I am a Co-founder looking to leave startup before a raise, how to handle

The key question is if you're critical to the ramp and success of the new businesses.

If the answer is no, then message that to all investors (existing and new): We're pivoting, here's why the new direction is good for the company, and, to make sure we have the right leadership on board, you will transition out and your co-founder will bring in a new leader who is critical to the businesses.

If the answer is yes, think hard about what you want to do. If you love the team and want it to succeed, then gulp it, stay on, raise, help out for a year or so until the business is in motion, and then leave. DO NOT leave a month or quarter after the raise.

If you really don't want to be there, then be honest about that with your co-founder and investors and let them decide the best path. DO NOT lie or hide with investors. It's not only unethical, it could be illegal and they could sue you for misrepresentation.

Companies aside, money is aside, this is a testing time for your personal values as a leader. Decide what they are and stick to them.

Don't overthink it.

If you were diagnosed stage 4 brain cancer, you'd just leave now, and no one would be upset.

People are upset for a day, and then they move on (see OpenAI?). Leave now. If the investors think the team can succeed, they'll invest, if not they won't invest. Full stop. The future is your co-founder's problem.

You can also leave just after the raise, it's really as you wish. Investors know the drill. They know you could be hit by a bus 2 minutes after signing the check. Don't listen to whoever tells you what to do and what not to do. If people remain angry against you, well they just haven't understood the rules of the game.

Be free.

IMO this all hinges on if the company has traction with the new direction and pivot. If there is traction, the message to investors becomes clearer and there is motivation to invest regardless of you being around especially if there is a clear story. Both because that investor became unenthused and because you want to leave, I'm guessing there is no traction. In that case, depends on your cofounder's relationship with investors + how much cash is left in the bank. Assuming you raised on SAFE notes, they can't actually force the company to return capital and it's a bad look for them to try. IMO don't worry too much about messaging and just leave, the investors will get over it if traction comes.

However, I would definitely not recommend raising while you're there on paper and leaving right after. This is a pretty material piece of news to leave off of a fundraise, and best case tanks your reputation going forward with investors, at worst is fraudulent and leaves the company (and perhaps you) open to legal action.

Optics aside, before a raise is actually the best time to leave because it means that a replacement can be budgeted for in the round (I have a friend raising with the expectation of a new CTO at the moment, although that departure was planned). VCs in later rounds often prefer key roles to be occupied by hires they think are better suited to scaling a company even if the cofounders are willing to retain responsibility; a cofounder who questions their own suitability can achieve the same end with less friction. Provided they're convinced it reflects you doubting yourself rather than your co-founder or the suitability of the solution for the market, which may involves more honesty about how little you want to work on the problem rather than less. A team pursuing an adtech/defense/crypto pivot despite an original founder's visceral dislike of that industry is much less of a negative indication about its potential than a team pursuing it despite a founder's unexplained doubts (especially if you've been the lead on the commercial side).

If your dislike of the new model is not that visceral then staying on as a paper adviser avoids the external appearance of serious discord, and phasing out your involvement avoids an abrupt transition, but you can't be dishonest about no longer doing the day-to-day stuff with investors.

Looks like no one wants to stick their neck out on this one. It's very touchy.

My advice would be to be honest with your co-founders, and try to work out a strategy that you can accept.

If you're lucky enough to have good relationship with your seed investors, you might want to bring them into the discussion. The fact is if you're not interested in the New Direction you're not that much of an asset to the company. The problem is, if you're the face of the company, there will be pressure to stay on until the next round closes.

Above all, try to maintain good relationships with your ex-founders.

Good luck!

The last paragraph may be your best option, if you’ve truly exhausted the possibility of a shared vision that can keep you all engaged. I would drill into why your co-founder is against it, but I imagine it could be that they don’t feel they can do it all over again without you. If this is the case, maybe you could help them find another cofounder. Regardless, there’s no sense in misleading others, or wasting your time or theirs, since that karma will follow you. At least, that’s my opinion, FWIW. Good luck!

It's nice to stay friends with people but at the end of the day you're not a charity. If you aren't being paid and your heart isn't in it just make a plan to leave sooner rather than later.

It'll damage your reputation if you're not open with investors (ie raise then leave) which means you'd have to raise, stick it out another year or so then leave which is all going to cost you in time, money and motivation. But a year down the line they'll be looking to raise again so you'll just keep kicking the can down the road.

Things happen in business. If it's a good idea your co-founder should have no problem finding someone else. If they struggle though, that's not your problem and you don't need to wait for them to do so. Just discuss with them, give notice and ramp down over a month or so as a courtesy.

Your co-founder ought to raise after finding a replacement, with a dedicated team instead of one where an exec wants to leave. Raising now will reflect badly on all of you and reduce your odds of success anyway if your heart isn't in it.

Most startups fail, so I'd prioritise happiness and future investor relations over those with a co-founder tbh. As long as you act professionally (ie give notice you're leaving) that's all anyone can reasonably ask.

This is like pulling a plaster off. Better to be quick and get it over with instead of dragging it out.

I thorny issue for sure. One suggestion is update the current investors that you will be leaving and you will create a succession plan that includes finding a new CTO (co-founder) to take on your role. For new investors, tell them clearly what that plan is, that you believe in the firm and you are willing to provide some of your shares to the new CTO. Accept that you will stay on until you and your co-founder can find this person. Be open to paying a headhunter. speed is important. Hope this helps.

You have to leave.

There’s no choice, anything else is misleading investors.

Do it quick, people will soon forget and move on and it will be no big deal.

Your heart is in the right place and you are thinking about all of this carefully. That is a good thing. But ultimately, don't compromise what you want and where you want to be.

So the best thing to do is to be honest with yourself and your cofounder/team. This means you need to let the cofounder and team know that it is time for you to move on. If you stay for them so that somehow a fundraise can happen, you are setting them up for failure because the later you leave, the more damage you will do.

It is one of those wounds where you have to rip the band aid off. Take short term pain and move on. Good luck.

It's possible new investors can be enthusiastic, rather than concerned, with the change. A startup without a founder who's not aligned with the new strategy is stronger than one who has someone around "just because" (which can imply an inability to make decisions).

danbmil99's suggestion of touching base with the existing investors is a good one. They could actually help explain this to new prospects.

People who've already met you may not be as enthusiastic about this change as completely new investors, to whom you'll merely be an artifact history, just like the previous strategy.

Focus on your co-founder only. See what you can do so he can successfully transition to the new pivot.

See if anyone in the company or market would be willing to step in for your role.

Discuss the possibility of you raising a new round, staying six months, and leaving.

Also evaluate the legal situation when you leave.

Despite the fact you've invested your time and money in the company, it still haven't found PMF or anything, so try to give equity away, it will make it easier for you to jump ship and move ahead.

You don't explain how you and the co-founder decided on the pivot. It appears the pivot wasn't your idea. And at least one investor isn't supporting the pivot either.

Reading between the lines: your co-founder is reliant upon you and your network and skills to raise funds. But if the pivot was at his urging, then the only honorable thing to do is what you propose in the last paragraph.

One question is that is there any financial upside for you if you stay through the raise?

If there isn’t then you can leave anytime. No one will bother you.

I do a fair bit of investing and advising (both for startups and venture funds). If you are the founding CEO and you are looking to leave, the most likely outcome for a company that's early, and without any sort of product market fit, is the company will die.

If you don't tell investors you want out, raise money, and leave shortly thereafter, you will burn all of those relationships and damage your reputation - it's a small world. It's also very disingenuous. Investors are betting on a committed team, that will go through hell and high-water to try to make this venture work - you already know you aren't that committed. And no one can be more committed than the CEO.

If you can't get behind the pivot, the only other thing you can do is work with existing investors (at the seed stage this isn't really an option) or find a founder with previous exit, an EIR looking to step into a company, our an early employee / non CEO cofounder who exited and wants to do it again - and see if they'd be interested in the CEO role - It's a find your own replacement scenario.

As far as your equity goes - you'll get diluted a bunch, but that's okay. It's going to be hard to hear, but no real investors will allow a non-participating, former founder, of a company that doesn't have a product or any traction (in your case your starting over with a pivot) to keep 10%. That's just too much of the cap table for not enough of a business / individual contribution. It's sucks, but if you stuck around and made it to a priced round, all of your equity would get clawed back and be subject to vesting again anyway (most likely). It's just the way it goes. You deserve something for your troubles and work, but it's not going to be 10%, not going to be anywhere close.

Good luck.