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Comment by iqonik | Hacker News Reader

I'll be brutally honest, just walk away.

You gave it a good go and have decided it isn't for you.

If it is still for your co-founder, thats fine - it sounds like she is the one with the debt anyway?

There is not point in haggling for equity if your company isn't profitable - it's worth nothing and you have decided you don't have the resources to make it profitable.

If you're really worried about it becoming something in the future, then perhaps you're not done yet and should regroup or pivot the idea.

You can't have your cake and eat it.

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You can't have your cake and eat it.

Yes you can.

There might be considerable future value in the work done so far. Neither party wants to give up on that, they both want to work on it, but they can't agree on a direction. So work out between you what all the non-sharable assets (physical things, brand, etc) are worth right now, and draw up an agreement that gives all of that to one party with an agreement to pay the other party the value of it plus something extra if a business is either funded or sold at any time in the future using those things.

Which person gets the assets should default to the person who took on the debt because if that debt is called in they'll need to sell those things to pay it off (the fact it was from a friend is irrelevant).

All the sharable stuff (code, IP, etc) just get cloned and you get a copy each.

Everyone's a winner.

Yes you can. There might be considerable future value in the work done so far

Ah, the Winklevoss Gambit.

Or more generally:

You currently have a share in the company which you want to sell. Without real revenue the company's value is almost entirely subjective. The right price then is basically what you can convince your partner to pay you for it.

If your partner calls your bluff and is prepared to scuttle the company that could well be $0. If (s)he believes in a bright future for the company it could just as well be $10+k though.

> If your partner calls your bluff

If you ever find yourself using those words when considering an action plan, run in the other direction as fast as you can. There lie antagonistic business practices. Ruining a friendship over a petty startup issues is not worth it. Nor losing your dignity. You're still friends, settle this as friends, each trying to make it beneficial to the other party.

No kidding. I was interested in band management awhile back and looked for some information. I was struck when I saw that it was common practice to operate without a contract or even a formal agreement. The gist was that nothing about that endeavor could possibly work outside of an environment of mutual and complete trust. If you even have to ask for one, it means your head isn't in the right place or that isn't the right band for you.

The thing about a startup is that only the investors are really in a position to negotiate cleanly and with a clear head. If you're betting your time and effort, then by definition you're coming to the table with assets that are far more important to you than they will be to anyone else.

Either you're projecting a lot into my choice of words or it's because English isn't my native language.

From my experience almost all cases where one party wants out and the other wants to continue (not just in tech) involve some amount of cash changing hands.

That amount being zero is just a special case for when very little value was accumulated. In that light giving "just walk away" as the general advice, even though it might be right in this case, is quite overly simplistic in my opinion.

And if your partner is also your friend you should also take that into account of course but from what I could tell the OP didn't mention anything about that.

It's definitely about the words you used, whether I'm projecting or not. I didn't want to assume any ill intent on your side, so I answered in general.

Saying that the other party may 'call your bluff' implies that you're attempting to cheat them and hoping they won't notice. The word "bluff" is an euphemism for lies and deception. It's used positively in poker because the game rules allow it. But in real life "bluffing", i.e. deceiving and cheating, is frowned upon and often illegal.

The OP seems to have a relationship of trust with their partner and I'm urging him to keep it that way. I also meant it as a general business advice - it's important to keep friendly, trust-based relationships with people. Having to constantly look over your shoulder afraid of your co-founder stabbing you in the back, which is when phrase like "them calling your bluff" makes sense, is a lot of unnecessary trouble.

Ah okay. I meant 'bluff' in the sense that there's no objective value here so any discussion over created value is basically just a matter of opinion/gut feeling/confidence.

For me it was basically just a metaphor for negotiating over intangibles; without the apparent connotation of cheating your partner out of something.

> All the sharable stuff (code, IP, etc) just get cloned and you get a copy each.

I'm not even remotely in this situation and probably never will be, but I'm curious how this can work legally.

Sure copying the code is easy but isn't there the problem that the rights to it (to sell, to use in a different product) are difficult to distribute among several partners.

Wouldn't a potential future buyer of the IP want to make sure that he buys exclusive rights? Otherwise the other partner could just sell the same code to the competition. Same goes for patents etc..

I have no experience with such things so I might missing something very obvious here.

The code is for anyone who can understand the business requirements it solves to make a similar product by using the same techniques. Basically at this point it's like a bunch of notes on how to solve a particular problem.

Any business will require substantial investment of a resource to read that code and remake the solution. At that point most of the scaffolding and UX code is redesigned and you have another clone with a different IP. This is different from the old brand but solves the technical problems in many similar ways.

In business it turns out that the UX is the requirement most of the time and the business IP will follow who ever has the same UX. No one really gives a shit about the nuts and bolts of the code unless it's open sourced.

IP cannot be copied; IP is any of several categories of legally exclusive rights to particular things.

IP can be (cross) licensed, for instance on a world wide non exclusive basis. To do a proper legal job of creating a license, you need to get lawyer(s) involved. At that point things tend to get (even more) adversarial and expensive. :-/

Sure, IP can be licensed so that both can use it: that's more sharing or splitting than copying, though.

This.

You either believe in the idea enough to get it traction or start your new one.

Don't try to do both.

Yeah, you can take away everything you've learnt from it (which in itself is a valuable thing) but you're unlikely to get the business in a form that's worth the trouble.

It's amazing how as humans we cling to the slightest thread of hope.

This. treat it as a cheap year's course in startup.

Wish your co-founder the very best of luck, sign everything over to her, and walk away. Hope she does amazingly well and can fund your 4th or 5th startup because you're still friends.

I would consider this the single most valuable lesson I've learned. You really can't back more than one horse.

It's all or nothing pre-traction.

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