4 ms·

Startup Legal Headache?

1 points by gavelin 5y ago

What's the biggest legal hurdle you've run into as a founder?

epc 5y ago
Is a co-founder story acceptable? Recruited by CEO to serve as co–founder & CTO. Asked to sign NDA. That would be the only legal document the CEO put together for the next year. Repeatedly ask him to put together the rest of the documents for the corporation including equity splits. 14 months in he produces documentation removing me as co–founder (honestly didn't care) and reducing my equity from 5% to 1% with vesting starting that date (14 months in). At that point I'd spent a little over US$10k developing the MVP. He refused to budge, made various statements hinting at litigation, so I walked away with the MVP. He had no rights to it, mostly due to him not moving on anything beyond the NDA. Company folded, since, amongst other things he didn't do during the 14 month window, he didn't raise any money at all. Net takeaway for me: do not create capital value for others without documented compensation up front.
- gavelin 5y ago
  Gut wrenching story! The overemphasis on NDAs these days is concerning, particularly in instances like yours where someone is clearly looking to claim ownership of an idea without the desire to put any effort towards developing it. The more successful people I know tend to be the types of people who enjoy building and sharing things rather than guarding their ideas. I love John List's interview on Tim Ferriss (Chief Economist at Lyft & ex-Uber), in which he discusses how important it has been to publish his findings for the sake of science as opposed to guarding them as trade secrets. Glad you were able to move on from that without any litigation. Although, I should mention that your ex co-founder could claim that you guys had a "de facto partnership" despite you not having signed any type of co-founder agreement or having formed a legal entity.
  - epc 5y ago
    He could have, but didn’t. The thing that stuck with me was that he was more concerned with preserving "his" equity than my walking away with the MVP.

1 points by gavelin 5y ago

What's the biggest legal hurdle you've run into as a founder?

epc 5y ago

Is a co-founder story acceptable? Recruited by CEO to serve as co–founder & CTO. Asked to sign NDA. That would be the only legal document the CEO put together for the next year. Repeatedly ask him to put together the rest of the documents for the corporation including equity splits. 14 months in he produces documentation removing me as co–founder (honestly didn't care) and reducing my equity from 5% to 1% with vesting starting that date (14 months in). At that point I'd spent a little over US$10k developing the MVP. He refused to budge, made various statements hinting at litigation, so I walked away with the MVP. He had no rights to it, mostly due to him not moving on anything beyond the NDA. Company folded, since, amongst other things he didn't do during the 14 month window, he didn't raise any money at all. Net takeaway for me: do not create capital value for others without documented compensation up front.

gavelin 5y ago
Gut wrenching story! The overemphasis on NDAs these days is concerning, particularly in instances like yours where someone is clearly looking to claim ownership of an idea without the desire to put any effort towards developing it. The more successful people I know tend to be the types of people who enjoy building and sharing things rather than guarding their ideas. I love John List's interview on Tim Ferriss (Chief Economist at Lyft & ex-Uber), in which he discusses how important it has been to publish his findings for the sake of science as opposed to guarding them as trade secrets. Glad you were able to move on from that without any litigation. Although, I should mention that your ex co-founder could claim that you guys had a "de facto partnership" despite you not having signed any type of co-founder agreement or having formed a legal entity.
- epc 5y ago
  He could have, but didn’t. The thing that stuck with me was that he was more concerned with preserving "his" equity than my walking away with the MVP.