

Ask HN: How to value your company when departing as co-founder? - throwaway1983

Hello,
for obvious reasons, i'm using an anonymous account to post this. but i've been a longtime member of HN so i was hoping you could assist me with this.<p>I was one of the 3 co-founders of a startup which has been running for 3 years. I'm the only technical co-founder and basically created the site and maintain the servers. The business has been profitable and we make around $100,000-$120,000 a year.<p>I've since started a side project for myself which i want to focus on and want to leave the current company. We all signed a contract to own 33% of it. Now if i want to leave, how much money should i ask for? should i sell my 33% for $100,000? is that too much?<p>what would you guys suggest?<p>thanks
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blakdawg
Have you seen those posts where someone asks "I want to make an
LLC/corporation, I don't have any $ so I'm not using an attorney, what's the
best way to do this myself?"

This is one of the reasons why that is a mistake.

You don't get to decide unilaterally how much your part of the company will
sell for - the buyers have to agree on your price, too.

There's a lot of information missing here to even start to talk about
valuation - e.g., what sort of "startup" is this? How replicable is it? How
replaceable are you? Would outside investors want to own a piece instead? How
much of the "profit" is left after paying reasonable wages to the principals
for their participation?

Maybe instead of selling your share, you should just be a passive owner.

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gamechangr
I think that's way, way too much, though I can see why it would seem like a
good idea. Sure, when you run the numbers that seems fair. In reality, I want
to be helpful (and not critical) and point out that $120,000 a year for three
co-founders is not a business worth pursuing??

I suspect you agree?? (which is why your leaving)

Your two partners will need to hire a technical founder. How much of the
profit will that take???? (maybe $60-$100k). You have maybe $20-$60k profit.

You should ask for $20-$40k max! Or increase the profit before you make the
transition.

Again, trying to helpful!!

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gamechangr
Those poor other co-founders...hope they can keep it together!

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paulhauggis
wow, if you're the only technical co-founder, those other guys are going to be
pretty screwed when you leave.

