Prevent founders from leaving startup and cloning it in order to regain their equity?


3

It seems like there can be incentive for founders to give away equity to incubators, seed investors and co-founders, and then drop the startup and build a new one doing a similar thing but keeping most of the equity.

I'm hoping to find options to reduce the chances this could make my equity as a co-founder worthless in the future.

Equity

asked Jul 17 '11 at 07:27
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Ashton M.
83 points

1 Answer


3

That's a valid concern. It doesn't happen much, but it's still a good idea to guard against it, within reason.

There are 'market' reasons against: Every startup requires time to build brand awareness, web presence, connections, etc. Leaving a startup that already has some momentum implies loosing this, and having to start over from scratch.

There are 'reputation' reasons against: This would be especially strong if institutional investors (VCs) are required for the 'cloned' startup -- a call from the old VC team to the new VC team could sink the founders reputation.

There can be / should be legal reasons against: The specifics will vary from country to country, but there are several possible places to attempt to regulate this.

You should go see a lawyer and obtain qualified advice relevant to your legal system and your specific situation. But bottom line, this issue can be addressed with a little bit of forethought.

answered Jul 17 '11 at 08:56
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Jesper Mortensen
15,292 points

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