My co-founder (a good friend of mine) came to me back in February with an idea for a platform. He came to me mainly because I'm a coder, and he's not, so he wanted someone to help him implement this idea. I loved the idea that he presented me with, so we joined forces and decided to be co founders of this venture together.
After a few months of working (me on the code, him on... well, nothing really, just asking his friends for advice on business plans and marketing, but he hasn't actually outputted anything yet), I have now come to realize that the two of us really don't see eye to eye on what the platform is about, and I've decided that I no longer want to continue on this venture with him.
We did write up a Founders Agreement (although we never actually printed it up and signed it), and in this agreement, it states that once a corporation is formed then all assets are transferred to the corporation, however, we haven't formed a corporation yet. The agreement also states that if one of us wants to leave before, we should have a mutual separation of assets.
When we originally spoke about if one of us wanted to leave, what would happen, he told me that he believed the person staying should own everything that was created, without any regard to compensation for the person leaving the venture.
So far, I've put in four months of coding work, along with some of my own money in various services (hosting, proxies, buying a domain, etc). If I leave now, I personally think that in this separation of assets, he should pay me back the money that I've spent on this venture, and that he should only get my code if he compensates me in some way (money for four months of work, or a percentage of the company).
I'd like to hear thoughts from everyone here, to see what I should do.
The co founder who split is of the opinion that everyone can continue to work on the idea regardless. But I think that's mostly to avoid him having to pay for our efforts/pay us to leave.
I had doubts about this, but now I am sure. It's simply not an option to have 2 companies working on the same thing.
Thanks !
Totally agree about the friends thing. I am a little wiser now.
Me and 3 others were working on a hardware/software idea in the music domain. One of the co-founders decided to split because of the following reasons :
1. Did not feel that equity should be split equally.
2. His personal vision did not align with what was good for the company(he said this himself).
3. He had issues with me "calling shots". We've known each other for more than a decade. This has nothing to do with the decisions that were taken, but more of a first among equals conundrum.
We were in the middle of incorporating a Pvt Ltd. So I am not legally protected.
The other 2 co-founders have decided to move on. They are finding this financially taxing and want to pursue higher studies.
Everyone except me is fresh out of college, I have one years experience (at a startup where we crowdfunded open source hardware).
My Contrib
Software (API, smartwatch app, etc.) as well as building the website (static).
Inputs on the hardware design from my end, but no commits to the repo.
Outreach :Setting up meetings with investors, bringing technical mentors onboard
I have spent roughly 50% of total expense.
The co-founder who has decided to split wants to work on the idea by himself and wants the other 3 of us out. He has said he is willing to compensate us for our expenses, and pay some remuneration for the effort put in.
1. How do I get a clean break from this ? This is more in an emotional context than anything else. I've documented and shared quite a few ideas about this particular project, and I feel quite close to it.
2. How should I calculate my remuneration after expenses ? Should this be calculated based on my salary at previous employer or something similar ?
3. Assuming I continue to work on this idea alone or with some of the other co-founders, what are the legal hassles involved ? Who gets to own what ? Is it even worth the effort, considering the fact that investors are wary about such a history.
Firstly, are you sure you describe the situation objectively? If this were a novel, I would consider the storyline under-developed. There must be some reason, however injust, why your co-founder thinks he should get a majority share. For example:
"currently, 100% of the design AND code was created by me."
You may have done the typing, but you also acknowledge that there was a lot of discussion that led to the current design. I guess that this is an area where your co-founder may see things very differently ('(s)he did the technical stuff, but all the ideas are mine')
As to your question, you should decide what you value more: getting back on your co-founder, or having the product succeed. In the first case, go talk to a lawyer; in the second, I think you should get an agreement that includes you leaving the company ASAP. That ASAP is because of phrases such as 'bullied', 'bosses me around', 'belittling' that make me wonder about the 'is' in 'who is a close friend.'
How much you can get out of it depends on the value you have to the company. That will depend on the technical complexity of the product.
When I decided to leave my co-founder we asked advice from the local chambers of commerce (In the Netherlands they provide this). I remember feeling the same: surely all my effort put in must be worth something.
The advice was clear. The value of the company is based not the future expected cash from my work, not my effort. In small start-ups, a leaving co-founder often takes about as much value away (e.g. relationships) as he/she thinks he/she deserves.
Difficult to accept. In the end I told my co-founder that it was important for me to see some compensation for the things we had build up. I got a few percent of the next project he did, and walked away with 10-20k EUR.
Looking back, that was totally fair. It has been 2 years since, and the company is still going well and generating good cashflows. Most (all?) of the income now is due to his work, not mine. I've come to appreciate over time how we solved this.
Co-founding a startup (or with multiple partners) is a very personal thing. People get emotional about it and there's almost always someone working harder, which causes discontent to grow over time. Eventually, you have to split or the party who provided more substance feels cheated. To make things worse, the value is often very subjective.
There's no easy way to handle this. It sounds like you are going to move on without him so just tell him that, offer him a small piece of the business and take the rest. If he doesn't want to cooperate, you can always just start a new entity and continue on your own.
Co-founder choice is the hardest and most impactful choice a startup can have. At a minimum, I try to craft an MOU that states what each person's responsibilities are, and that they contribute meaningfully over a 3 year vesting period. That ensures if either partner drops out, they transfer the equity to the partner continuing forward. That said, because of aforementioned reasons, even that is a mine-field.
My co-founder (who is a close friend) and I have been working on a startup for about 1 year now. My co-founder had the "idea" for a startup. He needed a programmer, so we joined forces. His role is supposed to be design (though currently the application uses my design) and sales/business development/marketing.
The product is 99% complete and could be launched in a week. Unfortunately, we can't agree on partnership terms and ownership of the company. My co-founder wants 60% of the company and refuses to split the equity equally with me. My attempts at discussing/negotiating this with my co-founder only stir hostile, belittling responses from him.
I've often felt bullied and mistreated by this person, who treats me like a "resource" and bosses me around like a child. Though in certain stages of the project my co-founder has contributed significantly to mocking up the user-interface, we've gone through many iterations and, currently, 100% of the design AND code was created by me.
It's looking like we are about to go our separate ways, and my he is threatening legal action and asking me to sign an NDA.
He is not trying to take my work. He wants to start from scratch again by finding a co-founder or hiring a developer to build his idea. The thing is, I'm still invested in my product. I don't want to ditch it.
I haven't signed anything up until now. I think my co-founder registered an LLC, but we've never agreed and signed any sort of partnership/ownership/nda agreement. What power do I have in this situation? Could I find a new non-technical co-founder and launch my product? As a last resort, I would even launch my product for free so my co-founder does not find another poor technical co-founder to abuse. I feel very cornered right now.
I've spent over 1200 hours designing and developing and have a very strong vision for the product.
What can I do?
Thanks in advance, HN. You guys are the best.
* ONE SUPER-IMPORTANT FACT I FORGOT TO MENTION *
My co-founder does not have access to my code. I've suspected a partnership breakdown for awhile now, and since I haven't signed anything legal, I decided to make sure all of my work stayed out of my co-founders hands. I've never signed any agreement. I haven't been paid a penny.
Along similar lines, make sure you have clear and reasonable terms for parting ways with your co-founder in the unlikely event that that happens. It will save you from major headaches later on.
I recently went through that process, and even for an amicable split, it was a lot more work to resolve than I would have liked.
Your cofounder will raise money based on the future needs of the company. If you're not a part of the company going forward, your cofounder will need to make it clear to investors how he plans to move the company forward without you. If your role is critical to the company's continued existence, he may need to find a new technical cofounder, which can take quite some time. If not, he may need to raise more money so that he can hire employees or pay for contractors.
If you do decide to leave it's going to be very much like breaking up...
If you've been communicating well with your cofounder he probably won't be surprised, and is more likely to be mature and understanding, and start discussing all of the things that will need to be done so that you can leave without hurting the company.
If you've not been communicating well, your cofounder may be completely surprised and upset, and may disagree that you leaving is the best thing for both of you. He may want nothing to do with you moving forward. It's important that you're prepared for this, and that you are able to show him exactly how you can leave the company without harming it. In other words, you'll need to make a very clear exit plan, so that it's clear that you're leaving the company, not trying to destroy it. If you're lucky he'll let you help execute the transition plan.
I was in a situation similar to yours for several years early on in my career. My co-founder had built somewhat of a prototype in his spare time, and he and I wanted to take it to the next level.
And we did. We launched a private beta, signed a couple small-time clients, and started making money. The product kept evolving, and my co-founder got less and less involved.
I kept pressing him to do the paperwork. We'd made a verbal agreement, which he affirmed many times (I still have the chat logs in Gmail). I trusted him to keep his word for a long time.
After about five years, I found myself suffering through depression, stress, and burnout. I couldn't take it anymore, so I left the company.
As soon as I left, he started to actually work on the business, finding clients and looking for funding and investors, free of the shackles of his promise to me.
The only way you can guarantee your value is to have a formal agreement -- one drafted by a lawyer. I don't know your co-founder, and I certainly hope he's not like mine, but you need to look out for yourself. Even if your co-founder is a stand-up guy, it's not his job to look out for your interests.
Better to have a clean break. If appropriate the shares can be bought out so that the "co-founder" does receive some compensation for the vested value. Let him leave and do his next thing.
I've counseled a number of founders on co-founder breakups.
It's hard to tell you what I think without knowing more detail, but based on what you wrote, and assuming you both signed customary IP assignments and RSPAs at incorporation, the simplest way to move on would be for the other founder to resign as an employee and director.
That would enable the company to repurchase his shares and you would own 100% of the company and the IP that belongs to the company.
Since he wants to start what is essentially a different company, he shouldn't have a problem basically walking away and leaving you with the old company.
You can sweeten the deal a little bit by allowing him to retain some small portion of his equity (like 1% to 5%) in exchange for his resignation.
There may be more details here and I'm going only off what you wrote. I'd recommend working with a lawyer if you're going to try to salvage the old company with your co-founder moving on to other things.
Hello everyone, for obvious reasons this will probably be a bit light on specifics, but I'm looking for some personal opinions and a bit of perspective really.
I'm in the position of co-founder in a startup, and I'm having serious doubts about the commitment/benefits of the other founder.
He approached me initially with an idea, we brainstormed casually for a month or two off-and-on, and then decided to make a go of it... and that's where his contributions have ended.
It was the plan that we'd both build the app together, we're both capable coders, and we'd split responsibility for all the non-coding tasks. It started well, we both collaborated and code was produced; however, due to his family/personal commitments I took on a heavier workload for the programming and he volunteered take responsibility for the more businessy side of things (registering the company, hiring an accountant, acquiring appropriate licenses, hosting, payments etc...).
Fast forward 3 months. The app is now almost complete, 99% by my hand (he contributed literally 1 class in the end), and I'm starting to put in place the finishing touches for launching. I've also taken on all the admin/business duties too, in order to keep the ball rolling.
His contributions:
* Initial idea
* Brainstorming of ideas/vision
* 1 class in codebase ;)
My contributions:
* Brainstorming of ideas/vision
* All development
* Register and manage servers (CI, test, and a prod box, email, database)
* Register company, handle the accounts, and bank account
* Licenses/legislation
* Payment processing
I like the guy, and it was his idea, and we did both do a lot of chatting about what the idea should become; but I'm not really seeing that he's really pulling his weight to own 50% of the company, right now I could've probably got the same value out of chatting to a friend at the pub. I have no feelings that he's deliberately trying to screw me or anything of the sort, he's just not actually doing anything.
I'm not that short-sighted though. I'm aware that doing it alone could be significantly more difficult than with a partner. I'm conscious that he may very well come through in the long haul.
What do you think? Am I being a fool for thinking like this? Or a fool for going 50/50 with this guy because we're friends and it was his idea.
Thanks for reading! Any advice would be much appreciated.
tl;dr: Should I pull a Zuckerberg on my co-founder for welching on his responsibilities and leaving all the work to me?
First, there should have been a discussion about who makes the ultimate decisions - him or you.
Has your code formally been added as an asset that the company owns? If not, you may still technically own all the rights to the code, and be able to do what you want.
Second, what is the potential of the product, and what is your passion like? Do you want to take this company over and make it a success, or would you rather just move on? Certainly easier to just move on, but finding another business cofounder is not a super difficult task (there are hundreds of people who would love to do it). Or since you are out of money, are you considering getting a part time job instead?
It seems odd that your cofounder 'got hired' while he was supposedly working as a 'cofounder' - at this point it should have been a flag that hes not committed and you should have cut him loose. Next time you are sacrificing a lot of time and money, make sure you have the control to fire someone if they aren't working out.
Either stay on-board, keep on fighting (and investing time/money) and make your mission a success together.. or leave it to your co-founder to do so! If you walk away now - considering the broken state of your company, the debt and all that - you basically give up all your rights. Especially when somebody else turns that ship around after you're gone.
Your co-founder will most likely end up with sleepless nights, 16+ hour days , pitching the idea to potential customers/partners/investors/buyers, worrying about financials and whatnot to get shit fixed.. while you, well, walked away starting something new or going a vacation as some already suggested. There's nothing wrong with that, but don't expect people to invite you for cake after you did. You can sell your shares to your co-founder for the initial value, or just give it to her for all the money she invested/lost. Your idea/work so far is worth nothing when you or the company can't monetize it right now.. See it as a very loooong marathon that you quit after a few miles of sprinting. Executing an idea means executing it to the very end where it became successful.
And in case you two decide to leave that ship together, share your earnings (debt) together.. Same as if you decide to turn things around together :)
Good luck with whatever you decide to do, as long as you play fair!
Has it occurred to you that this person is actually entitled to hang on to their shares?
You all made the choice to start the business together. You had the opportunity to work out ironclad provision for founders exiting.
You all worked to get it to this point.
Even if you have lost your respect for this persons contribution, it was part of the deal that they get these shares.
I understand totally if you don't like it, but have you considered that in fact this person might actually be in the right?
Lesson learned, give them the shares, live with the consequences of your decisions. If your company is going as well as you say then it is not the end of the world.
The co-founder you are referring to probably describes you guys as scumbag cofounders unfairly and unjustly booting him out.
Alternatively, get rid of the damn lawyers and ask this person what he wants to make a clean exit deal - it may be less than the full share entitlement and if that is the case then maybe you should take the deal.
And for gods sake stop spending money on lawyers - you are destroying your company firstly via time dilution and secondly by wasting money. Part of running a company successfully is to know exactly what it means to win, to compromise and what it means to take a pragmatic outcome that lets you get on with the job.
For those of you who've been through it all, I would love to hear your advice. My co-founder has decided to focus on another career path. While I've found another guy who's interested in helping me, I'm worried that people would just come and go without sticking it out for the long haul and potentially take away the equity. That being said, we haven't officially formed a company so I am not sure if my co-founder is entitled to anything?
Also, I'm determined to keep moving forward since we've been seeing some promise but at this stage, would it be a good idea to take on a co-founder? I can see a need for a more technical one but most people I know have stable jobs and aren't likely to pull nighters and weekends.
I can empathize, OP. I started a company with a good friend almost a year ago. I run tech, he does business. A few months in, and I moved 1000 miles away and have been building a client base on my end, while he has done nothing to help us grow in his location. However he has done his part outside of that.
We had a frank discussion and decided while we're happy to work together, this isn't something he's interested in pursuing. I paid him back everything he's invested in the business. We agreed that instead of splitting it 50/50 I would pay him a flat fee to continue what he's doing while I take the rest. Keep in mind we're doing less than $20k/yr in sales. I considered removing him from the legal structure but it's not worth my time.
Like with any relationship, you need to talk about it with your friend. Not what you've done by "alluding to it", but by being straightforward. "You don't seem interested in our company. I don't want to continue like this. Is it time for you to leave the company?" Yes it may be a difficult discussion but can it really be worse than what you're putting yourself through right now?
I own 49% of an online business with a non-technical co-founder and I've given up on my co-founder after 3+ years. He is supposed to handle fundraising, marketing, general business... while I engineering. We both work on it part-time, but recently I just can't get past the fact that I've put in so much more time than he has. He has done a couple things for the business in fairness (raised 5 figures for us 2 years ago) but the hours spent between us is grossly out of balance. We work in opposite timezones, so we just give each other updates over slack when they happen. His have been lackluster. I can spend a whole weekend making improvements to the technical side while nothing of substance happens on the business end aside from maybe a customer support email. I now regret my generosity in extra hours spent and I can't get it off my mind.
I have spent 1000+ hours of my free time (I was full-time for some months) on the code that backs our service and I don't want to abandon it. This week, I again expressed my concerns again how I feel we're not spending equal time on the project and how we need to think of ways to compensate me if we're going to keep adding huge features. After discussing, he offered me his share for a huge sum of money. It's especially huge considering we're no longer even profitable at this point. I told him if he offered me the same for my share, I would take it. I can't work with the unfairness on my mind. If I'm devoting my complete free time to a project for half of it's value, I expect the same of my co-founder. What are my options besides leaving the business to die?
1. Can I start a new business in the same sector - reusing some of the data and software? The business would be related, but I would pivot on our main idea.
2. Can I sell him my share and start my own indirectly related business?
tl;dr my co-founder is one of those group members you had in high-school who expects you to do all the work. How to make the best of this?
After a few months of working (me on the code, him on... well, nothing really, just asking his friends for advice on business plans and marketing, but he hasn't actually outputted anything yet), I have now come to realize that the two of us really don't see eye to eye on what the platform is about, and I've decided that I no longer want to continue on this venture with him.
We did write up a Founders Agreement (although we never actually printed it up and signed it), and in this agreement, it states that once a corporation is formed then all assets are transferred to the corporation, however, we haven't formed a corporation yet. The agreement also states that if one of us wants to leave before, we should have a mutual separation of assets.
When we originally spoke about if one of us wanted to leave, what would happen, he told me that he believed the person staying should own everything that was created, without any regard to compensation for the person leaving the venture.
So far, I've put in four months of coding work, along with some of my own money in various services (hosting, proxies, buying a domain, etc). If I leave now, I personally think that in this separation of assets, he should pay me back the money that I've spent on this venture, and that he should only get my code if he compensates me in some way (money for four months of work, or a percentage of the company).
I'd like to hear thoughts from everyone here, to see what I should do.
Thanks HN!
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