
Ask HN: My co-founders are trying to get rid of me. What should I do? - dramort
Hello HN. Me and 3 of my co-founders applied to an incubator (which I don&#x27;t name) and we got in. The incubator took 6% and the rest of the equity was supposed to be divided among the 4 founders. I would receive 30% based on the time and money I put in. 
I absolutely trusted my co-founders and didn&#x27;t check the incorporation papers but it seems that the incubator (+ the mentors in that incubators) and my co-founders didn&#x27;t want me as a founder and didn&#x27;t allocate me any equity.<p>I have tried talking to them about this and they said we&#x27;ll give you the equity after the incubator program is over which is nonsense. Since I&#x27;m not officially a shareholder, do I have any leverages to take my 30%?
(In 3 months the product is going to be complete and since I&#x27;m the main engineer on the team, I think they only want me for that 3 months and are not going to give me my equity after 3 months)<p>what do you think I should do? My options are:<p>1. keep working and hope I&#x27;ll get the 30% after 3 months which is unlikely<p>2. quit the company and work on the project alone. (I can directly contact some of the contacts we have and ask for money, then I can hire other people to help me out)<p>3. confront them and demand the 30%<p><i>UPDATE</i><p>Thank you all for all the help. I have been compensated for the past 2 months (everyone has been) but not the previous 8 months. We had a verbal agreement, but they have already failed to compensate me with the 30% of equity.<p>My co-founders are actually not very smart and rational, and I&#x27;m sure they haven&#x27;t thought this through. They&#x27;re on average 10 years older than me (they&#x27;re all in their 30s and I&#x27;m 22) so I&#x27;m just a kid in their eyes that they can get rid off once they have the product.<p>the team consists of one software engineer, two electrical engineers (hardware guys but we&#x27;re a software company and they mostly do business stuff) and a business guy.
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evgen
As others have noted, you are in a very strong position given your ownership
of the code. DO NOT SIGN ANY IP AGREEMENTS! Also do not take any money from
any of your co-founders or the incubator. Maintain your leverage over the
situation and ask yourself if you really want to be in business with any of
these people? To be honest it sounds like your best option here is number 2.
The incubator acceptance is your personal market validation, think about
incorporating your current effort and make this company (which you maintain
100% ownership of until you need a co-founder) the holder of the IP.

Another co-founder may have come up with the idea, but ideas are worth
literally nothing so do not let that sway you. Above all, walk away. Quickly.
And take everything with you.

~~~
solarmist
I second that. The minute you take money from one of them you are an employee
and they get to keep the code.

Don't sign anything or agree to anything verbally (in many countries that is
legally binding) unless they are willing to immediately write it down and sign
it.

~~~
greenyoda
Just don't sign anything until your lawyer has read the document that you're
signing. If you don't have a lawyer already, you need to get one before you do
anything else.

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fredophile
Gather all of your correspondence, particularly anything written that
discusses equity and speak to a lawyer. A short consultation won't cost very
much and they'll be able to give much better advice that is specific to your
situation than a bunch of random people on the internet.

~~~
x0x0
Ignore the rest of the people here; you need to see a lawyer who can look at
the contracts you have or have not signed, the emails you have, the state this
company is incorporated in, and advise you as to what your rights are.

ps -- instead of being emotional and incoherent (it's natural to be upset
about this, but it doesn't help), write out a short summary organized by date
with any supporting documentation. Keep it brief. Make it complete. Give this
to a lawyer during a consultation. It will do a much better job summarizing
things than you trying to explain it all verbally with all the things you'll
forget or tell out of order. This is from unfortunate personal experience.

~~~
hedgehog
An attorney can help you work through the mechanics of your situation, some
additional things to keep in mind (while you're getting materials to talk to
them because really, do that first):

1\. Try talking to someone who you trust & who is totally unconnected (maybe a
family member) and get an alternative and more charitable interpretation of
the other founders' actions. In the end you may not believe it but it's a
useful perspective.

2\. Only work with people you like and trust. From the sound of it whatever
the legal options you probably don't want to keep working with this team.

3\. Founder equity is not worth much if you don't also have a continuing role
in the company (leverage) or a strong relationship with the remaining founders
(trust). There are many things that can happen in future financing that are
highly dilutive and if protecting your interests is not seen as essential your
30% could end up not worth a lot (or readily liquid). Cash in any amount is
probably more valuable.

4\. Even if you legally can use the IP for a new company doing so could give
the current team ammunition to take shots at your reputation.

Good luck.

~~~
x0x0
I think you're totally right, but as the op was discussing taking the idea and
pursuing it on his or her own, it would be a debacle to do that with a legal
overhang. God forbid it takes off but he or she turns out not to own it...

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davemel37
> " I absolutely trusted my co-founders and didn't check the incorporation
> papers but it seems that the incubator (+ the mentors in that incubators)
> and my co-founders didn't want me as a founder"

There is already broken trust at this stage. Normally I would want you to ask
yourself if you are sure you are reading the situation correctly and recommend
you consult an attorney...but I've seen these stories play out time and time
again.

Even if you work past this issue, the trust is gone, and it's just a matter of
time before there is another falling out.

Even if you did get your 30% equity, very few startups survive messy founder
breakups and I don't really think the equity will ever be worth anything.

Your best option (if you can legally) is to leave them and start a new company
where you own 100%.

Your next best option is to demand a hefty payout in exchange for the code
base and/or agree to finish building it out for a premium fee on your time.

Bottom line, get out of there ASAP...

~~~
brador
Or consult an attorney and threaten to sink the ship. They should buy you
out/pay you off/settle.

Don't feel bad, remember, they screwed you first.

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sdnguyen90
Huge red flag IMO. I would leave ASAP. If they didn't see your value from the
get go, they probably won't see it until its gone.

If you try to demand the equity and they actually do give it to you(which I
highly doubt will be anything remotely close to 30% IMO), you're going to have
a huge target on your back in the future if you do continue working with them.
They didn't even consult with you before deciding on the numbers. They did not
give you ANY equity at all. So none of the 3 other founders said anything to
back you up?

What legitimate reason is there to not give you the 30% from the get go?

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CyberFonic
It's a sad situation. But if I were in your position, I would simply play
hardball:

1\. Leave immediately.

2\. Don't work on the project alone. Just sit it out. Why? Because you could
be accused of taking the IP, or something similar.

BTW 1: I doubt the incubator is being run by moral people if they are letting
the other co-founders act like jerks.

BTW 2: How much time, effort, talent and money did the other co-founders
contribute? Who came up with the idea?

~~~
dramort
thanks for the reply. Fortunately there's no IP in place. One of my
cofounder's came up with the idea but I have been the only one executing and
making the product. Other co-founders have been doing "networking" and haven't
had any success with it. All the codebase sits a Github organization which is
administrated by me and a license text is attached to every single file saying
that I own all rights to that code.

~~~
rayalez
So what is the problem? Sounds like it is your product, not theirs. And seems
like you don't really need them. Why not just go and develop it by yourself as
a different company and have 100% of the equity?

They will have nothing but the name of the company and will not be ale to
compete with you. Any moral obligation you had to the guy who came up with the
idea got thrown out of the window then he tried to screw you out of the
company.

Edit:

If that is really what is going on here. Make sure that it's not just a
misunderstanding.

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ScottBurson
The suggestion to talk to a lawyer is not a bad one, but I'll add my voice to
those suggesting you just walk out the door. It sounds like you haven't been
working on this very long anyway. Have you been compensated in any form at
all? If so, you might have to give them the code you've written. But if not,
seems to me (IANAL) that all you had was a verbal agreement which they've
reneged on -- so they have nothing to hold over you and you can do whatever
you want.

If you've described the situation accurately, then it doesn't sound like your
co-founders have thought this through very carefully. Who do they expect to
build the product if you don't? Maybe if you actually walk out it will bring
them to their senses.

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hngiszmo
Lol. Funny to read you are in my situation 3 years back. Had joined a team
where I did not at all trust that one guy but the others were ok. They asked
me to join on an equal share basis and asked me to lead the dev team in Chile
and relocate from Germany for that. That one guy came over for just the first
month. I was not a beneficiary of the incubator and after a month in Chile, we
had to found a company and that company was to be owned by only two of the
four founders, with "that guy" putting himself at 50%. I brought up the topic
in a skype meeting with 15 supporters and at the time I had figured that
mentioning that I signed up for 25% of the cake might get people angry and
"that guy" yelled at me he would fly down to Chile and kick my butt … anyway,
long story short, I took my hat and our Chilean founding partner made sure I
got my 90% reembursement of the reembursable money I had put in, and 100% of
what I paid to our developers to make them good for what "that guy" and the
other German partner didn't pay.

At the time, I was super stressed and worried and tried to document everything
in case it will be of relevance later on.

Yeah, that was three years ago and I'm forever thankful for our Chilean
partner that took a great financial hit later on when the startup finally went
down but that I only heard second hand …

Anyway, I'm still in Chile and like it here.

Not all startups will be the next Facebook. Being in an incubator is not only
a job. Make up your mind. Don't sign stuff against your interest.

------
bradleybuda
I think it's unlikely that you'll fix the situation and remain a member of
your company with your 30%; cofounder disputes, especially at such an early
stage, almost never end amicably, and they ruin many, many companies. It
sucks; I'm sorry that things ended this way.

So it seems like you have two options: 1) Walk away 2) Walk away and hire a
lawyer

Whether or not you hire a lawyer depends on whether or not the company is
worth anything. The answer is probably no, if you're relatively new and have
just been accepted into an incubator, but if the company has significant
revenue, a real valuation, or other overwhelming signs that it really is
valuable, then you could consider hiring an employment lawyer, with the
knowledge that it will be a large out-of-pocket expense.

If you're passionate about the idea, go do it on your own, or with new
cofounders. Don't take any code - it's not yours and it's a good way to cause
yourself more problems in the future - but run with the idea and out-execute
your old team. And good luck.

------
solarmist
There's not a lot you can do. You've done work for the company, but it seems
they have not compensated you for it. Legal action is possible, but would be a
horrible end.

The code is under your control use that as bargaining power, but you need to
actually intend to leave (but I wouldn't work on it, without a lawyer
reviewing it, with the intention of continuing the project on your own, that
could get legally hairy) with it if this is not resolved immediately. That
said they've screwed you majorly already do you really think that would be the
end of it if you got your 30%?

I'd say demand 10% for the work you've done and for you to part ways amicably.

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CookWithMe
I would walk away. Actually, consider yourself lucky that they've shown their
true face so early on and you can get out now :-)

When considering hiring a lawyer etc., also take a look at opportunity cost:
Even in the best case scenario, will you get more money out of it then if you
freelance for a similar amount of time? Probably not...

(Also, learning from the Winklevoss twins, it seems preferable to sue a
company when it is actually successful, because they got way more to loose at
that point then now. Although I strongly doubt that they'll be successful...)

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yalu
Flow like the river. River always reaches its destination no matter what and
how many obstacles she faces. Corny as it may sound it has worked for me so
far. This may mean any of the 3 forks and other meanderings others have
suggested. Get buy in for the value you create from as many people(team,
investors, other stakeholders not even considered like family) as you can get
support from responsibly. When majority sees/expresses value, minority tend to
think twice about deliberately ignoring that value. Good luck!

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11thEarlOfMar
If any code you've written (or anything you've produced that constitutes IP)
is in their released product, they have to compensate you for it. In startups,
the compensation is typically in the form of equity.

As others already alluded, in any case, it does not seem that you want to go
forward in business with either the founders or the incubator.

~~~
dramort
thanks for the reply, no released product as of yet and there's no IP in place

~~~
solarmist
It doesn't need to be released to be IP.

~~~
dramort
I haven't signed any agreements to transfer the IP rights to the company

~~~
solarmist
What about verbal agreements? They're a pain in the ass to enforce, but
constitute fully legal contracts (at least in the USA).

Or accepting money from one of the other founders? That could make you an
employee and then you don't need to sign anything for them to take your code.

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sabunmandi
dont give them access to your code, try not to share anything include idea,
system knowledge etc until they are give the 30% like they promise.

For me, will take option 1 with consider above consideration.

~~~
confiscate
agreed. at this point it won't help you to give them any more access to the
code you wrote

------
confiscate
I agree with the sentiment in the other comments, except that

as with most complicated situations, there is often the urge to "do what's
Right", such as "walk immediately" in this case, out of frustration. While
that's understandable, it is also often the case that you should _Think
Through_ the situation before acting.

You are not under pressure to respond right away--there is no explicit hard
deadline, so you should take your time to think clearly, consult lawyers, and
weight all your options before making a judgement. It could very well be that
you might decide, after contemplating more, that you should walk, but do take
the time to think about the pros/cons first and try not to make rash
decisions. Your goal is to choose the option that benefit you personally the
most given the situation

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toufique
4\. Quit the company. Find better co-founders.

As a technical co-founder, you're the one in high demand. Why stay at a
company that undervalues you? The opportunity cost is very high. Find better
people working on something interesting.

I wouldn't continue working on this. Sunk cost fallacy. Recoup the cost
instead. Ask them to pay you for the work you've put in so far before you give
them the code. Then I'd move on to bigger and better things. Focus your
energies on your biggest opportunities, not your biggest problems.

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valdiorn
Option #2 is a very good way to get sued and spend the next 2 years in court.

Walk away, and learn a very expensive lesson. Read your damn contracts!

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someear
What is the current state of traction? As many will tell you, ideas are
worthless...and in many cases, product is near worthless too. What is of value
is customers. Do you/they have any? If not, you're not really walking away
from much as it is, better to just leave this mess and start fresh with
someone else or on your own.

------
bravado
There is a chance I am familiar with the incubator you refer to and I am a
software engineer who has had similar experiences in the past. Please send me
an email at hnthrowaway@forward.cat if you'd like to connect and to see if
there is any way I can help.

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leppie
Walk, if they want you back, charge them ludicrous consulting rates.

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tiatia
1\. For now make sure nobody but you has access to the code

2\. Lawyer up

3\. Please let us know how this turns out.

Remember, Greed kills. A former partner of mine never got enough. In the end,
he ended up with nothing.

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OafTobark
Surprise no one has asked yet but which incubator is advocating removal of a
founder and is okay with the other guys doing this?

Also age or whatever is not an excuse.

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sahilpopli
I will prefer Third option if not work then second.

~~~
dramort
thanks for the reply, I have already kind of tried option 3 but they just gave
me a lame answer that they'll give it to me after the 3 months

~~~
prawn
Reply and say "That's not good enough." Nothing else. Makes your position
clear and leaves the ball in their court. You still have all options available
to you, but might motivate them to act.

Sadly, unless I'm misreading the situation, the relationship is likely broken
enough that you wouldn't want to continue with them. You'd be either going it
alone with your codebase or asking them to buy you out, subject to you seeing
it through to launch, perhaps?

If you can negotiate a payout rather than equity, it might be a better return
given their networkers aren't networking.

~~~
majc2
Another variant is four words: "we had an agreement." This emphasises that you
had already agreed to something.

I agree with everything else, it's very unlikely to work out.

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antaviana
You are and you will be an employee. Ask to get fully compensated for the
previous 8 months and if not, leave right now.

~~~
tiatia
Let this for a lawyer or judge to be decided. Besides this, this was not the
question if he is an employee or not. He can be an employee AND have equity.

~~~
antaviana
It is extremely easy to dilute ownership of equity. If double crossed, I would
not fantasize about ownership. I would run away, if possible in good terms
(paid for all previous work). Life is too short.

~~~
tiatia
A well drafted contract can not prevent dilution but can make it very
difficult do "dilute you out".

Currently all the balls are in his court. He could even demand "undiluteable"
equity. I don't know what to expect from his start-up. But why just walk out
with nothing when all the cards are in your hand?

~~~
dramort
The startup is pretty solid, thats why I don't want to leave. Our beta
hardware and software has around 20000 beta testers and is profitable

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rriepe
They need you to raise the money they'll use to replace you.

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panjaro
2\. quit the company and work on the project alone.

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Bluestrike2
Speaking from personal experience, ignore such warning signs at your peril. I
wrote about what happened to me a while back, and there are enough
similarities here that you might be interested in giving the story a read [1].

If you choose to fight over this issue, it's going to come down to the
attorneys. You'll have to decide early on what the desired outcome is: do you
want out, presumably compensated for your earlier investment, or do you still
want to be part of the company with the rights due a shareholder? If, as I
assume based on your wording, you invested money into the company as well as
your labor, that helps make things much more clear cut which would make an
agreement more likely. It'd still be long and messy, but not as long as a
fight without that investment. It's also possible that just hiring counsel
will help them budge. Legally, there's no real reason for them to delay
awarding equity for three months unless they're purposely trying to prevent
you from exercising any input during the incubator program (and with any
negotiations that occur during that time). At a very minimum, it makes things
more difficult for them by hampering your relationship--and that's something
any outside investor will eventually stumble upon and start asking undesirable
questions about assuming it doesn't scare them off entirely to begin with.

That said, even if you prevail without having to litigate, you're still going
to lose. That, unfortunately, is inevitable: your co-founders have already
amply demonstrated a willingness to stick a knife in your back. Even though
shareholders have certain rights available to them, there's no guarantee your
co-founders will bother recognizing those rights. There are a myriad of
different ways in which a minority shareholder can be oppressed and frozen out
of the business. Whether they're making decisions without informing you,
cutting your wages outright (it's not like they'll be paying dividends for
some time), or purposely diluting your shares, they have the ability to make
your life miserable with a fig leaf of justification thanks to their majority
status and your only option for recompense is through the courts. And while
it's likely that you'd eventually succeed, it'd only be after lengthy and
expensive litigation--assuming, of course, that the startup doesn't fail by
the time you're done (and the battle itself would certainly harm the company,
particularly in the eyes of potential investors).

Leaving hurts. Being forced to leave hurts even more. But sticking around?
Even if you feel that you win this round, even if they capitulate immediately,
the knowledge that countless more are waiting just around the corner will wear
you down. It'll wear you down, suck away your savings to pay for constant
legal advice even if you manage to avoid litigation, and it'll do so while
destroying every last thing that made you want to found a startup in the first
place. One day, you'll wake up and wonder just what happened to you thanks to
what was, in the end, nothing more than a pyrrhic victory.

You won't be the first, and you most certainly won't be the last. As it
stands, you're in a no-win situation. Consult with an attorney before you make
a move to avoid any potential problems (for instance, how much code did you
write yourself versus other programmers/employees), take your code, and walk
away.

P.S. - If they're planning to get rid of you once all "the code" is written,
it's unlikely that the startup is going to succeed in the end anyhow. That
sort of short-sighted attitude makes it abundantly clear that your partners
have no real desire to improve upon the product over time.

[1]
[https://news.ycombinator.com/item?id=7579845](https://news.ycombinator.com/item?id=7579845)

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probinso
leave

