let them do it then, so the blood can be on their hands. Otherwise the story is "tech co-founder walked away because he couldn't keep up".
    - tptacek 6y ago
      The funny thing about this is that it isn't even good advice in the chest-puffing status-seeking model in which its proposed, because a big controversy with a former founder might mostly just makes you someone reasonable people might not want to work with.
      - ghaff 6y ago
        If there's a pattern it's one thing. But for a single event when it's hard for an outsider to figure out who was in the right and who was in the wrong, it's probably easier just to avoid both of them.
lifeisstillgood 6y ago
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 to deal with
- gkoberger 6y ago
  Just to clarify, this person doesn't have 40%. They currently have 0%, and their agreement states they only get 40% if they work there for 4 years. Also, I don't know for sure, but I imagine they know the reason (even if they don't agree with it).
  - spottybanana 6y ago
    The OP however didn't say who has the power to fire and on what kind of terms. If the other founder can fire him, the 3% was offer for him to leave on good terms. Because they could just fire and OP would get actually 0% and no discussions or negotiations needed.
  - dgacmu 6y ago
    It's a little more complicated than that. As they described it, they own 40%, but if they leave early the company has the right to buy back certain numbers of the shares at the original price. The one year cliff suggests that at this point, the company can buy back everything, but in another month, they will have 10% that's not touchable.
    - gkoberger 6y ago
      Yeah, but each share is valued at a fraction of a cent. The company will have to cut a check for a few dollars. (Happy to explain more if you’re interested!)
      - 6y ago
isatty 6y ago
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.
- bipson 6y ago
  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 future investors?
  - mijoharas 6y ago
    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.
    - jacquesm 6y ago
      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.
- mikeryan 6y ago
  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.
Aunche 6y ago
Maybe it's just because I'm an outsider, but startup finance is complete nonsense to me. >Same goes for giving you the 40%... there's no way they can build a company when someone not involved owns a huge stake. This actually happened to one of my professors, which represents the opposite end of the absurdity. He started the company with a friend. The company pivoted to a completely different direction and the friend left because it was outside his expertise. My professor wanted to "do the right thing" and preserve their friendship, so he let the friend keep all the equity. In the end, the friend ended up getting millions of dollars despite producing 0 value to the company. There has to be some middle ground here, like offering options to the company to buy back OP's shares at the current valuation plus interest. If company still can't afford a buyback a few years later, then they didn't grow the company enough to deserve to own those shares anyways.
- tootie 6y ago
  Yeah, that is the option. They buy his equity for what it's worth. Currently that's not much, but apparently still more than they can afford.
  - tptacek 6y ago
    They only have to buy his vested equity. His unvested equity, for all practical purposes, reverts back to the company. In standard 4/1 vesting, you get 1/4 of your equity on your first anniversary, and then equal-sized chunks every month thereafter for 4 years. Prior to that first anniversary, the idea of 4/1 is that you get nothing; the whole idea is to avoid allocating equity to people who don't last a whole year.
- intricatedetail 6y ago
  Shares are not connected to the work done. Why would they? It's an investment. That friend got rewarded for making right choices and meeting right people
- spottybanana 6y ago
  The professor probably had other options, but decided that this is the route to go. And once the decision is done, there is no turning back. In the early phase of a startup it quite often happens that equity is given on very relaxed way on good terms. For example someone can work only short time in the company and still get nice piece of equity, just because other founders are lazy or careless. A lot related to startups is "play stupid games, win stupid prizes". Sometimes you can get lot of equity & money if you just happen to be in the right place at the right time. Other times you end up working a lot and get nothing.
Nowado 6y ago
Got to agree, this advice sucks.
the_cat_kittles 6y ago
if you can emotionally check out but legally remain, thats ideal. you are mostly likely getting pushed out, so recognize that you are in a 100% adversarial relationship and separate yourself from any kind of personal emotional investment. a completely detached self interested approach is totally warranted given the circumstances, and would significantly increase the probability that you will be compensated more fairly.
- unreal37 6y ago
  IMO. No serious investor will give money to a company where someone who owns 40% of the equity is no longer involved and/or left on bad terms. Having him around but not active is going to limit how the business raises money in the future.
mattmaroon 6y ago
I know you mean well, but this could not possibly be good advice because there isn’t enough information in that post for even a lawyer to give good advice. You don’t know what’s In his contract. Maybe his cofounder can’t fire him. Maybe He could but that would trigger the vesting. Maybe he could put it to the board and fire his cofounder. Maybe his cofounders threat that it’s 3% or nothing is bluffing. It doesn’t really make sense for his cofounder, because that guy maybe is in the same situation if OPs contract is favorable. Maybe It’s 40% or nothing for him. The only acceptable advice here is to go talk to a lawyer. That’s it. Internet advice about things like this is always bad even when it is meant well
- gkoberger 6y ago
  I agree we don't know the whole story. But this is the version of the story that puts the OP in the best light, and still, my overall impression is it just seems like it's not worth it. What's the best case scenario they could get out of it? Maybe 6% equity, or maybe a $10k severance. But going after a company with no revenue and only $40k in the bank doesn't really seem like the best use of anyone's time, energy or money. There's minimal available short-term value, and litigation/fighting will sharply blunt any potential long-term value.
  - mattmaroon 6y ago
    Well, one possible case scenario is that OP’s contract does not allow his cofounder to fire him, or fully vests if he does. He can this tell his cofounder to pound sand and his cofounder will have to realize that his options are 40% or 0%. If he believes the company has a bright future, he’ll take the deal. There’s a very real chance OP gets much more than 3% or 6%. Or there’s something better that I can’t think of because I’m not a lawyer who deals in this and don’t know the specifics. It’s just bad to give really any advice here, which is part OP’s fault really because he should not be asking a lawyer rather than Internet randos.
- Talanes 6y ago
  >Internet advice about things like this is always bad even when it is meant well Even if it's telling you to get a lawyer?
jacquesm 6y ago
Disagree. Normally I would agree, but this is such an outrageous situation that the OP should just dig in and tell the other side to GFT. Let's not set precedent that a-hole co-founders get to cut out their technical co-founders after almost a year for zero compensation without a fight.
- gkoberger 6y ago
  Well, we don't know the other side of the story. But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank? I get the impression this is all happening because things are going badly, not because things are really about to take off. My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
  - jacquesm 6y ago
    > Well, we don't know the other side of the story. This is such a tired line. No, we don't know the other side. But the OP is here and asking for advice, so rather than sliding into some kind of false balance you could simply assume that they are telling the truth and basing your advice on that. The obligation to inform is on them, and speculation on your part what the other side may or may not be is pointless. > But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank? That's all speculative. > I get the impression this is all happening because things are going badly, not because things are really about to take off. Alternative point of view: if it was worth nothing the co-founder wouldn't be making such a play to own it all. > My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it. But that's exactly why the OP is here: to ask people if they do see such a path. If you can't see such a path then maybe just stay out of it rather than trying to talk the OP into something that they may regret gravely?
pdutt111 6y ago
I agree to the point that the company is probably done at this point, but of the off chance that it succeeds I'd get the 10% and then walk. if he raises another round etc. then that's a bargaining chip to get something (probably would amount to 0 but better to have it)
piyushpr134 6y ago
Best revenge would be to shut down the effing website and watch the other one go up in flames as non tech guy won't know how to switch it on. JK This is very unsound and simp like advice. He has built it. If anyone walks away it is the other guy and not him
- gkoberger 6y ago
  A lot goes into starting a company, not just tech. We don’t know who contributed what and how much. And I say this as a technical founder.
captainredbeard 6y ago
Rolling over because it's the easiest path is not a good option. That type of attitude will be apparent to people around you and you will likely get taken advantage of.

yudlejoza 6y ago

I'm sorry but this is a ridiculous advice.

tptacek 6y ago
It's the plot of a movie that nobody on this thread wants to watch, but that doesn't make it bad advice.
- senko 6y ago
  Advising to give up while there's still room to negotiate sounds like bad advice. At the worst, OP could turn this into a learning excercise on how to negotiate in a tough situation, with zero downside compared to the advice given here. This doesn't have to be a protracted legal battle, but reading up on documents they signed, figuring out their proiories (continue in biz? get at least some value out? etc) and negotiating in good faith is something that might come very handy later, in another startup, with much more to lose.
  - tptacek 6y ago
    I think negotiation is good, if you're realistic about it, and if you actually value what you're likely to get from it. And I agree, they should quickly find an answer to whether they can be fired by their partner (they probably can, for reasons stated elsewhere on the thread, but it's very much worth getting a solid answer).
    - senko 6y ago
      Agree completely. It's not me, but if it were, I'd approach the getting fired problem with "look, I build this. You can fire me, but you don't have money for adequate dev and average Joe will run it into the ground in two months. Your greed will make you lose everything", and also approach the investor (if they're hands on) with the same rationale. Also agree with the point you made elsewhere - this can get gut wrenching (even without any lawyers getting involved) and if you're prone to dwell on negative thoughts, pretty damaging to your morale through the duration. Money spent fighting is not the only downside.
      - s1artibartfast 6y ago
        The downside here is what happens after trust is broken... You end up working for another 12 months at the company pro-bono, then get canned 1 month before your next cliff vesting. I would take 10% for the first year of service and walk with it, not expecting anything. The angel put in 100K for 10%, and you worked for a year for 10%. very simple.
MisterBastahrd 6y ago
I would burn the entire thing to the ground and piss on its smoldering ashes before I would allow someone to take advantage of 11 months of my work just because he thinks he can make more money for himself if he positions himself as a solo founder.
- tptacek 6y ago
  "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".
  - newen 6y ago
    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.
    - idlewords 6y ago
      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.
      - ZephyrBlu 6y ago
        They said they have 60k users. If you can acquire 12 * 60,000 = 720,000 users for 720k in less than a week I think you'll have a lot of people beating down your door.
    - valuearb 6y ago
      Successful??? They don’t have the revenues to hire a single employee!
  - ownagefool 6y ago
artemonster 6y ago
on a side note: what is the amount of karma required to be able to downvote on HN?
- TenJack 6y ago
  500 I believe.
- jxm262 6y ago
  Think I got mine around 500, iirc
- ayewo 6y ago
  It’s a karma of 501 not 500 to downvote. https://github.com/minimaxir/hacker-news-undocumented/blob/master/README.md#downvoting-comments https://github.com/minimaxir/hacker-news-undocumented/blob/m...
  - artemonster 6y ago
    Thanks for the link. Genuinely confused about the downvotes for the parent comment, because such info should be present somewher on the YC site, IMHO.
dbnoch 6y ago
the sad part is that they are right. I was in a similar situation and there really is nothing you can do. They don't own the majority share of the company to make the decision. It's honestly a terrible situation
elpatoisthebest 6y ago
Why do you say that?

bryanrasmussen 6y ago

I think the idea that they will not be able to work with the co-founder again really depends on the type of person that co-founder is. If the co-founder is just doing this as a strategic move, expecting things are going to become quite valuable soon and considering the 10% cliff it may be that if their strategy does not work they will not have any problem continuing the partnership - although if that is the case I would (when things became profitable/ much improved) negotiate for some kind of exit because obviously the co-founder is not trustworthy.

okokwhatever 6y ago

You know, I like your position here dude. Keeping out of discussion the money (everyone of us work to pay bills) I think sometimes to give up maintaining a high profile is better. Anyway, the personal situation of the founders is unknown to me and dont want to talk too fast. But i get your point here.

lostsoul8282 6y ago

I agree. They can fight this and drain energy but they will only get what they deserve up to this point. Which might be worth fighting for but if you believe that that you can do better, I would walk away - no agreement/liability to the company and if they are passionate about the idea rebuild it with a stronger team quicker. The difference this time is they is more knowledge, clearer path and knowledge of what a competitor is doing. Consider it draft 2..if that's a direction you want to go.

silexia 6y ago
This comment and the parent comment are absolutely right, but they are not decisions I would have ever thought of myself. Kudos to both of you!

jelliclesfarm 6y ago

i agree. you are not left with a lot of options. walk away. having been in somewhat similar position, i can tell you that it's not worth it. good luck. having said that, you can walk away. and still piss on their cake. but this a toxic partner. you cannot work with them. that's for certain. you will have to walk away.

stale2002 6y ago

> Them raising money to pay you just kills their chance at ever being successful > there's no way they can build a company when someone not involved owns a huge stake. So what? That sounds like their problem, not his. > But I'm 99% confident you won't get anything out of this, so it's best to just walk away. Possibly. But is that is the case, why not just keep the 40%? He's got nothing to loose. So in that case, there is no need to give in to someone else being unreasonable.

gkoberger 6y ago
From a purely legal perspective, this is incorrect. He's on a vesting schedule, and currently has 0% (his cofounder also has 0% currently, assuming they started at the sam time). They both entered this agreement to only get ~40% if they work there for 4 years (and at that point, they'll likely have to revest). Vesting schedules were created for this exact situation.
- stale2002 6y ago
  I mean, maybe. But that is not a reason to follow your advice and just "give up". If the choice is between "giving up" or getting as much equity as possible, for example by stalling for a month until he vests, but also causing those other problems that you mentioned, then the choice should be clear. Stall, and get the larger amount of equity. He's got nothing to lose, right? If you have nothing to lose, then there is no reason to not take as much as you can. I don't think it is some costly effort to simply stall for a month, and refuse any deal. He doesn't need a lawyer or anything. He can simply refuse a deal, and continue "negotiating" until he vests and gets his guaranteed 10%.
  - gkoberger 6y ago
    They can't stall; that's now how this works. There's no such thing as squatters rights when you're terminated. Like tptacek said a few times in this thread, they should read the contracts and see if they can be fired, but it's very likely they can be.
  - 6y ago

chuckus 6y ago

Agree with this, 3% of something is better than 40% of nothing. I was a technical co-founder was that left a startup early on, and because we didn't have a vesting agreement from the very beginning, I was entitled to my 40%, even when I left the company. While it was to my advantage, I didn't want my co-founder to give up when I left, so I gave most of it up. For my next startup, I'll make sure to have a goals-based vesting agreement from the very beginning i.e. co-founder gets x% on first sale, x% on first raise

itronitron 6y ago
I don't have any confidence that the other founder would ever honor the 3% arrangement in any form given their past behavior.

xwdv 6y ago

Wish I had downvote powers to downvote this because it's horrible advice. You literally have nothing to lose by just waiting for the equity to vest and keeping your 40%. Fuck the co-founder. Fuck 3%. Worst case you end up with 40% of nothing. Walking away you end up with 0% of nothing. If you don't stand up for your equity no one will. And if you let him get away with this, down the line he'll do the same shit to someone else. Stop this guy now in his tracks, don't let him swindle you and everyone else. Don't be an idiot.

cm2012 6y ago
Exactly this. You don't let bad actors walk all over you.
tptacek 6y ago
Your theory of the case here being that this company has managed to find a set of contracts that establishes 4/1 vesting and enabled a seed funder to invest $100k, but somehow didn't designate any officers of the company or any authority to terminate members of the company. It could happen! They might reasonably spend $400-$500 figuring that out.
- xwdv 6y ago
  Let them do it then, so the blood can be on their hands. Otherwise the story is "tech co-founder walked away because he couldn't keep up".
  - tptacek 6y ago
    The funny thing about this is that it isn't even good advice in the chest-puffing status-seeking model in which its proposed, because a big controversy with a former founder might mostly just makes you someone reasonable people might not want to work with.
    - ghaff 6y ago
      If there's a pattern it's one thing. But for a single event when it's hard for an outsider to figure out who was in the right and who was in the wrong, it's probably easier just to avoid both of them.

lifeisstillgood 6y ago

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 to deal with

gkoberger 6y ago
Just to clarify, this person doesn't have 40%. They currently have 0%, and their agreement states they only get 40% if they work there for 4 years. Also, I don't know for sure, but I imagine they know the reason (even if they don't agree with it).
- spottybanana 6y ago
  The OP however didn't say who has the power to fire and on what kind of terms. If the other founder can fire him, the 3% was offer for him to leave on good terms. Because they could just fire and OP would get actually 0% and no discussions or negotiations needed.
- dgacmu 6y ago
  It's a little more complicated than that. As they described it, they own 40%, but if they leave early the company has the right to buy back certain numbers of the shares at the original price. The one year cliff suggests that at this point, the company can buy back everything, but in another month, they will have 10% that's not touchable.
  - gkoberger 6y ago
    Yeah, but each share is valued at a fraction of a cent. The company will have to cut a check for a few dollars. (Happy to explain more if you’re interested!)
    - 6y ago

isatty 6y ago

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.

bipson 6y ago
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 future investors?
- mijoharas 6y ago
  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.
  - jacquesm 6y ago
    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.
mikeryan 6y ago
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.

Aunche 6y ago

Maybe it's just because I'm an outsider, but startup finance is complete nonsense to me. >Same goes for giving you the 40%... there's no way they can build a company when someone not involved owns a huge stake. This actually happened to one of my professors, which represents the opposite end of the absurdity. He started the company with a friend. The company pivoted to a completely different direction and the friend left because it was outside his expertise. My professor wanted to "do the right thing" and preserve their friendship, so he let the friend keep all the equity. In the end, the friend ended up getting millions of dollars despite producing 0 value to the company. There has to be some middle ground here, like offering options to the company to buy back OP's shares at the current valuation plus interest. If company still can't afford a buyback a few years later, then they didn't grow the company enough to deserve to own those shares anyways.

tootie 6y ago
Yeah, that is the option. They buy his equity for what it's worth. Currently that's not much, but apparently still more than they can afford.
- tptacek 6y ago
  They only have to buy his vested equity. His unvested equity, for all practical purposes, reverts back to the company. In standard 4/1 vesting, you get 1/4 of your equity on your first anniversary, and then equal-sized chunks every month thereafter for 4 years. Prior to that first anniversary, the idea of 4/1 is that you get nothing; the whole idea is to avoid allocating equity to people who don't last a whole year.
intricatedetail 6y ago
Shares are not connected to the work done. Why would they? It's an investment. That friend got rewarded for making right choices and meeting right people
spottybanana 6y ago
The professor probably had other options, but decided that this is the route to go. And once the decision is done, there is no turning back. In the early phase of a startup it quite often happens that equity is given on very relaxed way on good terms. For example someone can work only short time in the company and still get nice piece of equity, just because other founders are lazy or careless. A lot related to startups is "play stupid games, win stupid prizes". Sometimes you can get lot of equity & money if you just happen to be in the right place at the right time. Other times you end up working a lot and get nothing.

Nowado 6y ago

Got to agree, this advice sucks.

the_cat_kittles 6y ago

if you can emotionally check out but legally remain, thats ideal. you are mostly likely getting pushed out, so recognize that you are in a 100% adversarial relationship and separate yourself from any kind of personal emotional investment. a completely detached self interested approach is totally warranted given the circumstances, and would significantly increase the probability that you will be compensated more fairly.

unreal37 6y ago
IMO. No serious investor will give money to a company where someone who owns 40% of the equity is no longer involved and/or left on bad terms. Having him around but not active is going to limit how the business raises money in the future.

mattmaroon 6y ago

I know you mean well, but this could not possibly be good advice because there isn’t enough information in that post for even a lawyer to give good advice. You don’t know what’s In his contract. Maybe his cofounder can’t fire him. Maybe He could but that would trigger the vesting. Maybe he could put it to the board and fire his cofounder. Maybe his cofounders threat that it’s 3% or nothing is bluffing. It doesn’t really make sense for his cofounder, because that guy maybe is in the same situation if OPs contract is favorable. Maybe It’s 40% or nothing for him. The only acceptable advice here is to go talk to a lawyer. That’s it. Internet advice about things like this is always bad even when it is meant well

gkoberger 6y ago
I agree we don't know the whole story. But this is the version of the story that puts the OP in the best light, and still, my overall impression is it just seems like it's not worth it. What's the best case scenario they could get out of it? Maybe 6% equity, or maybe a $10k severance. But going after a company with no revenue and only $40k in the bank doesn't really seem like the best use of anyone's time, energy or money. There's minimal available short-term value, and litigation/fighting will sharply blunt any potential long-term value.
- mattmaroon 6y ago
  Well, one possible case scenario is that OP’s contract does not allow his cofounder to fire him, or fully vests if he does. He can this tell his cofounder to pound sand and his cofounder will have to realize that his options are 40% or 0%. If he believes the company has a bright future, he’ll take the deal. There’s a very real chance OP gets much more than 3% or 6%. Or there’s something better that I can’t think of because I’m not a lawyer who deals in this and don’t know the specifics. It’s just bad to give really any advice here, which is part OP’s fault really because he should not be asking a lawyer rather than Internet randos.
Talanes 6y ago
>Internet advice about things like this is always bad even when it is meant well Even if it's telling you to get a lawyer?

jacquesm 6y ago

Disagree. Normally I would agree, but this is such an outrageous situation that the OP should just dig in and tell the other side to GFT. Let's not set precedent that a-hole co-founders get to cut out their technical co-founders after almost a year for zero compensation without a fight.

gkoberger 6y ago
Well, we don't know the other side of the story. But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank? I get the impression this is all happening because things are going badly, not because things are really about to take off. My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
- jacquesm 6y ago
  > Well, we don't know the other side of the story. This is such a tired line. No, we don't know the other side. But the OP is here and asking for advice, so rather than sliding into some kind of false balance you could simply assume that they are telling the truth and basing your advice on that. The obligation to inform is on them, and speculation on your part what the other side may or may not be is pointless. > But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank? That's all speculative. > I get the impression this is all happening because things are going badly, not because things are really about to take off. Alternative point of view: if it was worth nothing the co-founder wouldn't be making such a play to own it all. > My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it. But that's exactly why the OP is here: to ask people if they do see such a path. If you can't see such a path then maybe just stay out of it rather than trying to talk the OP into something that they may regret gravely?

pdutt111 6y ago

I agree to the point that the company is probably done at this point, but of the off chance that it succeeds I'd get the 10% and then walk. if he raises another round etc. then that's a bargaining chip to get something (probably would amount to 0 but better to have it)

piyushpr134 6y ago

Best revenge would be to shut down the effing website and watch the other one go up in flames as non tech guy won't know how to switch it on. JK This is very unsound and simp like advice. He has built it. If anyone walks away it is the other guy and not him

gkoberger 6y ago
A lot goes into starting a company, not just tech. We don’t know who contributed what and how much. And I say this as a technical founder.

captainredbeard 6y ago

Rolling over because it's the easiest path is not a good option. That type of attitude will be apparent to people around you and you will likely get taken advantage of.