Possible drama in a starting startup


1

I know this is TL;DR material but I'm just trying to sort this out and feel I might need an outsiders view.

I was approached to become the CTO and co-founder of a startup. The founder pitched me the idea, I thought it was a solid project as the idea exists in the USA and has been successful. So we wanted to implement and create the software for another place in the world with high potential.

I was finishing up a contract with a major bank and thought this was a good opportunity so I started working on this full-time in November. The software was taking longer to create than expected and the other founder was getting very frustrated. I have read Joel's post Forming a new software startup, how do I allocate ownership fairly? and it got me thinking. I was only offered 19% in the company and I'm having to develop and manage the developer contractors that we're trying to get to help me get it done faster. I've also had to attend multiple meetings with possible clients when the software is ready and white label opportunities. I am okay with the work as I feel the experience I've gained with this has been very rewarding and that it is what the CTO should be doing but I find myself between a rock and a hard place right now. I approached the co-founder with the thought I should be earning more equity of the company as it is taking all my time to do this and yet I feel it's being ignored since the co-founder is off with his own startup company and doing this as a retirement concept on the side.

Perhaps I approached at the wrong time because this meeting was to go over a missed deadline we set to prove that I can hit deadlines. The deadline was set by me but due to complications of contractor's and over promising I was off by a day. This deadline was a “do or die” one on faith of hitting deadlines and in my eyes I didn't make it so my participation with the project should have ended. I believe the co-founder has lost faith in my ability to do this and believe that if I pursue this project I will end up being replaced later and left with little to reflect the work I've done. I am okay with being replaced by someone who is better as the point of making this would be to succeed and if I'm not the best than I should be replaced. But being replaced because someone is better is not the same as being removed and I'm more worried about being removed from the project.

His major point about me not getting any more equity is because he is putting money into my pocket to pay my bills and since I have not put in any money I do not deserve a 50/50 stake in the company. I didn't ask to be 50/50 partners, I asked for 24% so that it would end up being a 26/24 split. He responded with "if someone else has this idea and wants to make me a better offer I should pursue that instead". I know this goes against what Joel wrote, but I felt since he came to me with the idea and has domain experience with it that in the end he will be able to bring the clients where I would just be building the product. He did offer me 50/50 ownership at the beginning but that would mean I would front the cost for my bills and split contractors 50/50. As of our latest discussion 50/50 is off the table unless I give him the cost of the contractors and the money he paid me for the past 2 months.

Now with all this in mind I'm not sure how to proceed...

  • I have on one side a good relationship with the person and I do not wish to leave the project high and dry.
  • On the other hand I feel that if I stay and happy day scenario it succeeds all my work will go under appreciated and possibly lose out on a lot. Not just that I feel that once this stone of doubt has been thrown, it'll take a lot to get that back (or perhaps that's just me being young and naive).

So if I was to pursue this idea on my own and possibly make it successful would it be possible to be sued since I have no contract and feel that the work I've been doing is going in vain? I had mentioned in the last meeting with the co-founder that I still had faith in the idea and remarks about wanting to do this even if our partnership went away and he responded by saying "he would go back to our emails" (but didn't threaten he would sue, but it was implied). In the end if I did, I would probably just hand over the code and just make it again as I made it in the first place and can just write it again. The other idea I had about this was to make it myself and then offer him a partnership on my terms but I'm sure that wouldn't go over well as he would probably believe he deserves more regardless.

I am open to all views and opinions as they will help me come to a conclusion. Perhaps I'm wrong about all the above and am just being a whiny person expecting to be given more than what I deserve. I think that is a fair assumption because I didn't come up with the idea and I'm not putting in money, even though not making more money at another job is still in my view something to be considered.

Thanks in advance for anyone's thoughts and I'll update if people require more information.

Equity Legal Partnerships

asked Jan 21 '12 at 05:57
Blank
Graham
108 points

3 Answers


1

You didn't sign a non-disclosure or non-compete contract? If not then you are clear to follow your vision on building and running this yourself legally but the odds of you succeeding in that sort of paradigm is not as high as if you were 100% dedicated to the project. Just food for thought. Plus, the other partner could still sue you all though it may be in vain but the suit will complicate your life and possibly cost you money. If this idea is worth going through that sort of mess then have at it I suppose.

If it were me I would continue after getting a contract signed and the work share and expectations were solidified.

answered Jan 21 '12 at 06:46
Blank
Tim
670 points
  • Thanks for your reply Tim. I haven't signed anything but before proceeding with it I was going to have one made. If it isn't to my liking I was considering walking away. – Graham 8 years ago
  • That's probably a smart move. I would hate to just give up the work and move onto something new since reasonable people can usually come to an arrangement that would benefit everyone. If it were me though, I would have to have everything in writing. – Tim 8 years ago

0

If there is no contract between you then you are free to develop the software on your own. Question is, how would you go about doing this since he is the one paying the bills? Do you have another source of funds to invest?

answered Jan 21 '12 at 06:26
Blank
Henry The Hengineer
4,316 points
  • I would develop it on the side while working at another job to help fund it until I get to a point I can work on it full-time or get funding for it myself. – Graham 8 years ago

0

I think it depends on the amount of work you've done relative to what was agreed upon. If you went beyond expectations, ask for a raise like any other employee. If the owner doesn't want to put up the money to pay you, it can be made up in a higher percentage.

You missed it by a day so technically you shouldn't get it. However, if your partner thinks you're worth it, you should work somthing out.

Your negotiation may come down to who blinks first.

answered Jan 21 '12 at 06:59
Blank
Jeff O
6,169 points

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Equity Legal Partnerships