Change in equity split when founder is dying?
I'm currently involved in a software start up with two other people.
Abe started the company a couple years ago. He outsourced development for $100k. He's worked a lot of hours, but on a part time basis. Abe has 70% equity.
Barry joined about a year and a half ago. He has domain knowledge and a nationwide network which will be helpful when it comes to marketing. Barry hasn't done much though and still has his day job. Barry will likely not have a full-time role with the company. Barry has 20% equity.
I joined about a year ago. I have domain knowledge and a technical background. I was brought on to assist Abe with day-to-day running of the company, marketing, and assist with beta testing and roll out. Intention when I was brought on was for me to be full time. Since being brought on, I have been winding down my previous business and will be full time in January 2013. I have 10%.
The software is currently being actively developed, although most is in alpha testing. We have market validation, but no funding or customers lined up. No one is being paid a salary.
A few months ago, Abe told us he was terminally ill and he expects to be dead before the end of the year. I have since taken over development duties from him. I also have taken the lead on running investor pitches.
Going forward, I will be the only full-time worker, soley responsible for beta testing the software and rolling it out to production. Barry will help with marketing, but I will be responsible for crafting and executing the marketing plan. In essence, this is going to be a one man show with assists from Barry.
We are trying to bootstrap as far as we can, but expect to need to raise some money ($200-400k) to expand our reach.
I have told Abe and Barry that I think my increased responsibility warrants a reexamination of our equity split, but they are balking.
Am I right to want a larger share? How much more should I be asking for? Should I just walk?
Thanks for any advice! I'm out to sea and just want to ensure I'm being treated fairly.
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Is there a vesting agreement? If not - what's Abe's is Abe's, and will belong to his descendants/beneficiaries, not to you. – Littleadv 11 years ago
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Abe and Barry are fully vested and Abe's interest will be passing to his heirs. – Robbie 11 years ago
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Are you getting paid market wages? Is there revenue? Can you live with 10%? Can you get an option/agreement to buy Abe's shares? If it were me I might just walk away from this. – Tim J 11 years ago
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No one is getting paid wages of any kind. No deferred monetary compensation either. No users or revenue. The software is 95% feature complete, and we should have beta testing rolling by January 2013. I was comfortable with the 10% when my job basically consisted of being Abe's lieutenant. However, I feel less comfortable now that Abe and Barry want me to do my job plus Abe's job for no additional equity. They've made noise about it only being temporary until they can find a full time, more experience replacement, but I don't see that happening any time soon, if ever. – Robbie 11 years ago
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I'm also thinking very strongly of walking away. I guess I am really looking for a gut check. Thanks for all the comments so far! – Robbie 11 years ago
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So you question has nothing to do with the partner dying, but rather with shifting responsibilities and workload, for whatever reason. You can either accept it or reject it, its up to you. – Littleadv 11 years ago
