Ask HN: Co-founder split, company not yet incorporated

6 points by throwawayuname 10 years ago | 6 comments

Me and 3 others were working on a hardware/software idea in the music domain. One of the co-founders decided to split because of the following reasons :

1. Did not feel that equity should be split equally. 2. His personal vision did not align with what was good for the company(he said this himself). 3. He had issues with me "calling shots". We've known each other for more than a decade. This has nothing to do with the decisions that were taken, but more of a first among equals conundrum.

We were in the middle of incorporating a Pvt Ltd. So I am not legally protected. The other 2 co-founders have decided to move on. They are finding this financially taxing and want to pursue higher studies. Everyone except me is fresh out of college, I have one years experience (at a startup where we crowdfunded open source hardware).

My Contrib Software (API, smartwatch app, etc.) as well as building the website (static). Inputs on the hardware design from my end, but no commits to the repo. Outreach :Setting up meetings with investors, bringing technical mentors onboard

I have spent roughly 50% of total expense.

The co-founder who has decided to split wants to work on the idea by himself and wants the other 3 of us out. He has said he is willing to compensate us for our expenses, and pay some remuneration for the effort put in.

1. How do I get a clean break from this ? This is more in an emotional context than anything else. I've documented and shared quite a few ideas about this particular project, and I feel quite close to it. 2. How should I calculate my remuneration after expenses ? Should this be calculated based on my salary at previous employer or something similar ? 3. Assuming I continue to work on this idea alone or with some of the other co-founders, what are the legal hassles involved ? Who gets to own what ? Is it even worth the effort, considering the fact that investors are wary about such a history.

michaelpinto 10 years ago |

Firstly you should talk to a lawyer, and avoid getting legal advice online.

A good lawyer (and not all lawyers are good) will know the right questions to ask you. A good lawyer might also suggest a strategy that's in your best interests. Although beware of lawyers who look to sue right away and rack up hours. Make sure the lawyers also knows something about tech.

Although there is one thing lawyers have told me time and time again: You can not copyright an idea. Also I'll add that while a good idea is essential to a startup, it's all about execution, execution and execution.

Last thoughts: Write down every lesson from this and move on. I would say one key lesson is that before any money is spent in a business it must be incorporated (doesn't matter if it's a startup or not).

throwawayuname 10 years ago | |

Thanks !I'll definitely talk to a lawyer. Like the idea of writing it down too. Hopefully once things settle down.

Axsuul 10 years ago |

1. Sign an agreement and designate one party the right to work on the idea while others aren't allowed to anymore.

2. Not at all, you shouldn't treat this as an experience working for an employer. You took the risk and the risk is not getting paid for what you're worth.

3. If the company ever gets big, you can very well bet that ghosts will come out of the shadows and turn your world into a living nightmare. Just look at every successful company that didn't end things on a clean note (Snapchat, Facebook).

My suggestion is to move on and accept your losses. Everyone is too emotionally invested and in the end, only one party should have the right to continue working on the idea to avoid any confrontations. Anyone who doesn't have the right on the idea anymore can be fairly compensated but agree to a non-compete. So what amount of compensation is fair you might say? The easiest way is to value the company at a certain amount and then multiply that by your equity percentage. And good luck! I've seen my fair share of co-founder disputes and problems. They're nasty to deal with but the benefit to experiencing it is learning to choose your co-founders more wisely in the future. Simply being friends who just happen to be in the right place at the right time doesn't cut it in the long run.

throwawayuname 10 years ago | |

The co founder who split is of the opinion that everyone can continue to work on the idea regardless. But I think that's mostly to avoid him having to pay for our efforts/pay us to leave. I had doubts about this, but now I am sure. It's simply not an option to have 2 companies working on the same thing. Thanks ! Totally agree about the friends thing. I am a little wiser now.

1arity 10 years ago |

First the business : If you really believe in what you are doing, you won't let anything stop you. Just ignore it.

Now the emotions : The way you get a clean break from this emotionally is really on you to develop an emotional strategy to deal with that.

One way to approach this is to revise what you make this circumstance mean. The facts are one thing, they are the __what happened__, and what you make them mean, in other words ( literally so ) your narrative about them, are another thing.

Write down the what happened ( minus your interpretation and attribution of blame and feelings and judgements about it and people ).

And then write down separately your interpretation of what happened ( here is where you unedited express all the ways you feel about this, all the blame you attribute to others, all the judgements you have, in short, what you make what happened mean ).

So now in front of you you have your current narrative. If this narrative displeases you, it behooves you to revise it. Remember, you can choose what you make it mean. You constructed this interpretation in the first place, and if the interpretation doesn't work for you, write yourself a new one. A tip when writing your new narrative is : take responsibility for as much as possible, and blame others as little as possible, as every time you blame someone else you are giving away your feeling of power and agency to them ( by your own choice, mind ) and calling toward yourself a little more frustration that you would otherwise.

Finally, an inspiring mask of a possible destination : Perhaps, whatever path you choose, you can post your journey or results here so others may benefit. The benefit to yourself in getting out of this cleanly is one element, and this story of what you did to achieve that can inspire others as well.

throwawayuname 10 years ago | |

I thought of it, but ignoring it is not an option. Assuming both companies are unequally successful, spiteful actions are very likely in the future. I love your idea about the narrative. Facts vs what-i-feel-about-it should do wonders for me right now. A blog post is definitely coming once the dust settles down on this one. Thanks !