Ask HN: How to deal with a founder that won't leave his job (maybe)? | Hacker News Reader

Ask HN: How to deal with a founder that won't leave his job (maybe)?

7 pointszeleniks4 comments

We're 3 founders with an initial cap table of a) 40% - b) 30% - c) 30%. Founder c is working as a researcher and initially dedicates 15h per week to the project with the idea to go fulltime in the future. Founders a and b are working fulltime since day 1. 6 months in and he didn't decide what to do yet. We're preparing a funding round and we want to fix this before talking to investors. How would you deal with it? Founders a and b think this proposal is fair:

    -Scenario 1. Founder c starts fulltime now and keeps his initial 30%.

    -Scenario 2. Founder c leaves the company and he keeps 3%.

    -Scenario 3. The situation continues the same but founder c shares will start decreasing now (month 6) until we reach month 18 to a minimum of 5%. For example, if he joins at month 10 he'd keep around 20%, at month 14 10%, at month 18 5%...

Founder c thinks this is unfair.

Some considerations:

    -Founder c is very good and we want him in.

    -Founder c has not take any salary from our company during this time and he'd continue working without salary in scenario 3.

    -All founders put the same small amount of money at the beginning.

    -Founders a and c have been working on the project for a long time as a side project (more than a year). Founder b joins the project later when the first pre-seed round is being cooked (hopefully this explains the initial shares)

    -This is not a fight, we're close friends and we're discussing this issue in a friendly way to get the best outcome for everyone and the company.

We know we shouldn't have gotten into this situation in the first place. We learned the lesson, but this is the situation right now and we'd like to get constructive answers. Thanks.

I was in a similar situation once. Both of my co-founders needed to continue working their full-time jobs, leaving me to spend 70+ hours a week coding alone. We couldn't come to an agreement about what the equity distribution should be, so I left the company, and that was the end of things. Sadly, nobody wants to see 90% of their equity disappear overnight. They'd often rather keep 30% of nothing.

You left out something important: What does Founder C think is fair? If you haven't yet, you should ask him his opinion, and get him to draw up a plan. Maybe it will be totally reasonable.

I'd enumerate the potential ramifications, and use that as a rubric to score every potential solution that anyone suggests. You've got to consider A's feelings, B's feelings, C's feelings, your company's chances of success, your chances of raising money, etc. Come up with the rubric together, brainstorm solutions together, and score them together. Don't leave out C while you're discussing things.

There are plenty of potential solutions. One is to buy C out of the company. He's contributed lots of time and funding so far, so he deserves compensation.

Also, all three of you need to be on a vesting schedule. I believe the standard is 4 years to vest with a 1 year cliff. Chances are that a good investor will want to see that kind of arrangement, so maybe you should evaluate solutions with that constraint in mind. For example, maybe C can keep 30% but won't start vesting until he joins the company full-time. Or maybe he will vest 4x slower than the two of you until he joins full-time.

You might check out the book/concept called Slicing Pie by Mike Moyer. It addresses situations like this.

The quick summary is to allow equity ownership to change based on work done for the company that is not paid out in salary.

Start with an agreed upon value of the company(example $100K). Everyone has an hourly pay rate.

So if you all do 10 hours and don't get paid your ownership percentage stays the same. But if 1 person does 100 hours of work and doesn't take salary and the other people do 20 hours and no one gets paid actual money then the overal value of the company goes up by 140 hours time pay rate. And your ownership percentage changes based on how many hours you contribute.

If you have not read it yet, pick up a copy of *Getting to Yes." It is research based and a quick read.

After reading it, try to determine some of the parameters that really matter here. What are the sticking points? Then do some brainstorming.

After you brainstorm, then try to come to an agreement.

Do not count hours but contribution. Some peoples 15h contribution might be equally (or more) valuable than other peoples 40h+.

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