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Comment by hvidgaard | Hacker News Reader

I've seen a few pair of founders with great success have an agreement that one could at any point for any reason, decide to buy out the other party. Catch is that if you invoke that the other party can switch it around and demand that you accept that pay for your share.

It's crystal clear what and how, and you're not going to try and low ball it because you can be forced to sell for that yourself. I don't think it's perfect, but it is simple, self correcting and crystal clear.

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This only works well if the parties have equal access to that kind of cash. Otherwise you might get into a situation where the richer founder can just decide to buy the other founder out at a price which is unfair but still beyond their cash means.

With enough time, the other founder can find outside investment.

That assumes that the founders have enough intimate knowledge of the other founders personal financial situation. They clearly risk becoming a victim of it them if the other founder can find enough money.

If a company is clearly worth more than the offer, finding outside investment or even traditional financing through the bank shouldn't pose that much of an issue.

> Catch is that if you invoke that the other party can switch it around and demand that you accept that pay for your share.

I'm kinda curious how the low-level details of that work out. Do you have some sort of 3rd-party service which temporarily holds one founder's offer and gives the other founder N days to make a decision? Or is there some other mechanism to prevent the founder initiating a buy out from backing out ("no you see, I wasn't actually serious about buying you out!").

The mechanism is triggered by one founder making a clear statement, usually in writing, that they want to trigger it. From that moment on, they are bound to it.

Apart from invoking it in writing, I think such manoeuvres go through a lawyer, which a court will usually accept them as stating the truth about when an offer was send and received. I'm also sure the clause have some text about how long the other founder has to answer and how long they have to come up with the money if they decide to switch it around.

It's called a 'Shotgun clause'.

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