Founder/Co-founder exit with share holding


1

I have been one of the 3 co-founders/founders (all 3 have equal share holding) of a seed funded low revenue startup for about a year now. I have decided to leave the company while my partners are carrying on with the company with full blown effort to raise next round of funding. My partners expect me to leave the company with no share holding. While I want to leave gracefully and don't want my presence in the company to be a VC deal breaker for my partners, I also want to stay connected with the company in the future with a negotiable share holding as this is as close as I can get to be a non-trivial owner in a company and stay in close connection with workings of a starup/company. What options do I have for exiting from my startup as a cofounder and retain non-trivial share holding (perhaps a single digit number)? Do I need to hire a lawyer for this situation? Adding a small piece of information that the company and the founders are based in India.

Exit Strategy

asked Nov 3 '11 at 17:15
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Maxnine
6 points

2 Answers


2

What are the details of the paperwork granting your shares?

If you own stock outright, then those shares are yours regardless of your employment status.

If you have options that vest over time, or any other arrangement where you do not actually current posses real shares, then you own nothing.

Personally, I think it is most likely impractical for you to exit the company and expect to maintain any stake in the operation. Your best option is to negotiate to purchase some number of shares of stock, eg: to be an investor in the company like any other, as you are no longer investing your time.

answered Nov 3 '11 at 20:41
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Brian Karas
3,407 points
  • Thanks Brian. I own the stock outright. And my intention to own minority part (without meddling in day to day concerns) of the company is to cash out when the time is appropriate. I am not considering buying shares as I am money strapped. I was thinking along lines of reducing my share down to single digit number for free(guess its fair for not continuing contributions in coming future) and then allow dilution of my share in future to a fixed limit. I am not expecting too much for my contributions but just want fair reward in future for the risk, time, effort that I have put in. – Maxnine 8 years ago
  • Since you own the shares, they are yours and you are in control of the negotiation. You can decide to leave and keep all your shares. But you also are smart enough to understand that it might prevent investors from investing. I would wait until the problem happens and then be flexible and fair in giving up some ownership. – Alain Raynaud 8 years ago

0

If you are the shareholder of that company then it is your shares. I was in the similar situation two years back when I started a company with two of my friends, as I happened to be from both technical and management background they don't want me to leave so I agreed upon being a sweat partner of the company and guiding on future operations. My Reason for exit is my co founders were losing out from the vision I created. I don't have any investment in the company but have stake of 5% in it. I also draw a salary from them. Being from India I advise you to just consult a friendly lawyer who is your well wisher hiring a lawyer will bring more disaster and not serve the purpose of fruitful exit.

answered Nov 3 '11 at 21:16
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Faisal
31 points

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