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Hey. As a former lawyer, I'm going to echo the many comments in this thread to consult a lawyer. If you find a good one with relevant experience, it should onl
by andjd 6y ago
Hey.
As a former lawyer, I'm going to echo the many comments in this thread to consult a lawyer. If you find a good one with relevant experience, it should only take a few hours at most to properly understand the exact situation you are in and know your options. Your rights could vary drastically based on the specifics of the company and the employment/equity agreements you entered into, in addition to where you and the other founder are, and where the business was incorporated or registered. If there aren't formal agreements to this, but you have emails or other documentation that's short of a formal contract, that can also be relevant. Regardless, the co-founder and the investor owe you, an equity holder, a fiduciary duty. The threat to tank the business if you don't surrender most of your equity is a pretty cut-and-dry breach of that fiduciary duty, and you are fully within your rights to demand relief, which could be monetary, but could also be equitable, such as requiring your co-founder to relinquish control of the company, or to transfer ownership of the company's source code, domains, and IP to you. Whether any of this relief would be practically available to you would require expert legal advice and would depend highly on the specifics of your situation.
To others in this thread, if you're looking to join a startup as a technical co-founder like this, 'We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff.' is not standard in the same way it is for other early employees. In this situation, your equity should be in real shares from the get-go, not options that vest over time. You should also have a partnership agreement or similar document that outlines how board-level decisions are made, and for a business with a few mostly-equal owners, such decisions should typically require consensus of the owners, even if one person controlls 51+% of the equity. This is the most reliable way to protect your interest in the business, and this is what true co-founder status looks like. If the O.P. had asked for this before signing on, my guess is that the co-founder would have balked, and the O.P. would have known from the get-go what the dynamics would be, and could have walked or insisted on a higher salary to reflect the fact that he's being treated like an employee not a business partner.
- wpietri 6y agoI strongly agree. Find a lawyer, find a lawyer, find a lawyer. To the OP, if you're in California, I'm happy to recommend mine. Adam Slote of Slote Links and Boreman, slotelaw.com. 20 years back somebody was trying to screw me over; he charged me $500 for a solid "don't fuck around or you'll regret it" letter. They paid up instantly. Since then he's been great a dealing with my startup stuff both as an employee and as a cofounder. And much of his work is in litigation, so if you do end up suing, he's the right person for it. I also agree that the 1-year cliff is absolutely not standard for founders. Last time I did it, I had a 4-year reverse vest with no cliff at all.
- pdonis 6y ago> your equity should be in real shares from the get-go, not options that vest over time The OP said reverse vesting. Doesn't that mean he does own all his shares now? The company just has the right to buy them back if he leaves (and the cliff is when the percentage they can buy back starts decreasing from 100%).
- awinter-py 6y ago> 4yr reverse vesting with 1yr cliff.' is not standard in the same way it is for other early employees yes but -- have spoken to founders raising large rounds pre-revenue who do have this deal. Their stock is the same as employee stock.
- jiveturkey 6y ago> If the O.P. had asked for this before signing on, my guess is that the co-founder would have balked, disagree. If the OP didn't already have this standard type of cofounder arrangement, the other guy wouldn't be asking him to leave. He'd be telling him.