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Ask HN: How to fire your co-founder?
110 points by mesogamer on Dec 26, 2013 | hide | past | web | favorite | 81 comments
So I just read this HN posted article (The 7 Habits of Highly Overrated People - https://news.ycombinator.com/item?id=6965295) and thought a lot about my co-founder who is doing jack shit in the company. I already talked to him about lowering his share options (which he currently holds about 40%, (same as me, after seed round dilution)), but with no avail. He actually threatens the company's success if I ever try to "sneak a move" on him when in reality his contributions are near 0 for product development as well as S&M.

If I talk with my boards on his misbehaviour it will get them stressed and stop believing on the company. Is there really no way to fire him and the only way is to actually quit ?

If I talk with my boards on his misbehaviour it will get them stressed and stop believing on the company

Sorry dude, looks like that is precisely what you are going to have to do. Don't worry about the board stressing; they can handle it. That's their job.

Focus on YOUR job: the success of the company. The board will stop believing you when you prolong this longer than you should have, actually making the situation much worse.

When you go to the board, GO PREPARED. Assume the board does not know anything. And treat it almost like a trial where you will get to present your side, and at some point, your co-founder will get to present his. In these cases, I like to open up a document and put down the facts in bullet points. When presenting, remain calm and stick to the facts, which when evaluated by a sensible party(your board), should have them arrive at the same conclusion as you.

I was in a slightly similar situation (without a board), and I did wait too long to act, and by then it was too late and the only option was to break up the company.

It sucked, and I felt like I had wasted 3 years of my life, and while my co-founder definitely did his own damage by not holding up his end, my biggest personal mistake was to not immediately, and aggressively, deal with the problem when I saw it arise (and after initial cooperative attempts at resolution went nowhere).

If you are putting everything you have into your startup, then you have everything to lose if you let someone else fuck it up for you.

You may in fact be legally obligated to discuss this with the board. I would also give a heads-up to your lawyer about this. If this gets messy, you'll want some ironclad legal protection for the company.

He most assuredly is legally obliged to tell the board. His first duty is to do what is in the best interest of the company.

Thanks for the advice. I might go with this one after holiday ends. The only problem I see here is that he has more rapport with them (since I'm more product oriented and he's money oriented).

It's going to get real messy, especially since he holds all money, bank, passwords info (now I understand why he wanted to take control of those stuff in the beginning). Firing him will be so messy, and the 3 employees we have today respect him a lot especially since he's an expert following those rules in the article I stated in the original post (he's even deceived me lot's of times!)

shit.. Sometimes I think I need a new startup problem to solve to leave the company because this is not letting me sleep at night (and it's no longer the first thought when waking up in the morning).

You should enlist a friend or a mentor to help you prepare with this situation. They can come up with tough questions that the board might ask you and make sure that you have a coherent, clear answer. That has helped me tremendously in clarifying my own thoughts.

You should also roleplay with this person as if he is your cofounder. Have him be a dick and make any argument you can see you cofounder make at any point. I've learned that winning arguments and being right are two different things. This way, if your cofounder is good with the former, you need to be prepared and roleplaying will give you a great edge!

Also, write down all possible scenarios. So if the board asks you "what will happen if the employees quit?" you need to have already thought through that use-case. They will probably be very impressed if you have a document that has these use-cases and possible plans.

"the 3 employees we have today respect him a lot"

This is a big red flag. Who hired those people? Why did you agree to hire them if you don't respect their judgement? Or is your co-founder also doing all the hiring as well as taking care of everything else?

Starting to sound like you should be asking yourself what you contribute.

I am seeing this red flag here too. This is sounding a bit ridiculous. It seems to me if the other guy is the money guy and OP is the product guy, and the employees, board, logistics are all in the hand of the money guy, then he is doing precisely his job.

What does OP really want his cofounder to do, maybe its time he explains why is he an 'overrated' person.

In reading that he's the money guy, is he really not holding up his side of things? What's he specifically not doing, that he should be?

It's hard to read between the lines to know if he's really not keeping up his end. Employees like him, he sounds like he's the field expert, he's got the money, he assembled the board, etc...

One thing that helped me in my situation is that I made a document just describing my situation, written from the perspective that it is a business school case study. Then have some friends close to you read it and tell you who they think is at fault. The biggest key is that when writing the story, replace your company name and other names with made up names so people who you ask for feedback aren't biased.

This will give you first line of objective feedback even about your own positions.

> It's going to get real messy, especially since he holds all money, bank, passwords info (now I understand why he wanted to take control of those stuff in the beginning).

You're not kidding. I hope you just mean logistical access (as in, currently holds the details to), as opposed to actually having them in his name. If the latter, you're pretty much screwed. In any case, when you discuss this with the board, once you get them on board with this decision in the first place, you're going to need to make a clear plan for getting access to all of those resources transferred. Hopefully you can do so quickly and without legal action required. Fortunately, if they're in the company name, there are steps you can take to get that access.

I would recommend that anyone else reading this take note: you need someone on the board who is your ally. You can't let your partner fill it with his own people.

It's not going to get real messy unless he wants to go to jail for fraud / theft / embezzlement.

You need to present your case to the board, there is no other good way to go. If they side with you, your co-founder will have no choice but to turn over control of the money, and in fact you should encourage the board to force the point on the money / passwords / etc controls anyway.

I imagine this will get ugly if you just change the passwords and revoke his access. He owns a decent share of the company so my suggestion would be if you want this company. Buy his share and give him the money.

During this period of time you can hire a team (or someone) to secure your companies credentials. Hiring a team to review your assets both physical and virtual; code base and otherwise would be wise.

I would certainly not take such drastic action based on pattern recognition built out of some HN article.

Would you file for divorce based on an HN article about overrated spouses?

As others have pointed out, it sounds like he does do a fair bit for this company but you're blind to it. The one trick he's clearly missed is getting to this level of distrust with his cofounder. For that, though, it is not clear that you should fire him. Maybe he should fire you...

Could not agree more. You are not thinking of firing your co-founder, you are thinking of divorcing him.

No matter what its going to be messy, and you need to be absolutely sure its worth going down that road before you do it.

I'm in the uncommon position of having actually had to do this. It wasn't a "firing" per se as much as a parting of ways which I initiated, but here's what I learned:

• Discuss it very frankly with at least one board member you trust. Depending on their involvement with the business they may already suspect that something is wrong. Outline to this board member your concerns that Co-Founder is going to take this the wrong way and derail the business.

• Discuss with Co-Founder the specific areas you feel Co-Founder isn't pulling his weight (it isn't okay, even if it's the truth, to say "he isn't doing anything"). Make an irreducible list: start with what are obviously his strengths, and then list the ways in which he is not playing to them. Make it inarguable and prevent it from turning into a personal matter.

• Keep the focus on company not him. For the company to succeed, you need to accomplish XYZ.

• Explain very clearly what his options are. You are not trying to screw him, but you are displeased with his input. You would like to amicably resolve this so that the board doesn't have to be involved, but failing that you will take it to the board and ask them to do their job by sorting it out. He can accept reduced equity and no day-to-day involvement, or he can kick up a fuss and you will move him on. Either way he should accept the reality that his involvement is coming to an end and that his decision now is how it ends.

Your board, if they have any kind of experience in running a business whatsoever, will know that this is one of a billion things which will go "wrong" over the four or five years it will take to make or break your biz. You can influence a lot in the way you communicate this event to them. It sounds to me like it's not truly a crisis but a significant opportunity for you to offload someone who is not contributing and reallocate capital to someone who will put in the hours.

My overriding advice is that you should not worry about this. Next time you start a company be sure to finalise your divorce before you finalise your marriage (i.e. very clearly delineate duties for founders and establish what success for your roles looks like), but other than running out of capital or not growing, very few things are disastrous for a startup.

I'm sorry to hear about this.

Elad Gil[1] has written about this in depth about 12 months ago: http://blog.eladgil.com/2013/01/how-to-fire-co-founder.html

[1] https://angel.co/eladgil

"when in reality his contributions are near 0 for product development as well as S&M."

What, he won't even hold the whip? ;)

I'm pretty sure that "S&M" above actually refers to "Sales & Marketing", for anybody else who was... confused on a first read.

It's actually BDSM, Business Development, Sales & Marketing.

You might want to put those in a different order to not get confused with the other BDSM.

They actually refer to the same thing.

What's fun about business development, sales, or marketing?

It was a joke.

My take here differs a bit from that of the rest of the thread.

How about this OP - who are you to fire your coworker after he got a cosy relationship with a board?

This is literally no better than firing an 'idea man' after they did nothing, except just bring an idea, set up a company around it, and code the first version.

Who are you to do that? If you were good enough to found and run a company by yourself, including raising money, you would be doing that. Where are all the companies you founded and ran by yourself in the years and decades you didn't have your current cofounder? Even if he showed up to work three days: one day when he talked with you and then brought a huge investment from a board that you couldn't bring, then 18 months later to sign some Series A papers with you after discussing them by email, and the third day he to sign the IPO documents before quitting, you should still STFU and thank your lucky stars you're allowed to get 40% of an actual company that he actually orchestrated for/with you, in exchange for nothing more than working there, much as you might for whatever salary "S&M" or "product design" is worth.

It's not your co-founder's job to work for you. Who do you think you are anyway? Go design a product or do sales at a big conglomerate if you want pay grades, or go found a company by yourself if you don't need the things you've already listed your cofounder as bringing, including a cozy relationship with a board.

If you can found a company and raise money for it by yourself, go ahead and give yourself a 2.5x equity raise up to 100% by getting the fuck out and doing so. enjoy 100% of what you feel is 100%, since you feel your cofounder didn't add shit to the mix, in your extremely personally centered opinion.

Everyone else here has it 100% wrong, IMO.

I was about to write something similar to this.

So someone with 40% of the company thinks the other guy with equivalent ownership isn't worth his share? What if that guy thinks the same thing about you?

The other guy apparently has employee loyalty, funding, and administrative controls on his side...

I am not at all convinced that the OP deserves sympathy for wanting to screw his business partner, and publicly soliciting strangers' advice on how to go about doing it.

If I were the other guy, I'd put this HN comment thread in the hands of my attorney and take my own case to the board. Sounds like the jig is up for this partnership, take it out back and put it down.

Keep in mind that sometimes people misperceive each others' real contributions, because of differing competencies and priorities. But, assuming your estimation is correct:

Is an employee agreement and vesting schedule in place?

Who reports to whom? You haven't mentioned formal titles/roles, but unless you're already final-say CEO, you'll probably need the board's support to oust him. You'll definitely want their support and advice, especially if adversarial steps to adjust equity or reorganize are necessary.

Talk to older mentors/lawyers who've seen similar situations.

Look up 'shotgun clause'; even if one doesn't already exist, a 'him-or-me' game of chicken might be resolvable with minimal damage/legal-risk using some sort of similar bidding/step-up-or-leave arrangement.

This is why you have a board. And hopefully some decent legal documentation in place. Talk to them, lay out facts and the action you want to take, and just follow the documented process for things like board votes and such (again I hope you have legal docs in place, otherwise be prepared to get a lawyer and slog it out…). Sounds like you think the success of your company might depend on you getting rid of him, so just treat it like what it is: business, not personal.

Majority shareholders can't just vote to take away equity from minority holders. There are laws about minority shareholder rights. The OP better have some really specific agreements in place.

Well generally with more or less standard docs in place, the board can vote to remove the offending person from the company. And then it's just a matter of the vesting schedule as to the leaving person's remaining stake (this is why founders should have vesting). Not saying there won't be something of a legal battle, but certainly there's no special provisions necessary which you wouldn't expect in standard startup articles of incorporation.

My impression is that in California boards have large latitude to extremely dilute minority holders.

Let's see. He's the expert. He controls the money. He has the rapport with the board. Maybe he helped get a lot of the funding? Sounds like he's pulled a lot of weight so far.

Maybe he's not pulling the weight, but like a movie the other day, a Washing Machine works hard, so what.

Think through if he's benefitting the company in his total contribution. If you want more from him, ask. If he won't do it, explain it's unacceptable and go to the board.

Like badclient states, it's going to come down to perception based on asserted facts. Those facts will be interpreted through the lens of relationships.

I have been through this before, I can help if you want someone to bounce things off of real time.

"Those facts will be interpreted through the lens of relationships."

This is the key point for everyone advising him to go to the board or quit and start anew with the employees. It's unlikely the board meeting will go well unless the other cofounder has done something seriously wrong. Trying to work out goals with him, as suggested, has a better chance of being productive compared to asking him to reduce his equity.

I apologize in advance, but since nobody else seems to have taken the initiative I will opt for being the ass_ole in this situation.

Before you go to the board (you ethically should) let ascertain a few things.

Are you sure he's an overrate person or is it just that you don't see the value in his input?

Some where in the thread you mentioned:

> It's going to get real messy, especially since he holds all money, bank, passwords info

Some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful. If he has mismanaged finances, that's another story.

If he has not mismanaged the finances and has taken ownership/charge of these affairs you need to reflect on why you did not opt to share the burden.

Some people don't like managing finances, nothing wrong with that, but they do need people who'd do it for them, even better if there is a mutual need to succeed. Anyone can be the best money manager in hindsight.

> the 3 employees we have today respect him a lot especially since he's an expert

Respect is very important. Sure, the article says that the Overrated person can establish themselves as an expert, but believing this without a doubt also means that you don't trust the judgement of your first three employees.

Not saying you're wrong, but there is a possibility that you need to delve a little deeper on why they think your co-founder is an "expert".

> following those rules in the article

Not all rules apply all the time. Also these are not really rules but situational observations.

> The only problem I see here is that he has more rapport with them (the board).

Was he instrumental in helping you raise funds? Could you have raised the funds with a 100% surety without him if you were a single founder? Would this rapport help keep the faith of the stakeholders in the prospect of your success?

Maintaining and managing peoples belief in an idea or the people executing an idea is no easy task. Are you sure he has a zero percent contribution in any of these? And again are you sure you could have achieved a 100% of past results without him?

> He actually threatens the company's success if I ever try to "sneak a move" on him

Why would you try to sneak a move past anyone who has as much to loose as you, or even if it was a fraction thereof?

How does he threaten the company?

Does he threaten to leave? If you want him to leave, this solves your problem. But, if his leaving threatens the company, you should probably reconsider firing him.

>>Could you have raised the funds with a 100% surety without him if you were a single founder?

I see this problem clear in many situations these days. A lot of angel investors/fund raisers tend to think themselves as founders.

The problem with such a though is that, your job ends once you give the money. Though arranging for money is important once sales get going you tend to be looked up as some one who did an initial favor but is by and large not contributing anything to the company for months/years.

Mean while other people, even non founders who throw in insane efforts to keep the company going look at such people as dead baggage to carry whose only role was raising that initial investment and riding that accomplishment wave since then.

After some time it makes more sense to honorably give back the investment + profits to that initial investor than have them control you, while not contributing anything meaningful to the company.

This is important

If you want to (you should and must) get to the board and present your concerns, they are going to need those questions answered

It will only help your case

If your cofounder is as bad as I'm imagining, you should do your homework: get emails, recordings, etc which is strongly hinted by his threat (make sure you get him on that, record with your cell phone - hidden - or something)

But there's also a possibility things are merely like this: "some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful."

You need to work a very clear and ironed out case for the Board. And remember, to them everything is still ok, and they hold him (and you) in consideration, so you'll have to work the case real slowly, be tolerant of their questions, as dumb as they are (it's a dumb question to you, not to them)

And talk to your lawyer, of course. And make sure he doesn't know about this.

>make sure you get him on that, record with your cell phone - hidden - or something

Be incredibly careful: this could be a violation of state privacy/wiretapping laws.

Yes, what you need to check is whether your country/state requires one party, or two- (all-) parties consent. See this: https://en.wikipedia.org/wiki/Telephone_recording_laws

I don't mean telephone necessarily, but 'live' recording

Not sure what's the laws on that, but yes, it's better to check

1. Watch Startup.com.

2. Talk to him. Offer him something in return for his shares (such as a large amount of debt which is only triggered if/when the company sees a liquidation event of suitable magnitude).

There hopefully will not be a step 3.

Watch what? The site you're plugging may as well be a parked domain.

It's a movie about a terrible dotcom bubble startup that prominently features a founder breakup.

Thanks for that guys. I had no idea this was actually referencing a movie.

I was in a similar position with my first company, but waited too long because we were such close friends. I view failing to fire him as my biggest mistake/failing as CEO of my first co.

If you want to talk, drop me a line here and we can hop on the phone. I have a strong opinion on this topic: http://mattmireles.com/contact/

At the early stage of a company, equity is very important to keep people's incentives aligned to work really hard in the best interest of the growing the company. This generally initially expresses itself in the founders, who have a lot of equity and little or no salary, and then continues on with early employees. So just from this perspective, spending a ton of equity on somebody who isn't contributing is a massive opportunity cost.

Additionally, there is a reason successful solo founders are rare. It is hard to found a company, especially without somebody who is 100% aligned with you (at least economically) the whole journey. I'd imagine that a situation where you start with 2 founders and go down to 1* makes it even harder, because you are like a single founder but with all of this stress you are accumulating right now on things that aren't related to making a great product.

Now this isn't to say that founder strife is something that doesn't happen in successful companies. It does. It is just the magnitude and early-ness of your strife seems pretty large. Making a successful company is really really hard, and you really want to put yourself in the best position to succeed. If you aren't in a good situation, and getting to a good situation doesn't seem likely, then just leaving and starting something else might be your best available option.

Note: I have no idea how large your company is, so this post is assuming your company is 2 or 3 people and is very early stage. If your company is doing really well or is much larger, this advice basically doesn't apply at all, because then "sticking with it" starts to look like a good option.

*: I'm extrapolating that you had 2 founders based on your post. If for instance you had 4 founders and were going down to 3 I don't think it would be as big a deal.

Don't forget that just because he is a shareholder doesn't mean he has an automatic right to be a Director (or employee). Hold a vote of no confidence in his abilities to add value to the company and fire him as a Director - you can't take away his shares though, unless you can convince him to sell.

Your first and only duty is to the welfare of your company.

Typically (hopefully!) shares are vested based on work as an employee, in which case you can get back the unvested shares at least.

The best way to do it, is to not have to. The second best way, is to fail fast. I waited too long in my last startup and wasted too much time waiting for someone to carry their weight. It never gets better.

I recommend reading "The Founder's Dilemma's" to cover the other things you'll need to consider later as well prevent other, BIGGER, issues.

Perhaps what you have is worth fighting for, and you will therefore be willing to incur significant costs (in time, energy, opportunity and likely money) battling your co-founder. But I think you should consider the facts you have presented in your question and responses to other comments:

1. Your co-founder has the same level of ownership as you.

2. He controls the company bank account, passwords, etc.

3. His relationship with the board is stronger than yours.

4. Your employees like him.

5. He is aware of your desires and has made it clear he is willing to fight your efforts, apparently even if it means sabotaging the company.

Given these facts, I think it would be wise for you to consider what you can realistically achieve even if you are successful in removing your co-founder. You may find that the question, "How do I fire my co-founder?" is not the first one you should be asking yourself.

"He actually threatens the company's success if I ever try to "sneak a move" on him when in reality his contributions are near 0 for product development as well as S&M."

1) S&M? Sales and Marketing? At some point in the comments you mentioned that he's the financial guy in your team. I assume because you're writing this on hacker news you're the product guy. So I assume you're comparing his tasks with what you do day in day out.

I started a company with three other founders 6 years ago in Berlin. We had depressing times, but also great times. I left the company a year ago to join one of our VC and after 5 years I was the first to leave.

During those 5 years, I had moments were my co-founders didn't live up to my expectations. And the other way around with me. In retrospect I even think that two of us had a burn-out during the time (which results in exactly the behavior, described in the article you've mentioned) and because we had constantly re-invent our jobs.

And during the time were we re-invent our jobs, we're not that productive - or appear not productive - for some time. Give him that time, you'll need it at some point too.

2) You've started that company with him and you've raised funds. Congratulations, because at least your investors are thinking that you are a strong team - otherwise they wouldn't have invested in the first place.

From your ask and comments it sounds like your relation with your co-founder seams to be already hostile. For the sake of your company, you have to put aside feelings and put the interest of the company in front of everything. Which means your _ego_.

get some consultancy and figure out how to communicate on a professional level.

Someone mentioned to put up goals. I assume you have some, so try to reach them. If you don't need them then there is always the option to get another co-founder - maybe a more senior person - into your company.

Good luck.

To look at it the opposite way...

Could you quit and re-start? If you have employees, maybe they quit and follow you? Perhaps your investors would go with you too.

He likely has a clause in the employment agreement preventing him from competing in any way. Pretty standard

Well, yes. Except, with his leaving, and assuming all the important people, etc went with him, what would the remaining co-founder have left to be competing with?

Then what resources would the remaining co-founder have to go through the US court system?

Lastly, leaving and re-starting doesn't have to mean the exact same product.

I know what you are saying, but Im pretty sure it could be side stepped with some creative thinking.

>Then what resources would the remaining co-founder have to go through the US court system?

To bet on this would be to bet on the new company being a failure.

Because if it ever does become successful, plenty of lawyers would be willing to work on behalf of the ousted cofounder on contingency.

If the other employees respect him so much, they probably won't follow you if you quit.

I was in a similar situation exactly two months ago. As others have stated here, COMMUNICATE with your cofounder. Express what you are thinking and how you view the situation. My cofounder didn't. He immediately tried to push me away from the company and eventually removed me 'without cause'. We are in a legal battle right now. Even to this day I still don't know what or why he did what he did.

Communication is key in any relationship. If you can't manup and talk to them, you are part of the problem.

If after you two talk and there is no movement, then seek out other alternatives. But always try to keep an open line of communication. Sometimes the alternative is way too costly.

I'll reiterate what others have said here, keep notes and keep it all about the company. It isn't about how effective or overrated your co-founder is, it isn't about your relative "worth" to the company, it is all about making the company successful. Stay laser focused on that issue.

Don't talk to board about firing the co-founder, talk to the board about making the company successful. If that requires replacing the co-founder they are perfectly capable of figuring that out.

Lots of good advice. There are people who might say, "This is why you have think things through better in advance" but your situation is what it is. I'd also seriously consider whether his bad points could still be good for the company. (Zuckerberg clearly had an ego.) Also remember there is a cost for the divorce. If your contribution is 70/30, but you split the money evenly, the damage from the divorce may still be more than the benefit of finding a more equitable partner. (He may leave with all his equity, and perhaps some folks leave with him.)

All that said, here's my advice:

1) You have to be mentally prepared to walk, and go do something else, because there is a good chance you won't be able to work with this person again. You also should be prepared to rebuild the company from scratch.

2) If you have a good enough relationship with your co-founder (and one that's worth preserving) you have to go to them and say, "I think this isn't working. Can we figure an equitable way out of this?" You may have to be the one that leaves. You have to be prepared to let him have a large chunk of equity. If you skip this step, you will have an enemy for life. (You should only skip it if you already have an enemy for life)

3) After step 2, you should contact the board member that's closest to you and tell them, "I'm considering moving on. Can we talk?" They will be savvy to know that something is up, and they can help make the call for which of you two will stay.

4) No matter what the outcome, conduct yourself professionally at all times.

In the end, the code/passwords/money won't disappear. If your co-founder does something crazy when there are outside investors, his career is doomed. He may get angry, and you may get fired, but he won't so overtly steal.

Good luck and let us know how it goes.

(Sort of disclaimer, this may or may not be terrible advice from a legal perspective, IANAL)

So first off all, get someone to talk this through. Ideally someone who can give you an honest opinion, but any second opinion is better than none.

And second, after you decided to use the nuclear option, shelf it as a plan B. The nice thing is, almost everything is better than that. So you can plan with a lot more freedom, and you can play with a lot of risk. If it does not work out, then you just push the button and go nuclear. In your case, when you decided that there is only one of you left when the dust has settled, then you don't need to worry how you can work together in the future. One way to exploit this, you can be brutally honest. Perhaps you find a common basis again, or you go to your board.

Having gone through this, I would immediately read through your operating agreement, and any other operating documents. I went through same process, having numerous well documented discussions with cofounder.

If you wait to long, and your cofounder feels a threat, they may beat you to the punch.

After doing more than a million in revenue in our first 3 quarters and hiring a team of 15+, I was fired. A clause in our operating agreement allowed for this to happen, even with equal equity.

I encourage you to act quickly and very accurately in order to alleviate any risk of your partner taking action against you.

Good luck. I sincerely wish you the best. As messy as it gets, stay honest, stick to the points, and don't overreact in your defense. It will all work out as long as you diligently work to resolve the issue.

sorry to be late to the party but this is typically the kind of situation that requires you to "manage up" your board. DO NOT wait for the board meeting to address all this. Talk individually to your board members before the board meeting; present the solutions that you are envisioning and next steps. Ask for their input - that's how you're gonna make them feel better and confident that you're on top of the situation. If you go to the board meeting and present the situation then, there is absolutely no way this results in a healthy conversation. Everybody will look at you in a wtf-way and it's going to be very awkward. Prepare your board - so when you get there it's more of a follow up conversation.

You are trying to throw your cofounder under the bus without going directly to him first? Tell him whats on your mind. At least you owe him that. At one point you picked him to be your cofounder and now maybe things are not working out, it might be his fault, maybe he is having issues or doesn't know he is not collaborating as much, but you owe him at least a direct conversation man to man. He will appreciate this more than being thrown under the bus.

again, I don't know the full details of your situation but there is two sides to a story. Whatever you end up doing won't be pretty but talking is and discussing things hombre a hombre is the best approach.

funny. i was in this position many moons ago with 50/50 ownership between me and my partner.

it blows and there is never an easy way to dissolve such relationships. i had to threaten 'going nuclear', i.e. closing the business, to get him to leave.

Hustlers gonna hustle... welcome to business 101. Keep documentation. Set boundaries. Plan! If it's his prerogative to threaten the company's success, he is effectively diminishing his own returns. If mechanisms exist to oust him -effectively- in relation to what the company needs, those need to be implemented. This is why hiring decisions are important. Speak plainly. "Sneak a move" is unacceptable business language. Also, the marketing guy can't work with an unfinished product (just to make a point for his behalf).

Note to future startup founders: Make sure a vesting schedule is setup. (Pretty) please!

With a vesting schedule in place, parting with a co-founder (voluntarily and involuntarily) is much cleaner.

Wait until he leaves the office and then do a poo on his desk.

Talk to someone with experience who is both objective and tough, who can first tell you if you are in the wrong.

If you convince them of your case, seek their guidance in approaching your board and other influencers. You should also seek advice from the company's legal counsel, he is obligated to protect your confidentiality. Also quitting or firing are not the only two options here, but I'm sure your legal counsel should know about this type of stuff.

That sounds brutal. Do you have anyone that you both trust, like an older advisor, college professor, etc. that could maybe sit down with both of you and mediate?

Wow! What a shitty situation. If you can't buy him out you're going to have to get the Board involved so they can act collectively. Get you're shit together and "build your case" against them so it doesn't blow up in your face. Good luck!

I had to let go of my full-time assistant today. The holidays are over; do what you have to do.

livin' the dream, brah!

Hey - I've been in exactly this position last October, with a fairly messy end. We had to give up on the company.

More than happy to talk it through with you and let you know what worked well/didn't for us. Twitter: @MackMackTweet

Out of curiosity, are you both technical cofounders doing programming or are you both overlapping and trying to do sales and marketing? What is that situation like?

Here is one way you could structure this. Create goals for him to reach. If he repeatedly fails to reach them, then you can ask him for compromises such as giving up equity, etc. If you do it in the right way (that is a win-win, helping him to make more contribution), then it can be worked out. If he repeatedly fails, then you can involve your board and work out a solution that is best for the startup.

"Managing" the cofounder creates more work for everyone involved. As the OP is already trying to figure out a way to maximize work output by kicking the cofounder out, you run the risk of creating double work. In a startup, this is highly risky. And, it's business.

I agree except that since it's apparently been going on for a while, there's no time now to allow him to "repeatedly" fail. Ideally, this improvement plan would have already been attempted and the results of that (assuming there were repeated failures) could be included in the info provided to the Board.

At this point, he should just go directly to the Board and include his proposed improvement plan in his presentation. The co-founder has already indicated an unwillingness to change or leave; the Board should be able to force it.

How long till the guy (your co-founder) found out about this post?

Email me there are some things that people can't tell you publicly on how to deal with this type of situation.

> I already talked to him about lowering his share options (which he currently holds about 40%, (same as me, after seed round dilution))

if you're a co-founder and all you have is options and not a significant chunk of real equity, i'd say the problem is not that he isn't pulling his weight, but you (that's you, not him) got short-changed for the amount of work you are doing. and you are probably upset about that.

if he's a CFO/money type that's been charged with fund raising, money management, records, dealing with vendors and HR, etc, his compensation (no actual equity?) is probably correct, or even under-valued.

in which case, if you go to the board, you are going to be forced into a position of justifying why you want an increase in compensation for your work, instead of lowering his compensation for the work he's doing.

these are the kinds of things you learn so that your 2nd and 3rd time around are easier.

Just tell him, plain and square:

"When we started on this endeavour I was expecting you to behave/provide/take care of X and you are not doing those things that we agreed on (or the results you are delivering are WAY OFF the expectations that the company had on you). You cannot be part of this if you are not helping it getting better. I'm sorry but I don't want to continue with our business relationship."

Be honest (with him and with yourself), you DON'T WANT HIM and there's nothing wrong with it. The more transparent you are here, the better you'll come out of 'the negotiation'.

The negotiation: Wether you want it or not, he owns some part of the company, even if he had just been doing jack shit the fact that you invited him to your endeavour and you are still referring him as a co-founder means that he's ethically entitled to 'something'. Now, it's up to you to decide what is that 'something' that he deserves'; again, just be honest and talk about what would be fair for him to take.

Be honest! That's the only rule here and if he co-founded this thing with you (even though you knew he wasn't worth it, or didn't knew at all) chances are that you may be real-life pals; if that's the case, just solve it like pals, after all it's always better to have a friend than a dollar.

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