4 ms·

Ask HN: My co-founder fired me, sold the startup, and I haven't gotten anything

9 points by sadfounder2023 3y ago

Some relevant details: - Some of my equity had vested before I was fired, and I have proof of my equity ownership - I found out from a PR release that the startup was acquired by a PE firm - We raised $2M in total from a VC. I'm aware that if the startup was sold for less than $2M, all of it would go to liquidation preferences - I heard through the grapevine that the startup was sold for less than $2M, but I have no idea if this is true, or if there were any shady dealings involved - I've emailed my co-founder to ask for details but he hasn't replied or informed me of anything As someone who isn't a multimillionaire, I have no idea what I can practically do to learn more about the acquisition terms, figure out if I'm owed any money, or if I'm getting screwed in any way. Is there anything I can practically do that would be worth the money?

eschneider 3y ago
Talk. To. A. Lawyer.
mtmail 3y ago
7 weeks past since you last posted about the sale (https://news.ycombinator.com/item?id=38059219 https://news.ycombinator.com/item?id=38059219), have you contacted anybody in the meantime? Can you contact any employees that might have had significant share (received any kind of payout)? A strong worded letter by a lawyer is probably a good investment. You have shares and demand to know what happened to them.
- sadfounder2023 3y ago
  I reached out to my co-founder but haven't heard anything from him. I also asked around and heard through the grapevine that the startup was sold for less than liquidation preference. But I don't know how reliable this is. I suppose my main hesitation in hiring a lawyer is that it would cost me a bunch of money, only to find out that the startup was sold for less than liquidation preference. If I did get a lawyer to send a "strongly worded letter", would the company be required to provide details about the acquisition? Given that my co-founder is not being cooperative, I suspect he wouldn't share anything that he isn't legally required to
  - japhyr 3y ago
    Your last post mentioned a potential 6-figure payout. If that's realistic, then paying a lawyer to craft a communication that requires a response will be a lot more productive than continuing to post here. A drawn out lawsuit would be expensive, but asking a lawyer how to get clear information about what's going on shouldn't be prohibitively expensive.
anigbrowl 3y ago
Talk. To. An. Attorney. If you don't know any (which would be weird if you founded a startup) call the State Bar wherever you live and ask them for referrals. You should absolutely not be trying to to open-source the solutions to your private legal problem. You're just setting yourself up for a counter-suit for defamation or suchlike.
- gardenhedge 3y ago
  Do you mean crowd-source rather than open-source?
Ckirby 3y ago
[dead]
ipaddr 3y ago
Why would he sell for less than 2 million he would get nothing as well. Unless he restructured took preferred shared. But usually it is better to take a chance on a rebound. A number of things could have happened. If he is not responding a cheap lawyers letter can clear that up. A sale could have some public records depending on who purchased. How much did you own? 30%?
joshxyz 3y ago
Talk to a.. well you know the drill anon.
Chandraa 3y ago
Don't have a specific answer for you but: 10 person startup. $2M raise. PE firm. Smells a lot like aquihire where existing investors got back some money and that's it. Note that even if the purchase price was more than $2m, it's possible that investors took all of it. Typically the liquidation preference is 3-5x. And it the common shares got paid, it's all or nothing AFAIK. I've never heard anything different, but I haven't seen enough. Regardless, generally speaking, an acquirer - especially a PE firm - would never take any legal risk in a transaction like this.
codegeek 3y ago
PE firms are notorious for paying peanuts and often a lot of comp. is not cash but stock based. Regardless, the cofounder cannot sell without your approval and if you indeed had equity, you can sue both the cofounder and the PE firm as they didnt do their due diligence correctly. PE firms usually wont want to assume that risk so I am surprised that they missed this. TL;DR: Get a Lawyer. You cannot do anything else.

eschneider 3y ago

Talk. To. A. Lawyer.

mtmail 3y ago

7 weeks past since you last posted about the sale (https://news.ycombinator.com/item?id=38059219 https://news.ycombinator.com/item?id=38059219), have you contacted anybody in the meantime? Can you contact any employees that might have had significant share (received any kind of payout)? A strong worded letter by a lawyer is probably a good investment. You have shares and demand to know what happened to them.

sadfounder2023 3y ago
I reached out to my co-founder but haven't heard anything from him. I also asked around and heard through the grapevine that the startup was sold for less than liquidation preference. But I don't know how reliable this is. I suppose my main hesitation in hiring a lawyer is that it would cost me a bunch of money, only to find out that the startup was sold for less than liquidation preference. If I did get a lawyer to send a "strongly worded letter", would the company be required to provide details about the acquisition? Given that my co-founder is not being cooperative, I suspect he wouldn't share anything that he isn't legally required to
- japhyr 3y ago
  Your last post mentioned a potential 6-figure payout. If that's realistic, then paying a lawyer to craft a communication that requires a response will be a lot more productive than continuing to post here. A drawn out lawsuit would be expensive, but asking a lawyer how to get clear information about what's going on shouldn't be prohibitively expensive.

anigbrowl 3y ago

Talk. To. An. Attorney. If you don't know any (which would be weird if you founded a startup) call the State Bar wherever you live and ask them for referrals. You should absolutely not be trying to to open-source the solutions to your private legal problem. You're just setting yourself up for a counter-suit for defamation or suchlike.

gardenhedge 3y ago
Do you mean crowd-source rather than open-source?

Ckirby 3y ago

[dead]

ipaddr 3y ago

Why would he sell for less than 2 million he would get nothing as well. Unless he restructured took preferred shared. But usually it is better to take a chance on a rebound. A number of things could have happened. If he is not responding a cheap lawyers letter can clear that up. A sale could have some public records depending on who purchased. How much did you own? 30%?

joshxyz 3y ago

Talk to a.. well you know the drill anon.

Chandraa 3y ago

Don't have a specific answer for you but: 10 person startup. $2M raise. PE firm. Smells a lot like aquihire where existing investors got back some money and that's it. Note that even if the purchase price was more than $2m, it's possible that investors took all of it. Typically the liquidation preference is 3-5x. And it the common shares got paid, it's all or nothing AFAIK. I've never heard anything different, but I haven't seen enough. Regardless, generally speaking, an acquirer - especially a PE firm - would never take any legal risk in a transaction like this.

codegeek 3y ago

PE firms are notorious for paying peanuts and often a lot of comp. is not cash but stock based. Regardless, the cofounder cannot sell without your approval and if you indeed had equity, you can sue both the cofounder and the PE firm as they didnt do their due diligence correctly. PE firms usually wont want to assume that risk so I am surprised that they missed this. TL;DR: Get a Lawyer. You cannot do anything else.