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The instant your partners know you're involving a lawyer is when the relationship becomes adversarial (possibly permanently). This is not the lawyer moment. T

The instant your partners know you're involving a lawyer is when the relationship becomes adversarial (possibly permanently). This is not the lawyer moment. The lawyer moment is "after a lot of discussion, these guys refuse to do what me and the rest of the world thinks is fair". Has there been a lot of discussion? Get on a call with them ASAP. Tell them you think that pro-rata is both what's FAIR and WHAT IS DONE 99.999% of the time in these circumstances-- and mention that you've done a lot of research. Say, "Guys, obviously any two of us can impose a decision on the third, but I trust you guys, so I'm assuming you're doing this because you think it's normal/fair. How about this: I pay for a few hours of a high-end startup lawyer's time and we can get a sense of what's standard-operation-procedure here is? It seems like we might have different opinions about what's fair. I'd propose we appeal to a knowledgeable 3rd party. Is that cool?" If they agree, add: "If this experienced startup lawyer says that pro-rata is what's done virtually all the time in these circumstances, can we agree to go that route?" And see what they say. Just keep saying you trust them and ask questions along these lines. Eventually they'll either agree or it'll come out that they feel that you haven't earned your 10%. Understand: If things get ugly, they can fire you (wait-- are you vesting? If they fire you after 1.5 years, you lose most of your options). Once they fire you, they can dilute you and other people who are not with the company somewhat easily. Your job here is to be friends and to maintain/earn trust (and to not get taken advantage of!). NEVER THREATEN until there's nothing left to salvage. If you're a fabulous negotiator, you can HINT that you're willing (and financially able) to lawyer up.

jdmichal 12y ago
I just want to point out: There's a difference between lawyering up for advice, and hiring a lawyer to be your front man during the negotiations. OP can talk to a lawyer to examine his contract(s) and gain advice on what the potential options available to him are according to the law and those contracts. The company does not need to and should not know anything about this level of involvement.
- eccles 12y ago
  +1 In fact I bet the other parties have done the same already.
kordless 12y ago
The guy has no business trying to learn how to be a diplomat when he's already tasked with a day to day job for the founders. If it's gotten this far in the conversation (posting on HN) then the situation is clearly bad, at least on one end. Given it's a situation with unfair dilution, the assumption is that all stakeholders are well aware of the dilution results and are OK with what is being proposed. They are founders, after all, and SHOULD know what they mean by asking for this. Also, don't think for a minute they don't already have attorneys queued up on their end. I would say this is EXACTLY the time to have an attorney get involved to take a look at the documentation and render an opinion. If the situation is ugly, they may fire him if he protests, but that also gives rise to a reason to question the cause for termination. Given the contractual agreement between the parties, a termination event may provide an avenue to compensation for unfair termination, especially when seeking legal council could be shown as the reason for termination. When in doubt, lawyer up and be cautious of making blaming statements that aggravate the other party. You may want to end up working with them in the future. Or not, depending.
- tptacek 12y ago
  Saying that may make you feel better, but Tony seems to have the better argument. You absolutely can be fired for lawyering up what the founders intended to be a pro-forma restructuring of the shares. You will probably have no recourse when that happens. Assuming you're vesting, like most employees (and founders!) are, getting fired will cost most of your shares. Talking to a lawyer: good. Bringing a lawyer into the discussion with the founders: bad.
  - Silhouette 12y ago
    While these practical considerations are interesting, I think there is another observation worth making as well. If you really can be fired without cause or notice and at the loss of most/all of your interest in the business, you have no cards and anything you do is a bluff. If you really are dealing with cofounders who are are willing to push you out of 40% of your interests without offering much of anything in return as soon as the going gets good, then you have no reason to trust they won't push you out of the remaining 60% the day before any lock-up expires. In that case, your best options may be either to lever the practical value that keeping you on board has right now to get a better, more secure deal immediately -- one where you won't be vulnerable to being kicked out arbitrarily and without proper compensation in the future -- or to assume you're going to get screwed when your lock-up ends and leave now. It's a good idea to negotiate at this point rather than caving to the (probably very bad) deal being offered as an opening gambit by the cofounders, but the bottom line is that if they can fire you whenever they feel like it and you have no airtight contractual right to compensation if they do, nothing else you negotiate now actually has any value at all. (Edit: Obviously if you opt for the "apply leverage" option then you do it nicely. I'm not talking about lawyers-at-dawn and threatening to walk if they don't meet your every outrageous demand or anything silly and confrontational like that. But I think it would be perfectly reasonable to expect solid guarantees that your remaining interests will retain meaningful value in exchange for whatever you are willing to give up here, such as accelerated vesting and a condition that if they let you go early then there's something in it for you.)
Finbarr 12y ago
Employment laws between the US and EU are vastly different and firing the OP may not be a readily available option to the founders.

jdmichal 12y ago

I just want to point out: There's a difference between lawyering up for advice, and hiring a lawyer to be your front man during the negotiations. OP can talk to a lawyer to examine his contract(s) and gain advice on what the potential options available to him are according to the law and those contracts. The company does not need to and should not know anything about this level of involvement.

eccles 12y ago
+1 In fact I bet the other parties have done the same already.

kordless 12y ago

The guy has no business trying to learn how to be a diplomat when he's already tasked with a day to day job for the founders. If it's gotten this far in the conversation (posting on HN) then the situation is clearly bad, at least on one end. Given it's a situation with unfair dilution, the assumption is that all stakeholders are well aware of the dilution results and are OK with what is being proposed. They are founders, after all, and SHOULD know what they mean by asking for this. Also, don't think for a minute they don't already have attorneys queued up on their end. I would say this is EXACTLY the time to have an attorney get involved to take a look at the documentation and render an opinion. If the situation is ugly, they may fire him if he protests, but that also gives rise to a reason to question the cause for termination. Given the contractual agreement between the parties, a termination event may provide an avenue to compensation for unfair termination, especially when seeking legal council could be shown as the reason for termination. When in doubt, lawyer up and be cautious of making blaming statements that aggravate the other party. You may want to end up working with them in the future. Or not, depending.

tptacek 12y ago
Saying that may make you feel better, but Tony seems to have the better argument. You absolutely can be fired for lawyering up what the founders intended to be a pro-forma restructuring of the shares. You will probably have no recourse when that happens. Assuming you're vesting, like most employees (and founders!) are, getting fired will cost most of your shares. Talking to a lawyer: good. Bringing a lawyer into the discussion with the founders: bad.
- Silhouette 12y ago
  While these practical considerations are interesting, I think there is another observation worth making as well. If you really can be fired without cause or notice and at the loss of most/all of your interest in the business, you have no cards and anything you do is a bluff. If you really are dealing with cofounders who are are willing to push you out of 40% of your interests without offering much of anything in return as soon as the going gets good, then you have no reason to trust they won't push you out of the remaining 60% the day before any lock-up expires. In that case, your best options may be either to lever the practical value that keeping you on board has right now to get a better, more secure deal immediately -- one where you won't be vulnerable to being kicked out arbitrarily and without proper compensation in the future -- or to assume you're going to get screwed when your lock-up ends and leave now. It's a good idea to negotiate at this point rather than caving to the (probably very bad) deal being offered as an opening gambit by the cofounders, but the bottom line is that if they can fire you whenever they feel like it and you have no airtight contractual right to compensation if they do, nothing else you negotiate now actually has any value at all. (Edit: Obviously if you opt for the "apply leverage" option then you do it nicely. I'm not talking about lawyers-at-dawn and threatening to walk if they don't meet your every outrageous demand or anything silly and confrontational like that. But I think it would be perfectly reasonable to expect solid guarantees that your remaining interests will retain meaningful value in exchange for whatever you are willing to give up here, such as accelerated vesting and a condition that if they let you go early then there's something in it for you.)

Finbarr 12y ago

Employment laws between the US and EU are vastly different and firing the OP may not be a readily available option to the founders.