Leave startup but still keep ownership


3

I'm a co-founder of a 2 1/2 year old early-stage software company. The company was completely bootstrapped, no outside investing, and we have modest revenue for being such a small company (approx $250k/year). The business was his idea, but I mostly built it. I'm now acting a the developer while he mainly deals with the business-side of things. There's just the two of us and we do have legal representation and agreed to a 50/50 split in the company.

Well - for the past few months, we've been kind of infighting and it's gotten to the point where I'm not sure I want to work with him anymore. For the 2 1/2 years we've been in operation, I've busted my tail end off, worked ridiculous hours throughout the process, and have put in so much of myself into the company - all that and just getting little financial return until recently when the company's started to make some money.

So, my question to the folks here would be - what advice would you give in my scenario? I'm getting a little burnt out dealing with my partner, but don't want to leave what could become quite a lucrative opportunity. Or is there a third route where I can effectively step down, requiring him to find another developer, but still maintain my 50% share in the company?

Any thoughts would be appreciated.

Co-Founder Exit

asked Oct 3 '11 at 06:13
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Dnr
170 points
  • Can you give an update on how the advice worked out, 5 months later? – Amindfv 7 years ago

4 Answers


5

If you are currently drawing a salary, and it is market related, then the issue is simpler. You could opt to hire someone to replace you, and reduce your input into the company. If not, the options aren't pretty for either side.

That said, it is usually best for both parties if you sort out your issues. It sounds like you are in the typical situation where the business and developer guys (or girls) don't understand where the other is coming from. It is very worthwhile trying to understand what he is doing and how he sees the business.

I don't mean arguing with him, but simply taking the time to try and understand. You may just find that you are both frustrated by poor communication and by a natural bias that comes from each of your respective specialities.

It's often hard for developers to see what the business guys are actually doing or where their value is, and conversely for the business guys looking at the developers.

You've worked for a long time on this, why quit when it's finally starting to pay off? The only problems worth solving are difficult ones, and although it may be frustrating, I strongly suggest you sit down and talk this through. Focus on finding a solution, not on appointing blame.

answered Oct 3 '11 at 06:39
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John Gb
384 points
  • We're currently talking it through - being open about all our grievances and trying to sort everything out. I think we'll also look into hiring another developer part-time to reduce my load somewhat. – Dnr 9 years ago
  • @DNR: It sounds like you're heading in the right direction. – John Gb 9 years ago

1

I guess you can maintain some share if you leave the company, but a 50% share would be difficult (anyway I think it is an error from the start to do a 50/50 split because nobody is the boss).

If you leave the company, your ex-partner needs to be in full control and cannot do that if you own 50% of it. On top of that he may need to offer some share to the new developper, so my point of view is that maybe you will be able to keep let's say 30% and sell 20% to the new guy.

On the other way you have to keep enough share to prevent being diluted against your will... Check what is the minimum share to own in order to avoid that, it depends on how you registered the company and in which country...

answered Oct 3 '11 at 06:41
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Pillona
355 points
  • Thank you - yes, need to read into the legalese a little more to find out what that minimum share is. – Dnr 9 years ago

0

It seems to me that you're in a pretty good position. The company is bringing in enough to hire a developer (some assumptions here, since you don't list a breakdown of revenue and expenses). It seems reasonable to do just that - bring in someone to help on the development side of things and take a little break yourself.

@JohnGB is right, you should try to work out your issues. A company is unlikely to survive when the two founders are fighting instead of working on solutions to business problems. You should understand he (likely) has unique skills that he brings to the table as do you.

If you two are just too stressed out because you're working too much, try bringing in someone or perhaps even two people to take some of the load off. Both of you have worked and sacrificed and you should be able to enjoy the fruits of your efforts. Don't destroy what brings you both happiness (assuming you still like the company and just have problems with your partner).

Go out, have some drinks, relax a little, reminisce about the struggles you've gone through together. You're got what few people have, a business bringing in money. Use that to everyone's advantage.

answered Oct 3 '11 at 08:31
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John
1,194 points

0

It sounds like you are in a very strong position. You need to read the fine-print of your agreement, but if no vesting was planned, you own 50% of this company, no matter whether you work at it or not. You could disappear tomorrow to Hawaii and you'd still own 50% for life.

Now, if vesting is involved, or if there are custom clauses about what happens if one of the partner leaves, then you need to read them and tell us. We can't guess what they say.

answered Oct 3 '11 at 08:55
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Alain Raynaud
10,927 points

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