Hacker News Reader

Comment by Peanut | Hacker News Reader

Say I've put in $50,000 to the company as the founder and I own half of it (I hold 50% of the issued shares). The two other founders have 25% ownership each, all sweat equity since I'm the only one putting up cash.

What happens if one of them decides to leave? What is our stock valued at and how much would it cost to buy it back from them?

View on HN

It depends how much of your stock was in return for the money you put up, and how much in return for your work as a founder. If your work as a founder was worth zero, the valuation of the co (at the moment you invested) would be $100k, since you bought half of it for 50.

In most startups you don't have to buy people out if they leave (in the first year) because most startups have vesting with a one-year cliff. I.e. none of the founders get any of their earned stock till they've worked for a year.

We had a little chart that weighted the monetary contribution to 25% with sweat being worth 75%.

(Did a quick calculation, not sure if it's right... does this mean we're worth $400k??)

The reason why I'm asking is because I'm trying to convince the others that vesting is INDEED necessary since I'm worried that someone could just pull out and we'd lose all our startup funds in order to buy the stock back.

Our lawyers are apparently too busy to answer these questions because I've asked them and they haven't been any help at all. PG and others, if you can point me in the right direction that'd be great.

Reply on news.ycombinator.com