6 ms·

You're the bad guy in this story, and it isn't even close. At the point you and your partner had a falling out you had put in less than a year of work for the

• davidw 15y ago
  I think it's awfully premature to go around judging who is 'the bad guy', and that it's quite possible both or neither of them have done less than stellar things. But we simply don't have more than a smattering of facts from one side.
  • wisty 15y ago
    20% of a start-up (at year 1) is worth much less than 20% of it 5 years later. If the company had their paperwork in order, the OP should have maybe 5%, due to vesting and dilution. Or the original investor should have bought him out for a few thousand, as he was walking out the door (but he didn't did he?). Imagine if you had worked on building your company for 6 years, only to have an early employee (who presumably quit in a huff) come back and demand 20% - which they were meant to actually work for, and asserted IP rights on everything they had worked on. That said, the company is also behaving very badly, what with the extortion thing. They would be better off making a reasonable offer, and hitting themselves on the head for screwing up their ownership / IP assignment paperwork.
    • davidw 15y ago
      What portion of what is given to who is likely up to a judge and lawyers to decide at this point. Unlike HN, they'll have most or all of the available facts, which is likely to aid them in coming to some sort of agreement that's fairer than 0, which doesn't seem a reasonable amount either.
    • vladd 15y ago
      > If the company had their paperwork in order, the OP should have maybe 5% Vesting usually happens over 4 years, so quitting after 1 year means 20%/4 = 5%. After accounting for dilution due to investors, other stock grants and employees grants, I doubt it can be bigger than 1-2%.
      • jonnathanson 15y ago
        All of this assumes, of course, that there was a contract or signed, written agreement in place, with vesting as an explicitly stated term. What "usually" happens is, sadly, irrelevant unless it was stated in a contract in this case. There are moral arguments to be made here, and there are standards and practices that can be applied for and against those moral arguments. But it all comes down to what was, or was not, signed on paper. Founders should have written agreements in place, or else risk some very expensive lessons in due diligence.
    • ajross 15y ago
      The extortion accusation is just legal hardball, I assume. Remember that the OP hit first with the cease and desist along with a demand for $12M. So they hit back (though perhaps overstepped what is legal themselves, I don't know the law). Certainly they don't get brownie points for niceness, but they're playing on the same field as the OP.
• marcf 15y ago
  Does this individual have ownership of the company? What rights did he have according to the shareownership document? He may have a legal case no matter what you think of the ethics involved.
  • gmantastic 15y ago
    I agree - this descended too quickly into a discussion of what the OP "deserved" or what his shares were worth when he left. His claim is based on ownership, which should be established (or disproved) according to the law.
• vaksel 15y ago
  if his name is on a patent, that is part of their current offerings, he is indeed owed something
  • michaelrwolfe 15y ago
    Untrue. The company usually owns the patents. It just depends on whether he assigned his IP to the company when they incorporated, which he should have.
• lrm242 15y ago
  What would you say if this person's technology contribution was fundamental to the success of the company and, once complete, the other partner then did away with the technical mind behind the product so as to maximize benefit for himself? You have no idea what the true and complete facts are behind this guys story. Stop running around trying to apply half-baked, two-bit Valley Web-startup rules to his situation.
  • jsavimbi 15y ago
    > What would you say if this person's technology contribution was fundamental to the success of the company...? Looking back, I wrote some code in 2004 and again in 2005. Assuming that said code was left intact(1), at no point in my existence would I pretend that a company was able to launch, become a going concern and grow to the point of multi-million dollar sale based on some code I wrote six or seven years ago. (1 a completely insane assumption, imo)
    • nimblegorilla 15y ago
      What about the reverse situation? Someone invests money into a startup in exchange for 20% of the value. If they stop further investing does that mean the money was not fundamental to getting the company off the ground?
      • danshapiro 15y ago
        Equity is given before most of the expected value is provided, so it's important to have a mechanism to reclaim it if the expected value never materializes. That's why vesting is so important. If you decided to provide less than the expected amount of money, you would receive less than the agreed amount of equity, but it's really apples and oranges.
        • joshontheweb 15y ago
          The value expected from investors is longterm as well. Many startups take money from investors as a mechanism to get them on their board, provide mentorship and make connections. If the investor doesn't follow through on the mentorship, should he receive less equity?
• downandout 15y ago
  I agree that he deserves credit for building it into a real business, and he has been richly rewarded for that. However, everything - the company's name, its business model, and much of its intellectual property were my contributions. A large part of its success resulted from sales of products using my technology. The personal falling out was over a woman, and I did not leave voluntarily. This company was my brainchild and I would have continued working under the worst of circumstances if allowed. Finally, I don't think that anything entitled them to attempt to extort me, or to use my intellectual property while in breach of contract.
  • ramblerman 15y ago
    > and I would have continued working under the worst of circumstances if allowed. Well that's obviously not true...
    • chairface 15y ago
      It's far from obvious. Perhaps you missed the part where he involuntarily left the company?
• kahawe 15y ago
  Totally aside from what "feels" and "seems" good or bad, the only relevant question is whether OP kept their shares or not when they left... this should be the only point they have to prove, no? And what about the patent? Was that bought or licensed from them? I think we are lacking the important details, namely what happened when they left the company and what they signed then and before. So it comes down to what papers were signed when by who and do you still have copies? If all you have as proof is "word of mouth" without any witnesses then, well, you might be fighting a lost cause.
• michaelochurch 15y ago
  That's what vesting is for. He's clearly not entitled to 20% of the sale price, but these people are behaving like contemptible assholes and he should get something. He should figure out what he'd have if there were a 4-year vesting schedule in place and settle for that. He would get 1/4 of his partner's take if he had stayed for the entire vesting period, so if he was there for exactly 1 year, he should get 1/16 of whatever his partner got. Here's the reality he faces, though. He's up against sleazebags who are going to try to make sure he gets $0.00 and he's going to have to fight to get anything. He needs a good lawyer. We can't help him.
• grellas 15y ago
  Just a passing note here without commenting on the substance of these claims. Many founders do a "quickie LLC" on their own "just to get started" with the expectation that they will get a lawyer later to clean up the paperwork. When they do this, the two classic mistakes they make are: (1) not imposing vesting requirements on grants made to founders; and (2) not requiring that founders assign all IP rights into the company in exchange for the grant. In most cases, this becomes no-harm-no-foul and is simply cleaned up at a later stage. If there is an early falling out, though, you can have founders who leave the company and subsequently assert expensive legal claims even though their contributions to the venture may have been slight. In such a case, the do-it-yourself attempt to save a few dollars at the outset becomes a very expensive lesson in just how badly things can go wrong when you cut corners on such matters. Don't know the facts here and am not commenting on OP's position, which might be entirely legitimate and which can only be evaluated by those who know the facts.
  • JabavuAdams 15y ago
    A lawyer friend once described to me (but did not advise me) that a large part of contract disputes is figuring out what the original intent was. If that's true, is there any benefit practically speaking to having a simple e-mail that records the main points of agreement? It's perhaps not legally ironclad, but could provide evidence of the intent of both parties. I think there's a mental hurdle of going to the lawyer versus just exchanging a few emails.
    • grellas 15y ago
      A business contract typically tells a story about what two or more people hope to achieve by a mutual exchange of items of value in their deal. For most such contracts, a "meeting of the minds" lies at the heart of what the contract means and how it will be interpreted. If you don't have a formally executed document that itemizes the deal in total, it usually helps in documenting your intent if you have contemporaneous emails that set forth that intent. Note a couple of points: 1. It is important that they be "contemporaneous" - after-the-fact emails that try to paint a self-serving picture do not help and can sometimes backfire. 2. It is important that they be clear. In emails, we sometimes ramble or make ill-conceived statements or simply incomplete ones, and all this can be twisted against you in any later dispute. Best advice here: be yourself and set forth the terms as you see them honestly, clearly, and in keeping with the nature of the relationship (no CYA stuff), preferably without legalese; don't document pointlessly but only as needed to add clarity to what you are hoping to achieve. 3. Watch out for "merger" clauses in any final documentation if your expressions of intent as set forth in emails are contradicted by what the final contract says. A merger clause says that the written contract sets forth the entire contract between the parties and that nothing that has previously been said or even tentatively agreed in prior exchanges between the parties is valid if it contradicts what is set forth in the final written contract. When you sign a contract that has such a clause, you will be hard put to push any contradictory interpretation that you might have previously documented in emails. The emails still matter if all they do is help interpret otherwise ambiguous expressions in the final contract but not if they contradict clear provisions of that contract. The lesson here: don't assume that, simply because you have documented something in an email, it will necessarily help you in the end. 4. Get good legal advice before signing any important contract and normally document it in a formal contract if it is at all important. If it is a smallish, then the ebb and flow and the informality of email documentation can work just fine but do be aware of the limitations of any such approach. A good lawyer will also help think through the issues and help eliminate problem areas concerning whether the contract expresses your true intent. Do not use a lawyer slavishly but use one when it matters. This is really the theme of my GP post where I essentially say be careful not to be penny-wise and pound-foolish when it comes to using legal help on things that matter.
• tptacek 15y ago
  I modded your comment up because it makes some important counterpoints to our usual knee-jerk "hackers good, businesspeople bad" mentality. But let me join the chorus of people saying that we don't know enough to call him "the bad guy", even if only because he may not understand why shares usually vest in the first place (if you're a first-time founder who came up with the idea, you might reasonably believe you have an iron claim to your % of the company, even if it rarely works out that way in the real world).
  • gizmo 15y ago
    By saying that he's "the bad guy" I did sort of imply that there is malicious intent on his side even though that may indeed not be the case. Perhaps he did not deliberately name the company he worked for in the OP to gain extra leverage, and perhaps he did not deliberately play the victim card and perhaps he really feels he deserves to get $12.8 million for his contributions. Perhaps. And for what it's worth, I think he should get some compensation for his contributions and that the counteroffer of $0 is unreasonable as well, for the reasons given by other people.
• anigbrowl 15y ago
  I repeat: when you quit your shares were worth nothing. First, you have no idea what they were worth. For all we know, the company could have been profitable in its first year of business. Second, you have no idea whose fault the break-up was, and are assuming the OP is at fault. Third, if passively owning shares in a company means one is not entitled to any of the capital gains thereon, the vast majority of investors are in for an unpleasant surprise. I can't understand the angry tone of your comments. You seem determined to assign all fault to the OP, despite his observation that the firm's first patent is still a core part of the IP. I'm guessing you're against software patents or something and are discounting the net present value of that contribution to zero, so as to argue that all value derives from the operation of the firm by the OP's ex-partner. Patent #7,676,834 was applied for in 2004, but only granted in 2010; it's conceivable that the granting of a patent was what made it worthwhile for Equifax to acquire the firm, as opposed to its book of business. I'm not a big fan of software patents, but this one looks unusually valuable as these things are currently handled.
  • gizmo 15y ago
    The angry tone is because he publicly accuses Anakam and his ex-partner of screwing him out of $12.8 million, accusing them of extortion and that he's the victim and needs the internet to help him. Even though, when I look at what he wrote, that doesn't represent the situation accurately at all. I see this as a thinly veiled attempt to get an internet lynch mob started. I think he chose the title of the HN post deliberately to evoke an emotional response, specifically one of outrage. Had he obfuscated his story such that we wouldn't be able to identify the people involved I wouldn't have responded with an angry tone. He could even have kept the inflammatory title. (FYI: I'm not particularly against software patents.)
• tlogan 15y ago
  I think that asking for $12.8 million is a lot. However, the person is co-inventor of a patent on which business was based on, so he does have some legal ground. Or at least common sense.
• neuroelectronic 15y ago
  Too bad all your points are completely subjective and trivial. The only thing that matters is what ownership he legally had.
• apinstein 15y ago
  How do you know? If he was a legitimate partner in the original LLC/Corporation, he may have equity rights that the other owner ignored, buried, etc. You have no idea. From his post it sounds like the founders didn't have a formal setup but had a gentleman's agreement which was ignored. It is not just "OK" to ignore a gentleman's agreement. Maybe they had something formal, maybe they didn't. Either way, there are laws governing how the "four D's" are handled if nothing is stipulated on paper. The four D's are death, disability, divorce (ie partners decide to separate, which is what happened here), and departing (amicable separate through pre-arranged buyout/exit terms). In any case, let this be a lesson to everyone else to have these situations pre-contemplated and agreed to in writing :)