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Yeah - I don't see how people can tell them to just give up.

Go scorched earth - what do you have to lose? Know the other guy is hostile and don't trust them to do the right thing. Consider your options outside of that and talk it over with the other investor.

If you're the technical cofounder here you're probably in a stronger position to negotiate.

If you can get the other investor to see what's happening here (your cofounder pushing you out one month before the cliff after you've helped to build things up) you may be able to get them on your side.

As I see it without knowing details:

- Either your contributions are real and your cofounder is a miserable person trying to screw you out of it and risking the company in order to do that.

- Or you haven't done anything substantial and the cofounder wants you out. Even in this case it's still wrong of them to do this one month before vesting (and the way they're approaching it sounds dishonest, they should be direct).

If it's truly the former I think getting the third investor to understand this is key, if the non-technical cofounder is risking the entire business at this stage they're going to be bad going forward - you probably need to get rid of them.

If it's the latter (which seems unlikely since the other cofounder is non-technical) you'll still want to negotiate a reasonable exit, but it may be harder to do so (and you'll probably need a lawyer).

This advice will almost certainly result in no deal and leave all parties worse off.

Instead, I would have an open, honest conversation, listen from a place of empathy and generosity and seek a compromise.

The truth is, unless your cofounder has the right to terminate your employment, then continue working and try to create as much harmony as possible.

Co-founder disputes are awful and usually result in the death of the company. But being aggressive will only speed up the Demise not prevent it, and if the company implodes that equity is worth nothing anyway.

I'm all for pragmatism and cooperation, but it sounded like the OP already tried that and the current state is the result. Yes, start with what you're suggesting but don't just accept getting used.

Who's at fault matters here, if the cofounder is truly acting in the way suggested and is not willing to compromise then it's critical to get the other investor to see what they're doing. If that leads to the cofounder blowing up and the death of the company happening sooner rather than later so be it.

If it turns out OP is actually not contributing anything then yeah, better to seek some sort of clean exit compromise. The details matter and how much leverage OP has matters. It's impossible to give good advice without knowing that in either direction.

At a minimum the OP should get the one year cliff on exit.

Well no, fuck them. If the choice is to get some crumbs of a cake I was vital in baking or to throw the whole cake, I'd throw it unless I was starving otherwise! It is not a good move to let someone get away with something like this. Also, it will mark you as a pushover in future endeavors with other people, should they get wind of what happened there. Do not let anyone get away with that kind of antisocial behavior, if you can help it, is my two cents.

Parent posters point is that the battle for control will end up being so toxic it will fuck the cake.

Which seems like a valid concern.

There's a worse outcome: the technical cofounder might be wrong, might actually be entitled to zero, might spend months and thousands of dollars fighting for something they're not entitled to legally, even if they are morally, and might end up in the hole.

Given the upside, how can you not think it's worth the shot?

As a pretty well- studied gambler, and given the limited information we have, I think you're right-- there a worse possible outcome. But it's 100% worth the shot.

so be it. He either gets to eat the cake equally or no one does. Not the bastard who doesn't even know how to make the bloody cake

How much in lawyers fees do you want to pay to fuck a cake?

Point being, as others have said, it’s essentially a negotiation. Not a war.

Plus, I guess if the guy really could fuck the cake that gives him leverage and a negotiating position. If he can’t, then it’s moot.

And as other folks also pointed out further down, OP needs good legal advice and, to determine when the cost in time and money ends up being high enough and the probability of a lucrative outcome being low enough that it’s time to walk away.

Knowing those things can help make good decisions.

Sometimes it is not just about the money. Believe me you won't be able to sleep well after walking away from something I this. I would not want any techie to walk away something like this. You gotta fight for what is rightfully yours.

This person created this valuable asset, giving his time and effort. The other person's effort to create it might be non zero but so are OP's and therefore, there is no reason why OP should walk away from it.

How many nights of bad sleep, vs months of conflict or being in court and tens of thousands of dollars for lawyers?

It’s a calculation. And it’s not a binary fight-or-flight situation. There’s room to maneuver - legal maneuvers, speaking with the investor, etc.

Doing things in order to achieve your goals and priorities comes AFTER you set your goals and priorities.

These comments here merely suggest that the goal should be to fight for what the OP rightfully earned, and that hostile actions and a threat for war should not be left unanswered if you have the capability to answer, both in order to retain the value the OP has at this moment and in order not to hinder their reputation in future endeavours - and, also very important, to have peace of mind (sleep at night). Feeling like a piece of sh!t guarantees lifelong bad sleep nights, incomparable to having to wake up early to go to the court.

I also disagree that this is just a plain negotiation. The timing of it suggests it is not. They want to throw the OP off board just before the cliff.

I think of this like this: OP created the cake of value being in a near equal partnership, thinking it would be cut equally when it is done. However when the work of OP is done and cake is baked, they want to have the full cake. This is not negotiation. This is breach of trust...it is morally, ethically dishonest on part of their co-founder.

Sure. It may be unethical and so on. But.

If it’s not a negotiation, what is it?

And, how does OP assess their position, possible outcomes, and decide what cost is worth it?

How many months of ones life or tens of thousands of bucks is it worth? Depends on what’s likely to be at the end of the tunnel, no?

Point is - it’s a calculation, of just how badly one desires justice/vengeance, if nothing else. Which, when contracts are involved, for stuff like this means getting advice from a lawyer, unless you want to get your ass handed to you.

IIRC most court cases resolve with some kind of settlement - which is a negotiation.

Even if the process does become adversarial, how do you think wars end? Even when one side is the clear victor there is still negotiation. Consider the U.S. post-WWII occupation of Germany. Even there negotiation was involved at the end. We struck deals with the (now former) Nazis because they could help us against the Soviets in various ways.

There’s a third investor, who it sounds like has the power. So agin, potential for negotiation with the investor.

Negotiation does not equal weakness. It could very much mean negotiating an outcome in your favor from a position of strength. But if all you’ve got on your mind is cake-fucking then you may miss that opportunity.

No. The co-founder is not coming into this negotiation seeking an agreement amenable to all parties, but rather to get their way. They are a hard bargainer (in the sense that they are attempting to push the needle as much to their side as they can, rather than find something equitable). They are the person coming in to the yard sale, seeing the sign that says "$5", and saying "I'll give you 30 cents for it".

You don't move the needle back by being kind and compassionate with those sorts of people. You move it back by using whatever leverage you have. We don't know what leverage the OP has, but his only defense is to use it to either trigger a real buyout, to get the other investor on his side, to risk tanking the company, to say "no" in the belief the co-founder won't tank the company in response, or some other option we're unaware of.

In the same way you won't make headway trying to explain to that lowballer at the yard sale why $5 is more than fair, you won't make any headway trying to explain to someone who has come out of the gate with something so starkly unfair as the OP presents why their proposal is unfair. They know.

I think there's a middle ground, and my thinking here is inspired by Chris Voss, that there's a good strategy in being both reasonable, calm, and resolute, as well as helping the other co-founder get to the decision. You don't need to be "aggressive," you need to be "the immovable nice person."

Nowhere did I say to be unreasonable, aggressive, or rude. Just that being kind and compassionate is not what you need to be. As you say, "an immovable wall", which is hardly kind or compassionate. By "nice", if you mean polite, of course. By "nice", if you mean kind and compassionate (reiterating those adjectives), no, unless you mean "polite" by those as well.

"Helping the other co-founder get to the decision" is only going to be achieved with leverage given that it's clear they're not looking to find an equitable (hah!) solution. They're trying to get as much control and equity as possible. It may be the OP has no option but to accept it (keeping 3% and moving on). Or it may be the OP has better options. But the point is that the other party has made their intentions known. They haven't come to the negotiating table saying "This is what I want, how can I get you to agree", they've come to it with "This is what I want; accept it", and when provided what the OP wants in return, turned it down, rather than seeking some middle ground or otherwise budging.

> Instead, I would have an open, honest conversation, listen from a place of empathy and generosity and seek a compromise.

What kind of compromise do you think is available that treats OP fairly that can be gained by performing empathy, compassion, generosity, and active listening?

From the story told, it sounds like the poster might have tried that already.

No deal is better than a bad deal and a compromise is a bad deal for both parties.

Cit. "Never Split the difference".

Something important I learned over time. Sure, listen, but don't take a deal that doesn't make you happy.

People keep saying this person has nothing to lose, but that's obviously not true. I think comments like these are mostly based on we, as a "technical cofounder" cheering section, want to see happen in the world. What's important about that is that the outcome for this particular person is an externality to us. If the whole company blows up and all equity is worth zero, that's great for the cheering section, even if it's obviously worse for the technical cofounder.

I think this is a reasonable point and depends a lot on the OP's financial situation (and it sounds like OP's is better than the non-technical cofounder).

If they're reasonably secure they have more ability to fight for a better outcome, risking the 3%.

I would do that myself because having a cofounder tell me 1 month before vesting that they want me to leave with less than half of our deal is unjust and wrong. I'd do what I could to avoid that outcome, if the company blows up as a result it's the cofounder's fault - I'd sleep fine.

I would never do what the non-technical cofounder is doing to someone I partnered with.

Not clear who actually owns the equity outright. If its the OP, based on what's written and nothing more it sounds like a racket the non-technical founders are running. I personally would identify the laziest path for you to exercise your rights to extinguish the entire venture, ideally with counsel, and then tell the other people what you've decided to do, let them name their price.

If things roll your way, maybe you resurrect the business later buying its assets out of bankruptcy. Either way, think lazy; this looks like a scam for your time; the more you put into it at any price, the worse off you are.

It actually sounds like the co-founder knows what he/she's about, and could potentially restart a competitive offering quickly enough. In which case bringing about the demise of the initial now toxic partnership is also an option.

Whatever the root reason this is now conflict over control. Therefore you need to know your legal contractual options and obligations and his plus whatever poison pills or repercussions for out of contract behavior. Who owns the IP is key. What is that? No need to necessarily write here but to bolster your resolve. Now if the contract allows bad actors without downside risk ... There are no good answers except experience. Watch out for attrition by tying you up on legal fees. But then call BS on him not having buyout proceeds. Finally, maybe you need to press him and not let him set the context. Saying no is but one play his side. You can put him in a box too All this assumes an adversarial process. Good luck to you.

> Your 40% is worth $400k based on that initial funding valuation, right?

One quibble. That is typically not how it works, since his shares are likely common stock and investors get preferred stock. In my experience, the range of value for common stock in private firms varies widely, but it is never one to one with preferred stock (the golden rule being, of course, "who has the money makes the rules").

I have seen values ranging from 10% to 30% of the preferred stock price. Now, of course, I only have a few data points, so ymmv, but founders shouldn't delude themselves that their sweat equity is valued the same as preferred stock.

Where are you getting the idea that the tech co-founder (TCF) owns "40% of something fairly valuable"? It seems the TCF currently owns 0%, and will go to ~10% (25% of 40%) if they don't get laid off/fired in the next month.

It's not clear the other founder actually owns any more than TCF does. What makes you think TCF can be so easily pushed out or that the other founder has significantly more leverage? It isn't clear to me that they have different deals.

Honestly, if non-technical thought he could fire this guy, he probably would have already. That's why TCF is being bullied into resigning.

What is non-technical going to tell the investors when he fires the guy who keeps everything running, built everything, and did all the SEO?

Think of it this way, take the deal and you get 3% of nothing because it'll get driven into the ground.

Don't take the deal and either you keep working on it, and get 40+% of something decent, or you get N% of nothing because other guy drives it into the ground but you got a better buyout.

There's very little downside for TCF in actually sticking to his guns, and it's not like he's going to look like the asshole here.

Non-tech founder (NTF) started it, so I'm guessing NTF is CEO. NTF is probably on similar vesting schedule, but won't fire himself. The fact they're having these conversations means that NTF has probably made up his mind, and decided this is not going to end on mutually amicable terms.

It's possible that TCF can hang on until the cliff, but I doubt that'll happen, and it's not going to be pretty if they do. There are all kinds of ways NTF can reduce/destroy TCF's equity; I'd take 3% and move on with my life.

> There are all kinds of ways NTF can reduce/destroy NTF's equity

What are those ways? The only sane thing is to go and talk to lawyers. In what world is it going to be the best option to let yourself be used and abused?

NTF and investor can simply issue more shares under any number of arrangements; cap tables are not written in stone. If they have a hard time, they might also start a new company, and liquidate all the assets from the current company.

Every ongoing business arrangement relies on goodwill and intent to survive, like any other relationship. Consulting a lawyer with expertise in the area may be a good idea, but the best solution is probably the cleanest and easiest one.

I don't think letting someone steal from you is ever going to be the "best" solution. Doing what you described is not new or inventive. It isn't going to catch an experienced lawyer off guard.

If there are other employees, wouldn't this require firing all of them and invalidating their equity?

The closing and re-opening would invalidate everyone's equity, and open the door for a complete re-negotiation. Dilution usually hits people who are gone the hardest (as they usually get nothing out of the new option pool if there is one).

> I'm the technical co-founder of a pre-revenue startup. We were 51/49% to them and took a small round of pre-seed funding (~$100k) so our cap table is approx 40% for me and co-founder, 10% option pool and 10% investor. We have very standard shareholder agreements for 4yr reverse vesting with 1yr cliff.

Note the “reverse vesting” bit, this caught me out too. This is not the standard employee “you have zero until your 1yr cliff” deal, it’s the opposite in some sense, the founders own their shares unless they leave, in which case they are clawed back, and the clawed back amount goes by the 4yr period.

In this case if the investor has voting rights, neither founder has a controlling share, and the investor is the tiebreaker. So OP can fire the other founder with the investor’s vote.

The non-tech founder is likely CEO (as they started in, and likely got the investor on-board), so they can likely fire the TCF without a vote. The board, likely made up of NTF, TCF, and investor could then fire the NTF.

In any case, this is not going to end nicely, and I would recommend walking away with whatever equity can be had without setting the counter-parties against TCF. If NTF and investor get really mad, they can easily dilute or destroy TCF's equity, so I'd try to avoid that.

Wouldn’t firing the TCF (or any key staffing decision) require a board vote at this stage? Not to mention potentially being a breach of the NTF’s duty of loyalty to the shareholders if they don’t have a good business reason for firing them? In other words the NTF would need to have the investor on board to make that move.

IANAL so interested to know how folks with more experience have seen this fact pattern play out.

The grandparent comment stated this. The TCF needs to make a case directly to the investor to show their worth and tell their side of the story.

It's not explicit this was done, so it's assumed it wasn't. If the TCF hasn't spoken to the investor directly, it's relatively easy to assume the investor will vote in the NTF's direction.

Lots of assumptions, but we don't have that much to go on.

You don't give up a board seat for $100k. At least, you definitely shouldn't.

You do if you have no other funding.

I would like to disagree a bit. Resolving disagreements between co-founders I tricky.

I would request OP to assume good intent and ask the following question.

> What are you giving me in return of my 40% of the stock ? Why is that a fair price ?

I do not know, but it is perfectly possible that the other person might have a good answer. If you have already made up your plan you guys can agree on some kind of plan where you divest your stock over a period in one way to another.

I have a suspicion that the other co-founder probably does not want OP around for whatever reason. But OP can help him by simply taking a break while keeping the stock.