4 ms·

Not a smart move for the parting founder though as keeping a 50 % stake of an unprofitable company will drastically reduce the chance of that company succeeding

Not a smart move for the parting founder though as keeping a 50 % stake of an unprofitable company will drastically reduce the chance of that company succeeding. The remaining founder won't be able to secure funding (no sane VC will touch a company with such a cap table) or offer those shares to new hires. Shares are a means to generate value, they should be handed out in exchange for taking risks (as the original founders), doing work (early hires / employees) or contributing money (investors). Having a large fraction of shares just "lie around" without contributing anything is pretty damning for a startup. Most likely outcome of those situations is that the remaining founder will abandon or sell the company.

JoachimS 5y ago
Exactly - unless you are bitter and hate the company, why would you like to cause harm, in effect reduce the value of your stake? Inactive, uninterested founders in general will only be a burden. Either you are engaged or you are not.
dwohnitmok 5y ago
It appears the final offer was to keep a 5% stake, not a 50% stake, and then get the remaining 45% bought out for 100k (30k upfront, 70k over 10 years), and the disagreement was over whether that 45% was worth closer to 100k or 26k. Basically as far as I can tell, as far as it pertains to shares, this conflict boils down purely to differing valuations of current shares (of course I'm sure on a personal level the conflict is much more complex).
- fastball 5y ago
  > bought out for 100k Which sounds kinda ridiculous to me given that the company had $52k in the bank and had been operating at a loss for an extended period of time.
  - dwohnitmok 5y ago
    Maybe. Being paid out 100k for 45% of any future exit of the company forever doesn't seem unreasonable on the face of things, even if the company only has 52k in the bank and has been operating at a loss for a long time. But that would depend on the specifics of what the company has in the pipeline. But if you think the company is likely to follow something like the following trajectory of net income then 100k for 45% doesn't seem all that unreasonable, even with time discounting. Year 0: -10k Year 1: 0k Year 2: 10k Year 3: 20k Year 4: 40k Year 5: 80k Year 6: 100k Year 7: 100k
    - fastball 5y ago
      Why would we expect a company that has been steadily reversing that trend to follow that trend? Suddenly because a founder is leaving you expect them to start turning a profit again? That seems a little backwards.
      - dwohnitmok 5y ago
        Has that been true? I don't know what the company's financials have looked like year over year. > Suddenly because a founder is leaving you expect them to start turning a profit again? No, it's more a question of whether you think the company will ever turn a profit. That's probably the point of contention over how much the shares are worth: do you think Elementary OS will ever financially support a team? If not then you probably lean closer towards a 0 dollar valuation (or in this event 26k). If you do then you probably lean closer to a 100k valuation.
        fastball 5y ago
        Well the tweets said sales fell and haven't recovered since COVID, which has been going on for two years now. But regardless, the value of the shares are... whatever their value is now. It doesn't matter what they might be worth in 10 years if their current value is ~zero and a founder wants to divest them now.
        dwohnitmok 5y ago

JoachimS 5y ago

Exactly - unless you are bitter and hate the company, why would you like to cause harm, in effect reduce the value of your stake? Inactive, uninterested founders in general will only be a burden. Either you are engaged or you are not.

dwohnitmok 5y ago

It appears the final offer was to keep a 5% stake, not a 50% stake, and then get the remaining 45% bought out for 100k (30k upfront, 70k over 10 years), and the disagreement was over whether that 45% was worth closer to 100k or 26k. Basically as far as I can tell, as far as it pertains to shares, this conflict boils down purely to differing valuations of current shares (of course I'm sure on a personal level the conflict is much more complex).

fastball 5y ago
> bought out for 100k Which sounds kinda ridiculous to me given that the company had $52k in the bank and had been operating at a loss for an extended period of time.
- dwohnitmok 5y ago
  Maybe. Being paid out 100k for 45% of any future exit of the company forever doesn't seem unreasonable on the face of things, even if the company only has 52k in the bank and has been operating at a loss for a long time. But that would depend on the specifics of what the company has in the pipeline. But if you think the company is likely to follow something like the following trajectory of net income then 100k for 45% doesn't seem all that unreasonable, even with time discounting. Year 0: -10k Year 1: 0k Year 2: 10k Year 3: 20k Year 4: 40k Year 5: 80k Year 6: 100k Year 7: 100k
  - fastball 5y ago
    Why would we expect a company that has been steadily reversing that trend to follow that trend? Suddenly because a founder is leaving you expect them to start turning a profit again? That seems a little backwards.
    - dwohnitmok 5y ago
      Has that been true? I don't know what the company's financials have looked like year over year. > Suddenly because a founder is leaving you expect them to start turning a profit again? No, it's more a question of whether you think the company will ever turn a profit. That's probably the point of contention over how much the shares are worth: do you think Elementary OS will ever financially support a team? If not then you probably lean closer towards a 0 dollar valuation (or in this event 26k). If you do then you probably lean closer to a 100k valuation.
      - fastball 5y ago
        Well the tweets said sales fell and haven't recovered since COVID, which has been going on for two years now. But regardless, the value of the shares are... whatever their value is now. It doesn't matter what they might be worth in 10 years if their current value is ~zero and a founder wants to divest them now.
        dwohnitmok 5y ago