My co-founder has written all of the code, I have been responsible for leading growth, marketing, content creation, and have been central to product development/design/mockups etc (while not writing code). We signed a founders agreement, we each have a seat on the board, and he holds a majority of shares. None of our shares have vested - my first vesting date is in 6 months when ¼ of my shares vest.
My co-founder has decided he wants to pivot to what I view as an entirely new business that has little to do with the problem or mission we set off to address. We set out to build a product that solves a problem, and he has decided to start a staffing agency. He is quite “failure-averse”, and while I can understand he believes a staffing agency may have a higher likelihood of success, it is uninteresting to me and I don’t believe it is a good use of my time.
As we have only been trying this for a short period, I am still interested in pursuing our initial idea and seeing if I can make it work.
My co-founder has said he would be fine with me pursuing the initial idea as an entirely separate venture. The code is not proprietary in nature, it supports a very simple workflow and presents basic data. As I am not technical enough to re-create the product myself, it would be time/resource intensive to build something similar from scratch. When I asked my co-founder for rights to use the existing code in my new venture, he refused, citing concerns over sharing IP.
I have dedicated myself to this mission for the past 6 months (which I recognize is relatively short), and don’t love the idea of walking away with nothing to show for my time - but is that my only option?
Really appreciate any insights from anyone who has been through something like this or has any thoughts. Will answer any questions that might come up. Thank you very much for reading.
It's hard to tell you what I think without knowing more detail, but based on what you wrote, and assuming you both signed customary IP assignments and RSPAs at incorporation, the simplest way to move on would be for the other founder to resign as an employee and director.
That would enable the company to repurchase his shares and you would own 100% of the company and the IP that belongs to the company.
Since he wants to start what is essentially a different company, he shouldn't have a problem basically walking away and leaving you with the old company.
You can sweeten the deal a little bit by allowing him to retain some small portion of his equity (like 1% to 5%) in exchange for his resignation.
There may be more details here and I'm going only off what you wrote. I'd recommend working with a lawyer if you're going to try to salvage the old company with your co-founder moving on to other things.
At the same time ... if you've been at this for 6 months already and you don't have any meaningful traction, you should strongly re-evaluate whether this is going to be a viable market for you.
>he holds a majority of shares
>My co-founder has decided he wants to pivot
>My co-founder has said he would be fine with me pursuing the initial idea
>asked my co-founder for rights to use the existing code in my new venture, he refused
Are you sure you are a co-founder? It sounds like you are an employee
Whether that was anyone's intent or not, he founded a company and sold you an opportunity to profit from its success in exchange for the services you could contribute. That company of his is now evolving, maybe because he's risk-averse or maybe because he has good instincts.
If you can't get behind the new vision and don't think the company will succeed, you're working for nothing and should write it off as a learning experience and move on, thankful that you only bet six months on it.
You're the 4,454,313rd startup employee to experience this and if you keep working for equity like you did here, you'll probably experience it several more times.
If it’s still a good problem, then maybe your cofounder is right and the solution you were working on won’t solve it. If he’s the tech guy and you’re the business guy, I would assume you’ve done more of the talking to customers, but maybe there’s a tech challenge he sees. Worth investigating.
Strongly suggest against getting wrapped up in cofounder conflicts - that definitely doesn’t solve a problem.
If this is THE problem you want to work on, and you think your solution was headed in the right direction, modern no-code tools like Bubble make developing an MVP doable for a nontechnical founder. Depending on exactly what you’re building, something even simpler like a newsletter or some Google Forms integrations can do it.
>> [...]and don’t love the idea of walking away with nothing to show for my time
That's how it goes running a business. Most of the time you will end in failure and have and you need to learn to be ok with that. Hopefully you've learnt something at least (in this case possibly about having equal control of the company next time) and that will help in the next venture.
Now, start looking for a technical co-founder who shares your idea and vision. YCombinator's upcoming StartupSchool seems to have a dedicated focus on finding and matching co-founders. Try that.
If you are in the Valley, start pitching investors; if not, look for an Accelerator. :-)
- Code without the person who wrote it is mostly going to be useless. You think you can get traction quickly using his code but that's not how it works. You have a sales/marketing/product market fit problem clearly since for 6+ months, you have no meaningful users as you said. So don't worry about keeping the code.
- Seems like your co-founder has decided to pivot and wants to re-use some/all of the code for the new thing. Clearly, you don't want any part of it and you are better off starting fresh even if that means you have to get someone to do the coding again.
I think it is good that he wants to let you pursue the same idea on your own but you need legal help to ensure that you both sing contracts that allow him to do what he wants and allow you do what you want and no possible conflicts happen in the future. One way is to ensure that there is no IP sharing.
Code is mostly useless and can always be re-written. So focus on what you can do on your own to pursue the same idea since you 2 failed at it together. I would evaluate that and go from there.
- If a founder sets up a company with other people, they are both a founder and a co-founder [source](https://www.startups.com/library/expert-advice/startup-found...). It is inaccurate to say that OP is not a co-founder but rather an employee because they have less equity. It both violates the commonly accepted definition of co-founder AND if true would mean that there's no such thing as a co-founder unless equity were perfectly divided. OP is a co-founder. What it means to be an employee has its own specific meaning, too.
- In the case of startups, ownership is best determined by setting percentage ownership between founders along with a vesting schedule (i.e. when each founder will receive those shares). In OP's case, their co-founder was provided more equity.
- Control of a company, either direct or indirect, is determined by voting shares. These are not always the same as shares, but in the early stages generally are. Unless OP has the same number of voting share by way of dividing board seats equally, we can assume that all share in this company are voting shares. Therefore, co-founder likely has a controlling interest.
Therefore, OP is a co-founder. They do have ownership of the company. They likely do not have control of the company. It would be very helpful to keep this in mind when offering advice on how to approach the situation.
I'm sure there are quite a few gaps in what I've written above, I appreciate any feedback or input!
curious what your founder agreement says? Does it have a clause on dispute resolution? It's shitty that your founder won't let you walk away with the code if they are doing something totally unrelated imo, and this is coming from an engineer.
Six programmer months of code is a lot of work, but also in the bigger view it is not that much for someone else to redo, especially if you've a clear model to work from. Perhaps you can secure rights to operate the service while someone else writes a new code line.
The other question is how does your founder see replacing you in his pivoted venture? Maybe your participation is worth more to him than he realizes.
Let's say you own 40% of shares, he owns 60%. The code you want was developed by a single person (him) in 6 months. If you can agree that a reasonable developer salary would be $120K/year or $10k/mo, your software has a value of $60K, with $24K belonging to you already, and $36K belonging to him. So you could offer to pay him $36K for it. If you think you can hire someone to reproduce the software for less, then that would be a better alternative for you. If you can get quotes to produce the software for less, even better: you can use those to negotiate for a lower value of the software.
At the same time, if he is planning to use anything you have built together, such as customer lists, etc., you'll have to agree on a value for them and he would have to pay you 40% for those.
Does your Founders' Agreement cover any of this? If it does, it could make things a lot easier.
One of the best pieces of advice I ever received was from a lawyer who drew up a 50-50 corp agreement for me and a business partner: while you are still on good terms with each other (now!), put in writing how you will dissolve your company and part ways; because at that time, you may not be on such good terms.
If this is a actually a good idea, then I'd try to find a new technical co-founder.
If you really think the IP is valuable (which I doubt considering you don't have any users), I'd focus on why your co-founder won't sell you the code for a % of the company. What are his concerns over sharing IP?
It’s reasonable for you to move on.
And it is reasonable for your cofounder too.
My co-founder has written all of the code, I have been responsible for leading growth, marketing, content creation, and have been central to product development/design/mockups etc.
If shares were vested, they would only be vested in sunk costs.
If they viewed you as a true co-founder and partner they would have phrased it as an ask. "Hey, I've been pondering pivoting us to this, what do you think, should we consider it?".
In the end it's so much more than the idea, it's about the team. If your co-founder doesn't view you in that way then that's not really a problem you can solve.
You had a free shot at your idea. It failed. Better luck next time.
If you really think you’ll make it work, make the guy an offer for the company, and continue.
you are now in the situation of whatever you can bargain for, you can get, whatever you can't bargain for, you don't get. Dealing with what you call a highly risk adverse person makes it hard to negotiate, because the most risk adverse action is bury the code and say goodbye (what they have proposed). It is likely you can change the action only by suggesting a less risky course of action.
I have been in a similar situation before, and tried to use Greed when only Fear was going to work. Many situations are like this. I now know more about sales now. I didn't get the source code (which I wrote and was useless to them) and it was probably for the best. If I didn't have the motivation to rewrite, i didn't have the motivation to start a company. Likewise, if you don't have the motivation to get new, fresh code written, you don't succeed either. There are many many ways to get code made, if you believe in this, find one. it will be the first of many trials.