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Ask HN: Leaving My Own Startup, Need Advice

13 points by throw_away_100 ↗ HN
The situation: I started a company last November that finally saw some traction in the past few months and is currently making ~$1,200/month but is not profitable yet. As the CTO and co-founder I owned almost half of the company and our lawyer made a mistake of using a clawback clause instead of a typical 4yr vesting schedule with a 1yr cliff. So upon leaving, I will still own a small amount of the company, roughly 10%. We initially raised around $25k and also purchased a laptop for me with some of the company funds.

I'll be leaving the company at the end of the month to become a co-founder in another company with much more traction. The new company has a similar business model (subscription based) but in a completely different market, hence no competition. So my code may possibly be similar in some ways, or not. Ultimately, I want to make sure that we don't get screwed in the future by my old-cofounder if the new company becomes successful and they say they still own the IP on something.

The dilemma: Old co-founder wants my shares back. They want to me to keep my laptop (worth ~$1500) in return for the shares, but I know the laptop is considered IP of the company (unless there is a way to say it isn't). I'm not sure I should even trade the shares for any amount since that company could possibly be worth something in the future and I built everything from design and dev. On the other hand, I don't want any legal issues in the future if I were to keep my shares. Any advice would be helpful, thanks!

15 comments

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nostromo
Did you sign a non-compete? (If so, are you based in California?)

If those still at the company really don't like you and think that you screwed them, there are some shady things they can do to dilute you down to next to nothing. (They can sell the company you in-part own to a new company that you don't for a trivial amount. It happened to Eduardo Saverin and I've heard even Y Combinator in the early days. It sounds like the lawyer maybe wasn't good enough to prohibit this sort of thing.)

If I were you, I'd try and come to some agreement with them -- give back the laptop and split the difference in the shares. I'd also make sure not to re-use any code at the new company, as that would be unethical and would open you up to legal issues.

throw_away_100
To make things clear, the new company is in a completely different market, and we would not be competing. Anyways, I don't think I signed a non-compete and didn't see anything about it in our agreement paperwork. We are not based in California.

When you say split the difference in shares, what do you mean? Give back 1/2 my shares? Is there anything I should request in return as far as compensation for the shares? I don't think they are worth anything today.

nostromo
My broader point is that if they are really upset with you, there are things they can do to dilute or remove your share of the company. To avoid all that potential legal nastiness, I would do my best to find a way to come to a signed agreement.

Obviously I don't know much about your situation, but I would immediately return the laptop, and offer to give back half (or some %) of the shares as a sign of goodwill.

By the way, I'm assuming you did take some sort of salary or other compensation. If not, I wouldn't be as giving in terms of shares.

throw_away_100
I took a very small salary (min wage) to get by and pay bills, not much else in return for equity. My co-founder has already offered to sell our software to another company for ~$10k which is why it's not an easy choice to give shares away for me. I may have to come up with a number that makes sense.
staunch
Laptop is not IP it's just P. It's the company's if they bought it. Give it back if you're not going to be an employee.

The only reasonably safe way to walk away from this to a likely competitor is to have your previous company sign an agreement wherein they consent to the situation. That way if they try to sue you later you can show that it was all above board. Sounds like they're going to want some or all of your shares in exchange for that agreement.

You need a lawyer to be safe, otherwise you will probably end up settling for a part of whatever you create at the new company.

Not a lawyer.

throw_away_100
To be clear, the new company is in a completely different market and will not be competition. They want all the shares back and I guess I will need to get something written up from a lawyer soon. Thanks for the info!
staunch
If it isn't a competitor then it's not nearly as risky. You still need to be very careful though. Don't take anything with you. Don't use their laptop, servers, accounts, services, code, secrets, ideas, paper, clothing, anything. Walk away completely clean.

You could give them your shares back, but don't do it for free. If you want to be nice then sell them back cheaply or trade them for something you want.

Woost
Just in case it hasn't been considered, this is all stuff that can be negotiated with the original company.

With proper legalese (read: talk to a lawyer to get a proper contract) you can trade your shares for the company agreeing that they will not sue you for trade secrets/ideas/code/etc.

tstegart
I agree with the above. the laptop is not IP, just property. If it's wiped clean there isn't really an issue. You get a $1500 laptop in exchange for your shares. If you don't think it's worth it, then ask for some more cash or something.
nhangen
Considering you are a co-founder and jumping ship instead of pivoting, I'd want my shares back too. I'd also be leery of accepting you on my team if you are so eager to bounce based on traction alone.

I'm not a lawyer, but I think your best bet is to negotiate something and get it in writing so you don't have it lingering over your head or negatively impact your new company.

throw_away_100
There is a lot more to it than just traction, but I'd rather not get into it. I didn't mean to suggest that was the sole reason of me leaving. I'll be talking to a lawyer soon, thanks!
brudgers
As others have pointed out, passive non-controlling ownership in a closely held company is worthless when your relationship with the controlling parties is adversarial.

Simple advice: Startups fail. What you will gain by walking away as amicably as possible and getting on with your life is worth far more than the shares. [1]

[1] 10% with 2:1 dilution requires a $150,000,000 exit to provide the FU money minimum of $7.5 million.

AznHisoka
I'd just give them the shares back and even the laptop too if can afford to. Just start from a blank slate and don't risk the chance of something biting you in the future. The shares don't mean anything to you.. if you're leaving it probably means you're almost sure that startup won't make it big.
throw_away_100
Should I be talking to our company lawyer (which my co-founder knows personally before we started) or another who knows nothing of the situation?