
Ask HN: Do I choose a few team members or lose our only investor? - CaptainAwesome
Hacker Friends,<p>I seem to only come here to vent and ask questions that I know I can only answer myself but I digress.<p>I run a small start up based in the south west area. We are in the drone space, we have some pretty awesome tech, our IP is strong, we are funded and its looking like we will continue to be. Heres the kicker.<p>We have been in business for a little over 7 months. In that time period we have brought on some team members to write software and put them under the direction of Andrew (not his real name). Andrew believes that we should allocate equity and options to him and his team right now, this second or he will take the team we have built and walk. In a way he is holding my software team in escrow. It sucks and its not ideal.<p>On the other hand.<p>Our investor, to put it quite simply, &quot;doesn&#x27;t negotiate with terrorists&quot;. And has asked me to fire him in the morning. He has refused to allocate options at this point and believes we should wait until we raise another round. He is old fashioned and only believes in rewarding value. While its nobel its not ideal either.<p>So heres my problem. Do I take the nobel high road and take my men, distribute equity and pretty much kiss goodbye any chance of follow on investment. OR... Do I fire Andrew, risk losing over half my software team, and be set back months which could potentially cost me the company?<p>Thoughts? Comments? Questions? Concerns? I dont imagine i&#x27;ll be sleeping much tonight and could use as many points of view as possible.<p>Best, 
-C.A.
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cjbprime
Seems like:

* Your investor is 100% right about not negotiating with blackmail. You should absolutely fire Andrew soon. Your relationship with him is unrecoverable. (The demand to do it "tomorrow morning" is itself close to blackmail, and you could postpone a little to collect your thoughts and make a less emotional decision. It is hypocritical for your investor to reject blackmail while blackmailing you.)

* Your investor (and you should own some of this responsibility too) has screwed you over by expecting software engineers to work at a startup with an eternally-postponed equity discussion. I don't even understand how that works. You may need to compromise with your investor by firing Andrew (which isn't really a compromise; it's the right idea even without your investor's demand) but also insisting on an equity discussion immediately so that you have something to show the rest of the team that you're listening and want to treat them right.

* Andrew's threat to take the team with him is confusing. Where does he think they'll go? They probably want jobs that pay them money, and it seems unlikely he has one of those ready tomorrow. He (and you) may be overestimating their attachment to him. If he behaves like this among them, they may even _completely understand_ why he's leaving.

Seems like some combination of firing him, and having an honest conversation
with the remaining team where you say that this is solely about him and not
them, you want to make things right with the them regarding equity, and having
stern words with your investor is the way to go?

(I have no qualifications which make this particularly good advice to follow,
to be clear. But maybe simply being detached from your situation is helpful.)

~~~
CaptainAwesome
I appreciate your input and perspective. Thank you.

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tlb
You should have given all the employees equity when they joined. It's better
to give them equity sooner rather than later, but definitely before the next
funding round (because the strike price has to be higher).

Employees with drone experience are in high demand right now. You have to give
them equity to compete with other startups, as well as Amazon, Google, DJI,
and others that can pay higher salaries.

Investors often have good advice from years of experience, but ultimately the
CEO has to make the decisions.

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CyberFonic
I'm not a lawyer, nor an accountant, not even a cartoonist (sorry Scott Adams)
- so my suggestions are solely based on my experience.

You don't mention how much you have invested in the venture. If the investor
is paying for everybody's salary (including yours), then the golden rule
applies (he who has the gold, makes the rules).

In the hi-tech space, execution is more valuable (in the long run) than
finance. Does your investor understand that? If your ideas are really good,
you could stall and find a new investor who has an acceptable view on equity.

Given that Andrew and software team want equity - are they willing to pony up
funds? that way you might be able to bootstrap the business. If you are able
to bootstrap the business, then I would fire Andrew but not the team.

If I were in your position, I would lock-out everybody. Shutdown the servers,
etc to preserve the software. Then hardball negotiate with both Andrew and the
investor - separately. At the same time seeking out other potential investors.
It might take a couple of weeks, but in terms of the long-term I would see it
as a risk worth taking.

~~~
CaptainAwesome
He has invested all the capital. When we first started we were just an idea
and now were weeks away from "flipping the switch"

All I care about is making the product. Not the money, or potential money. Its
tough, our investor has also served as a mentor and stepping away from that
mentality is difficult.

~~~
CyberFonic
Your response clarifies a few things (but not all).

Assuming a couple things:

1) you have discussed any delays to flipping the switch arising from firing
Andrew with your investor / mentor. And that he is Ok with that.

2) that your investor is prepared to pay any termination payments, especially
those in-lieu of notice.

2) that you are paying your staff the going rate for the work they are doing.

3) that you have standard employment contracts - i.e. no soliciting, no rights
to IP, etc

You will need to write a termination letter - which basically says that Andrew
can have no contact with your staff, no rights to the code nor IP, nor compete
in the technical area.

Ideally you have your investor there in the morning. You call in Andrew, give
him the letter of termination and clearly say that if he tries any funny
business then you will sue him. Then march him off the premises. You can send
any of his personal stuff to his home later in the day.

Then you announce to the rest of the staff what you have done and that you
need to pull together to ship. Once there is demonstrable results then equity
discussions can take place. Invite any disgruntled staff to leave on the spot
- with the same termination conditions as for Andrew.

I'm sure that some people will protest that I'm suggesting a heavy handed
approach. That is true. You have cast your lot by committing to the product
and your investor / mentor. Taking somebody's money comes with a commitment to
them.

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orionblastar
Both Andrew and the Investor sound like jerks to me. Sometimes you have to
deal with jerks and sometimes you have more than one jerk to deal with.

Building a team that works well with each other is hard to do. I don't know at
what stage the project is at yet, or if you have the equity to give to the
team. How well are they paid? I figured if they are paid well like at least
the average salary for their position, there is no need to distribute equity
until the project is finished.

The problem might be that your startup doesn't have any income yet, so you
can't distribute what you don't have.

I hope each member of the team has signed a contract, one that has a non-
compete clause in case they do walk and take IP with them.

You need to look for another investor or do some crowdfunding to raise funds
to replace him.

No matter what choice you take, fire Andrew or get rid of the investor or even
do both, you will be in for a hard time.

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redsable
Making an important decision like this under pressure of time is sure to
result in a mistake. You need to understand why Andrew has put you against
such an immediate deadline. Is it because he has another offer for his
services? Is it something you said or did? Is there anyone on the software
team that would be able to give you the whole story? You need to see this as
well as possible from his eyes, forgiving his words as rash judgement if
possible.

My guess is that Andrew sees something that you don't...maybe that the
software, after a certain amount is complete, can be finished by others and
his services won't be needed. On the other hand, did Andrew do this at a
previous company? Do you know? I would think you need to find someone that can
take over Andrew's place if you decided you wanted to go on without him? Do
you have this person? Anyway, I would not fire Andrew. I would use the time he
stays on to find a replacement and figure out how to replace him. Also try to
document what he is doing. This kind of blackmail works once in the corporate
world. If it gets out that he has done this in the past it will make him
radioactive with others.

I think the first decision is to buy time. Any ideas?

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facorreia
Allocate options to the team. Fire the blackmailer.

~~~
CaptainAwesome
That seems to be what has to happen. It unfortunate because he has formed a
software union of sorts and is acting as a union rep. If I fire him I could
potentially lose 2-3 others.

~~~
CyberFonic
Possible but people are reluctant to jump ship when you make the traitor walk
the plank. It's the sword in the back that drives the point home - if you'll
pardon the pun ;-)

