Ask HN: My co-founder refuses to sign a vesting agreement | Hacker News Reader

Ask HN: My co-founder refuses to sign a vesting agreement

6 pointsask_startup6 comments

I and two other co founders recently started a tech company. We received funding from two investors at about a total of 150K. I wanted to enter a four year vesting agreement for our shares in case one of us decides to leave the company.

One of my co founders refuses to sign an agreement like this. This makes me worry that he is not committed. What would be my options if, for example, he decides to leave in the next 6 months? I am based in San Francisco by the way. Are there any legal methods for me to force him to sign a vesting agreement?

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Is the company properly formed yet? Did you use an attorney to do it? Essentially there is an entire process to creating the shares and issuing them. If he wants to join and have his ownership his option is to sign the vesting agreement or not join. Not much other than that. You will have to deal with the potential that he/she says no thanks then and just jumps ship. If that happens what do they know you don't, is it a major problem? Can they hold the company hostage to accessing something they built before the company was created and the technology transfer was completed?

This is best likely answered by an attorney that should be helping you with some of this, if not find one cause there are a ton of steps to properly form the company, transfer the IP from individuals and assign the shares etc.

In the end, if one founder has a vesting agreement all should. And just in general, they are the right thing to do. Make sure this person also understands liquidation rules and vesting acceleration etc. I found someone I mentored last year didn't understand how vesting acceleration worked or when it would happen so they felt the vesting agreement was an investors way to shaft founders out of their total equity. A little time spent explaining the reasoning and benefits might help.

Consider from the cofounder's perspective:

Say he does sign the vesting agreement. Things are going well, but you've taken on more investment, and those investors insist you drop the cofounder hours before his vesting begins, even though he's been a good contributor.

It's a cheap way to enhance their equity position, and now that the company's survived to infancy, the cofounder's large looming equity stake is a liability.

This doesn't always happen, but it does happen sometimes.

Consider a shotgun clause instead of, or in addition to, vesting (strictly for founders).

Also consider voting structures that disproportionately favor founders, so that he can't get voted off the island even if he's not financially vested. I don't know your situation exactly but this sounds like a struggle of control rather than wealth.

What is the reasoning that he gives? I was quite averse to them at first.

Is he looking for a "passive income" gig? He can rest and vest in 4 years.

Is he worried that you can fire him in 3.9 years? Make sure the contract covers firing that all parties can agree on.

Is he worried everyone else will leave at 4 years? 4 years is a good "reassessment" period. If some people want to continue and some don't, they can sell their shares to the others.

Is he worried he can't commit? Vesting is perfect for that! Get paid scaled accordingly with commitment. No social guilt if another opportunity comes up or if the startup isn't making enough to feed the kids. Similarly, you don't have to be so worried about his commitment if he signs.

Exactly.

Understanding WHY he doesn't want to sign gives the direction to solve it. I've had clients being resistent on them as well, but addressing the why helped resolve. Usually there is a fear behind it - getting screwed, getting fired, fear of losing control of their baby etc.

> Are there any legal methods for me to force him to sign a vesting agreement?

This seems like a red flag for any relationship. If your attitude to your cf upon disagreement is to find a way to force him, it doesn't sound like a partnership. more like someone you don't want to work with. if that's the case, maybe better to face it and find a way to part ways.

Send him some blog posts about why vesting for founders is fair - a lot of newbs don’t understand this. If he still refuses, figure out a way to drop him ASAP.

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