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> I'm the technical co-founder of a pre-revenue startup. We were 51/49% to them and took a small round of pre-seed funding (~$100k) so our cap table is approx 4

> I'm the technical co-founder of a pre-revenue startup. We were 51/49% to them and took a small round of pre-seed funding (~$100k) so our cap table is approx 40% for me and co-founder, 10% option pool and 10% investor. We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff. Note the “reverse vesting” bit, this caught me out too. This is not the standard employee “you have zero until your 1yr cliff” deal, it’s the opposite in some sense, the founders own their shares unless they leave, in which case they are clawed back, and the clawed back amount goes by the 4yr period. In this case if the investor has voting rights, neither founder has a controlling share, and the investor is the tiebreaker. So OP can fire the other founder with the investor’s vote.

nickff 6y ago
The non-tech founder is likely CEO (as they started in, and likely got the investor on-board), so they can likely fire the TCF without a vote. The board, likely made up of NTF, TCF, and investor could then fire the NTF. In any case, this is not going to end nicely, and I would recommend walking away with whatever equity can be had without setting the counter-parties against TCF. If NTF and investor get really mad, they can easily dilute or destroy TCF's equity, so I'd try to avoid that.
- theptip 6y ago
  Wouldn’t firing the TCF (or any key staffing decision) require a board vote at this stage? Not to mention potentially being a breach of the NTF’s duty of loyalty to the shareholders if they don’t have a good business reason for firing them? In other words the NTF would need to have the investor on board to make that move. IANAL so interested to know how folks with more experience have seen this fact pattern play out.
  - irjustin 6y ago
    The grandparent comment stated this. The TCF needs to make a case directly to the investor to show their worth and tell their side of the story. It's not explicit this was done, so it's assumed it wasn't. If the TCF hasn't spoken to the investor directly, it's relatively easy to assume the investor will vote in the NTF's direction. Lots of assumptions, but we don't have that much to go on.
- gkoberger 6y ago
  You don't give up a board seat for $100k. At least, you definitely shouldn't.
  - icedchai 6y ago
    You do if you have no other funding.

nickff 6y ago

The non-tech founder is likely CEO (as they started in, and likely got the investor on-board), so they can likely fire the TCF without a vote. The board, likely made up of NTF, TCF, and investor could then fire the NTF. In any case, this is not going to end nicely, and I would recommend walking away with whatever equity can be had without setting the counter-parties against TCF. If NTF and investor get really mad, they can easily dilute or destroy TCF's equity, so I'd try to avoid that.

theptip 6y ago
Wouldn’t firing the TCF (or any key staffing decision) require a board vote at this stage? Not to mention potentially being a breach of the NTF’s duty of loyalty to the shareholders if they don’t have a good business reason for firing them? In other words the NTF would need to have the investor on board to make that move. IANAL so interested to know how folks with more experience have seen this fact pattern play out.
- irjustin 6y ago
  The grandparent comment stated this. The TCF needs to make a case directly to the investor to show their worth and tell their side of the story. It's not explicit this was done, so it's assumed it wasn't. If the TCF hasn't spoken to the investor directly, it's relatively easy to assume the investor will vote in the NTF's direction. Lots of assumptions, but we don't have that much to go on.
gkoberger 6y ago
You don't give up a board seat for $100k. At least, you definitely shouldn't.
- icedchai 6y ago
  You do if you have no other funding.