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Comment by kylec | Hacker News Reader

Is it possible to draw up an employment contract for yourself that has steep penalties if you're terminated? That way, even if you lose control of the board there's still a strong disincentive to getting rid of you.

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That is what is normally called either a "Golden Parachute" or a "Poison Pill". Management at large firms do it all the time, especially if they suspect that their firm is about to be acquired. While they still control the company, they write themselves contracts with fat, juicy termination clauses. Then, when their company gets taken over, they get huge money if they are fired. It works out well for them either way - the new owners either keep them or give them a hell of a lot of money.

You certainly can. The real question is: if you do, will you be able to attract any investors at all?

I think the most you can hope for is to have some portion of your vesting accelerated on termination without cause. The problem is that they can drum up "cause". I think the best you can do to solve that is specify very clearly what cause is (conviction of a major crime, etc).

The best way to do this is to set your vesting date as early as possible. Once your stock is vested, they can't take it away from you without your consent.

During a sale can't the company just dilute everyones stock and redivide the new stock amongst whoever is still at the company? That way anyone who is not present at sale time gets a very diluted stock. I think this is why if you leave the company and your vested you still get much less percentage of a company than you theoretically should have. I would think this is the norm?

No, but they can create new stock. Or give some sort of bonus/better conversion ratio only to holders of preferred stock (VCs), with bonuses for current employees. Or...

All of these are possible. But open the company up to lawsuit.

Why would anyone even want investors that didn't believe in the founder sufficiently to agree not to displace him for X years, or else pay founder lots and lots of money? While it may turn many investors away, I know I wouldn't want a group of investors that didn't believe in my ability to run the company and were just trying to get away with a coup that will allow them to control the IP.

If that is important to you, you can make it clear to the investors before they come in, and get them to agree to limit their ability to remove you from the board and from your position running the company. This can be done in a shareholders agreement. The problem is (a) if you need the investors more than they need you, they will not agree to this, and (b) people often think of this only when they are on the verge of getting the boot, when it is too late to work something out. Investments usually always begin with everyone singing "kumbaya" in harmony, and every investor always says they invest in founders, but when things don't go according to plan, the founder who's sold control is often going to be the first to go.

It's about leverage. Big companies try to attract "superstar" CXOs who have bargaining power to get "golden parachutes". Most startup founders don't have that kind of leverage.

Josh makes a good point. VCs are in the business of making money. One of the most important factors in making an investment successful is the management team. If the founder can't deliver, they need to be able to find someone who can.

I would never invest in a company where the founder had a no-fire contract.

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