ASK HN: Leaving startup, should I give up most of my equity? | Hacker News Reader

ASK HN: Leaving startup, should I give up most of my equity?

1 pointconfusedfound3r10 comments

I've been at my startup about a year and a half. We just closed our seed round. I am leaving for 2 reasons. 1. I don't have the stamina our boundless self-confidence I used to and I frankly find the stress of this type of company too much for my currently health. 2. My co-founder and I aren't compatible partners. I respect them as a founder and believe the company will be success (which makes it super hard to leave) but our approaches are too different and I've struggled to do my work successfully.

I'm leaving at a shitty time, and I get that leaves the company in a not so great position and pissed off investors, but I also think my co-founder is better off with a killer employee at this point aways. I'm most valuable at 0-1 or as a consultant/advisor.

Investors are trying to convince me (through my co-founder) to give up a lot of Equity for various reasons -- future fundraising red flags being a major one, me leaving at a critical time right after a raise, also discrepancy between me and employees (?!)

Investors wanted to try to get me to give up >80% of my vested equity, co-founder negotiated for them to try to get me to give up 64%.

I am willing to make a consolation to help out the team and acknowledge I am putting them in a shitty situation but 64% of vested equity sounds like a lot.

Legally I'm entitled to all of it (unless they find a loophole they can use to screw me over.) But the last thing I want is a legal battle or bad blood with a team and company I really care about. I tried to be as impartial as possible when describing the situation, would love thoughts, advices or anyone's else's experiences.

Having been a startup founder on the other end of the equation you’re describing, my advice is to be generous. Equity should be earned, not given and your partner is still at the beginning of what is likely going to be at least a five year journey. The fact that you didn’t have a vesting schedule just speaks to inexperience.

Also, don’t discount the demotivating effect all the deadweight your equity can have on the team. The success of this startup is far from secure, and if there’s too much dead weight on the cap table, there’s a very real chance your ex partner decides it’s not worth it to keep fighting on this hill and walks away, making everyone’s equity, including yours, worthless.

My advice is to give away what they’re asking in order to maximize your chances of seeing a payoff one fine future day. And because I, personally, believe it’s probably the most fair thing to do.

How much would he have got with a typically four-year vesting schedule plan with a one-year cliff?

OP says he’s only worked there for 1.5 years, so with four year vesting he should only get 37.5% theoretically of the total equity he’s been allocated.

I'm just thinking this though with imaginary numbers, no opinion yet. So you raise 500k seed at 5M valuation, your equity is like 1-2M as one of 2 co-founders? If that's at all in the ballpark (and I made it up so who knows), it seems hard to justify. If you can get it and don't care about burned bridges, that's your right? A compromise could also just be being made whole on the time you put into it, like a fair salary for your experience (not your position) for the 1.5 years your were there, maybe with a request for an extra ~20% due to the circumstances.

Maybe I'm thinking the wrong way though, and you can't actually get the cash, we're just talking about staying invested in the company. If that's the case, keep it all, you're still exposed to the risk.

Anyway, after all that, if you can take a cash buyout, do it and be reasonable for what you put in. If you're stuck holding equity, keep it.

It’s vested. It’s yours. You are giving up future equity by leaving. The other founders continue to vest. If equity is needed for the reasons you state then I would expect equal contribution from the other founders. Don’t give away your hard work.

Did you get full salary during this years?

(I agree with the other comment, but this is also important to frame the discussion.)

I got a salary most of the time i was there and it wasn't terrible, I took like a 30% pay cut. And worked way more hours with very few holidays/days off.

Are they going to pay you for it?

no. I mean maybe if I leave them no other options - the investors seem REALLY pissed about the idea of me walking away with much equity at all. but don't want to put my co-founder in the situation of having to give up more equity to investors, especially at a discount, or have to spend runway.

Just tell the other investors they can buy you out, let you keep your equity, or some combination. To do otherwise seems to twist the definition of “equity.” If a founder suddenly told an investor they “couldn’t keep their equity” there’d be lawyers involved. As soon as you tell them you want cash I’m sure they’ll shut up real quick.

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