Ask HN: My co-founders are trying to get rid of me. What should I do?

[dramort]

Hello HN. Me and 3 of my co-founders applied to an incubator (which I don't name) and we got in. The incubator took 6% and the rest of the equity was supposed to be divided among the 4 founders. I would receive 30% based on the time and money I put in. I absolutely trusted my co-founders and didn't check the incorporation papers but it seems that the incubator (+ the mentors in that incubators) and my co-founders didn't want me as a founder and didn't allocate me any equity.

I have tried talking to them about this and they said we'll give you the equity after the incubator program is over which is nonsense. Since I'm not officially a shareholder, do I have any leverages to take my 30%? (In 3 months the product is going to be complete and since I'm the main engineer on the team, I think they only want me for that 3 months and are not going to give me my equity after 3 months)

what do you think I should do? My options are:

1. keep working and hope I'll get the 30% after 3 months which is unlikely

2. quit the company and work on the project alone. (I can directly contact some of the contacts we have and ask for money, then I can hire other people to help me out)

3. confront them and demand the 30%

UPDATE

Thank you all for all the help. I have been compensated for the past 2 months (everyone has been) but not the previous 8 months. We had a verbal agreement, but they have already failed to compensate me with the 30% of equity.

My co-founders are actually not very smart and rational, and I'm sure they haven't thought this through. They're on average 10 years older than me (they're all in their 30s and I'm 22) so I'm just a kid in their eyes that they can get rid off once they have the product.

the team consists of one software engineer, two electrical engineers (hardware guys but we're a software company and they mostly do business stuff) and a business guy.

[evgen]

As others have noted, you are in a very strong position given your ownership of the code. DO NOT SIGN ANY IP AGREEMENTS! Also do not take any money from any of your co-founders or the incubator. Maintain your leverage over the situation and ask yourself if you really want to be in business with any of these people? To be honest it sounds like your best option here is number 2. The incubator acceptance is your personal market validation, think about incorporating your current effort and make this company (which you maintain 100% ownership of until you need a co-founder) the holder of the IP.

Another co-founder may have come up with the idea, but ideas are worth literally nothing so do not let that sway you. Above all, walk away. Quickly. And take everything with you.

[solarmist]

I second that. The minute you take money from one of them you are an employee and they get to keep the code.

Don't sign anything or agree to anything verbally (in many countries that is legally binding) unless they are willing to immediately write it down and sign it.

[fredophile]

Gather all of your correspondence, particularly anything written that discusses equity and speak to a lawyer. A short consultation won't cost very much and they'll be able to give much better advice that is specific to your situation than a bunch of random people on the internet.

[x0x0]

Ignore the rest of the people here; you need to see a lawyer who can look at the contracts you have or have not signed, the emails you have, the state this company is incorporated in, and advise you as to what your rights are.

ps -- instead of being emotional and incoherent (it's natural to be upset about this, but it doesn't help), write out a short summary organized by date with any supporting documentation. Keep it brief. Make it complete. Give this to a lawyer during a consultation. It will do a much better job summarizing things than you trying to explain it all verbally with all the things you'll forget or tell out of order. This is from unfortunate personal experience.

[jen729w]

I know HN doesn't like "me too" comments but, really, this can't be stated strongly enough.

Do not listen to anyone on these comments other than the people that tell you to go and see a lawyer, immediately.

And yes, be calm, be methodical. Generally, when it comes to the law, sensible wins. Screaming and shouting rarely does.

[davemel37]

> " I absolutely trusted my co-founders and didn't check the incorporation papers but it seems that the incubator (+ the mentors in that incubators) and my co-founders didn't want me as a founder"

There is already broken trust at this stage. Normally I would want you to ask yourself if you are sure you are reading the situation correctly and recommend you consult an attorney...but I've seen these stories play out time and time again.

Even if you work past this issue, the trust is gone, and it's just a matter of time before there is another falling out.

Even if you did get your 30% equity, very few startups survive messy founder breakups and I don't really think the equity will ever be worth anything.

Your best option (if you can legally) is to leave them and start a new company where you own 100%.

Your next best option is to demand a hefty payout in exchange for the code base and/or agree to finish building it out for a premium fee on your time.

Bottom line, get out of there ASAP...

[brador]

Or consult an attorney and threaten to sink the ship. They should buy you out/pay you off/settle.

Don't feel bad, remember, they screwed you first.

[sdnguyen90]

Huge red flag IMO. I would leave ASAP. If they didn't see your value from the get go, they probably won't see it until its gone.

If you try to demand the equity and they actually do give it to you(which I highly doubt will be anything remotely close to 30% IMO), you're going to have a huge target on your back in the future if you do continue working with them. They didn't even consult with you before deciding on the numbers. They did not give you ANY equity at all. So none of the 3 other founders said anything to back you up?

What legitimate reason is there to not give you the 30% from the get go?

[CyberFonic]

It's a sad situation. But if I were in your position, I would simply play hardball:

1. Leave immediately.

2. Don't work on the project alone. Just sit it out. Why? Because you could be accused of taking the IP, or something similar.

BTW 1: I doubt the incubator is being run by moral people if they are letting the other co-founders act like jerks.

BTW 2: How much time, effort, talent and money did the other co-founders contribute? Who came up with the idea?

[dramort]

thanks for the reply. Fortunately there's no IP in place. One of my cofounder's came up with the idea but I have been the only one executing and making the product. Other co-founders have been doing "networking" and haven't had any success with it. All the codebase sits a Github organization which is administrated by me and a license text is attached to every single file saying that I own all rights to that code.

[ScottBurson]

The suggestion to talk to a lawyer is not a bad one, but I'll add my voice to those suggesting you just walk out the door. It sounds like you haven't been working on this very long anyway. Have you been compensated in any form at all? If so, you might have to give them the code you've written. But if not, seems to me (IANAL) that all you had was a verbal agreement which they've reneged on -- so they have nothing to hold over you and you can do whatever you want.

If you've described the situation accurately, then it doesn't sound like your co-founders have thought this through very carefully. Who do they expect to build the product if you don't? Maybe if you actually walk out it will bring them to their senses.

[hngiszmo]

Lol. Funny to read you are in my situation 3 years back. Had joined a team where I did not at all trust that one guy but the others were ok. They asked me to join on an equal share basis and asked me to lead the dev team in Chile and relocate from Germany for that. That one guy came over for just the first month. I was not a beneficiary of the incubator and after a month in Chile, we had to found a company and that company was to be owned by only two of the four founders, with "that guy" putting himself at 50%. I brought up the topic in a skype meeting with 15 supporters and at the time I had figured that mentioning that I signed up for 25% of the cake might get people angry and "that guy" yelled at me he would fly down to Chile and kick my butt … anyway, long story short, I took my hat and our Chilean founding partner made sure I got my 90% reembursement of the reembursable money I had put in, and 100% of what I paid to our developers to make them good for what "that guy" and the other German partner didn't pay.

At the time, I was super stressed and worried and tried to document everything in case it will be of relevance later on.

Yeah, that was three years ago and I'm forever thankful for our Chilean partner that took a great financial hit later on when the startup finally went down but that I only heard second hand …

Anyway, I'm still in Chile and like it here.

Not all startups will be the next Facebook. Being in an incubator is not only a job. Make up your mind. Don't sign stuff against your interest.

[bradleybuda]

I think it's unlikely that you'll fix the situation and remain a member of your company with your 30%; cofounder disputes, especially at such an early stage, almost never end amicably, and they ruin many, many companies. It sucks; I'm sorry that things ended this way.

So it seems like you have two options: 1) Walk away 2) Walk away and hire a lawyer

Whether or not you hire a lawyer depends on whether or not the company is worth anything. The answer is probably no, if you're relatively new and have just been accepted into an incubator, but if the company has significant revenue, a real valuation, or other overwhelming signs that it really is valuable, then you could consider hiring an employment lawyer, with the knowledge that it will be a large out-of-pocket expense.

If you're passionate about the idea, go do it on your own, or with new cofounders. Don't take any code - it's not yours and it's a good way to cause yourself more problems in the future - but run with the idea and out-execute your old team. And good luck.

[solarmist]

There's not a lot you can do. You've done work for the company, but it seems they have not compensated you for it. Legal action is possible, but would be a horrible end.

The code is under your control use that as bargaining power, but you need to actually intend to leave (but I wouldn't work on it, without a lawyer reviewing it, with the intention of continuing the project on your own, that could get legally hairy) with it if this is not resolved immediately. That said they've screwed you majorly already do you really think that would be the end of it if you got your 30%?

I'd say demand 10% for the work you've done and for you to part ways amicably.

[CookWithMe]

I would walk away. Actually, consider yourself lucky that they've shown their true face so early on and you can get out now :-)

When considering hiring a lawyer etc., also take a look at opportunity cost: Even in the best case scenario, will you get more money out of it then if you freelance for a similar amount of time? Probably not...

(Also, learning from the Winklevoss twins, it seems preferable to sue a company when it is actually successful, because they got way more to loose at that point then now. Although I strongly doubt that they'll be successful...)

[yalu]

Flow like the river. River always reaches its destination no matter what and how many obstacles she faces. Corny as it may sound it has worked for me so far. This may mean any of the 3 forks and other meanderings others have suggested. Get buy in for the value you create from as many people(team, investors, other stakeholders not even considered like family) as you can get support from responsibly. When majority sees/expresses value, minority tend to think twice about deliberately ignoring that value. Good luck!

[11thEarlOfMar]

If any code you've written (or anything you've produced that constitutes IP) is in their released product, they have to compensate you for it. In startups, the compensation is typically in the form of equity.

As others already alluded, in any case, it does not seem that you want to go forward in business with either the founders or the incubator.

[dramort]

thanks for the reply, no released product as of yet and there's no IP in place

[sabunmandi]

dont give them access to your code, try not to share anything include idea, system knowledge etc until they are give the 30% like they promise.

For me, will take option 1 with consider above consideration.

[confiscate]

agreed. at this point it won't help you to give them any more access to the code you wrote

[confiscate]

I agree with the sentiment in the other comments, except that

as with most complicated situations, there is often the urge to "do what's Right", such as "walk immediately" in this case, out of frustration. While that's understandable, it is also often the case that you should Think Through the situation before acting.

You are not under pressure to respond right away--there is no explicit hard deadline, so you should take your time to think clearly, consult lawyers, and weight all your options before making a judgement. It could very well be that you might decide, after contemplating more, that you should walk, but do take the time to think about the pros/cons first and try not to make rash decisions. Your goal is to choose the option that benefit you personally the most given the situation

[toufique]

4. Quit the company. Find better co-founders.

As a technical co-founder, you're the one in high demand. Why stay at a company that undervalues you? The opportunity cost is very high. Find better people working on something interesting.

I wouldn't continue working on this. Sunk cost fallacy. Recoup the cost instead. Ask them to pay you for the work you've put in so far before you give them the code. Then I'd move on to bigger and better things. Focus your energies on your biggest opportunities, not your biggest problems.

[valdiorn]

Option #2 is a very good way to get sued and spend the next 2 years in court.

Walk away, and learn a very expensive lesson. Read your damn contracts!

[someear]

What is the current state of traction? As many will tell you, ideas are worthless...and in many cases, product is near worthless too. What is of value is customers. Do you/they have any? If not, you're not really walking away from much as it is, better to just leave this mess and start fresh with someone else or on your own.

[bravado]

There is a chance I am familiar with the incubator you refer to and I am a software engineer who has had similar experiences in the past. Please send me an email at [email protected] if you'd like to connect and to see if there is any way I can help.

[leppie]

Walk, if they want you back, charge them ludicrous consulting rates.

[tiatia]

1. For now make sure nobody but you has access to the code

2. Lawyer up

3. Please let us know how this turns out.

Remember, Greed kills. A former partner of mine never got enough. In the end, he ended up with nothing.