Ask HN: How to get rid of a co-founder

[naivedeveloper]

Almost a year ago a friend and I started working on a company idea together. We decided to bootstrap the mvp, get it launched, and then see where to take it from there (probably continuing to bootstrap until it seemed viable as a real business).

I, being the programmer, of course had to build it, with my partner being the domain expert (and non-technical) would handle all business and marketing stuff. The understanding was that since we were building this on the side of our day jobs we would just work on it in each of our free times.

At first it went really well, my partner was engaged and got a lot done. After a few months, though, his enthusiasm fizzled. I myself took about a month and a half off from the project to focus on a talk I was giving, so I wasn't judging him harshly, but since that time he hasn't done very much. Some of the tasks we talked about him doing back in March still haven't been done, to my knowledge, at all. And where we used to talk about our company all of the time (again, we have been friends prior to this), we now never talk about it unless I bring it up.

I've tried a couple of times to give him outs; asking him when he'll have time to work on the project and (hoping he would say that he doesn't have time in the immediate future) wanting to bring up that maybe it's not a good time for him... but every time I've alluded to this he says that he's going to work on it tomorrow, or the day after that, but he never does.

At this point I don't know what to do. I feel like he still likes the idea of our company but doesn't want to put any work into it. I absolutely do not want to launch this product if I've done all of the work but do not have 100% equity. We've missed several soft deadlines because of this, and I find myself even slowing down because there's little for me left to do. I really want to go into crunch mode and finish the mvp off before it gets to a year, but the situation with my co-founder is hanging over my head.

[KirinDave]

You need to be honest with your project partner and stop being so passive aggressive. Say, "You're not pulling your weight, you haven't done these things that you're supposed to do, and I've been continuing to work on the project. You can decide now: are you going to work on this or are we going to dissolve the partnership."

This is not being an asshole. This is being real and drawing a boundary beyond which you can no longer be taken advantage of.

The optimum result is they agree to leave the partnership. But either you need to eject this person from a project you want to continue to devote time to, or you need to move on to the next project. Your current situation is untenable.

[tptacek]

What's your vesting plan? Please say you have one: if not, you can't safely pivot without your soon-to-be-former partner, because everything you do going forward will be tainted by the partnership.

I have been in legal drama over these issues before. It is not fun.

If your partnership isn't well documented, you should consider walking away from the work, including all the code.

People on HN have talked about how vesting is unfair. But this situation is the problem it protects you from. If a partner refuses sane standard vesting, run, don't walk.

[siegel]

The only concern here is that they likely have a partnership, legally, and each partner owes a fiduciary duty to the other. He can walk, for sure, but my guess is the co-founder will claim he was frozen out and, if OP is successful, will sue for breach of fiduciary duty (and other things).

[tptacek]

My bigger concern would be that he pivots, takes the code with on the pivot, finds success, and 6 years later when he's about to sell his cofounder returns claiming 50% of the proceeds are owed to him.

[siegel]

We're basically talking about the same thing. But, yes, you are 100% correct about the likely danger in trying to use the code in the future. That's why I think the cleanest thing to do (if at all possible), if he wants to make something of this, is to offer the guy a small equity stake in whatever entity is created to do this work and get a release.

I've been involved with lawsuits over the exact type of situation. Maybe the OP could win, but it will be a costly process...

[naivedeveloper]

Thanks for your (and everyone else who has commented here) advise. I think the approach I am going to take is to see if he's willing to sign an agreement to dissolve our partnership, giving me 100% of the company. If he really has just grown tired of it, as I suspect, I think he might do this. If he's not willing I'm going to try some type of buyout, payable once revenues can pay for it. Then I'll offer a small stake as a last resort. If he's unwilling to accept that then I guess I'll just have to quit the company. I really don't want to do that, I've spent so much time on this :( . But I'm also not willing to keep working on it without my fair share of the company; I'd rather start from scratch again on a different idea.

[jakobegger]

It sounds like you've already made up your mind -- now it's time to take action. Stop "alluding" to things. Don't expect people to read your thoughts.

Tell your cofounder that you'd prefer to work on the idea on your own, and if he agrees, ask him to sign an agreement.

If he's your friend, and if he doesn't care much about the project anyway, that shouldn't be an issue.

If your friend doesn't want to agree to that, one thing you could offer is a mutual agreement to license all existing ideas and code to eachother, allowing each one of you to pursue the project on their own with new partners.

[naivedeveloper]

Thanks for your reply. I haven't made up my mind. I'd much prefer to pursue this with someone else rather than on my own. But I can't make him be motivated. Aside from asking him what he's gotten done, what can I do? If anyone has suggestions here I'd be very grateful.

All of your other advise is excellent. I think this is exactly what I should do, if it comes to that.

[cookiecaper]

I suggest you work to understand his frame of mind and act accordingly. If he wants to make valuable contributions that you believe are needed but just needs his life to be reshuffled to make it happen, you should consider how you can help accommodate those changes.

If he truly is not interested anymore, guide your conversations in that direction without stating your intention to exclude him overtly. You want him to talk until he comes to his own realization that he shouldn't be involved anymore. That's the only way this will occur without his feeling that he was violently pushed out. You have to make this easy, and you have to make it feel like he made the choice, or at least made his own bed, not that you're cutting him off unfairly.

[nandorsky]

Is your company generating revenue? Is it worth anything? Unless you're talking about equity split in a company that is worth millions engaging with a lawyer is a waste of money.

I wouldn't even waste time trying to re-engage him. If it's this early in the game and he is already checked out and it will only get worse. Sure, he may re-engage for a little but he'll go back to his ways in a matter of time.

You have the upper hand as the technical co-founder. If you leave he has nothing. Tell him you're out and go start another company. Ideas are a dime a dozen, the value is in the execution.

[bmh_ca]

> Unless you're talking about equity split in a company that is worth millions engaging with a lawyer is a waste of money.

I disagree. The company doesn't need to be worth money now for engaging with a mediator or getting legal advice to have value.

For example, a proper Full and Final Release, mutually agreed upon, can not just save you a fortune in future litigation, it can free you to seek investment in a future venture without the fear or need to disclose past stakeholders, and give peace of mind to work knowing that it won't be derailed by skeletons in the closet.

The spectre of litigation can at-best cloud your optimism, at worst undermine your prospects; it can be a weight upon your every move.

As time passes, the natural human bias is to over-value their past contributions, and undervalue the past contributions of others. The longer the time passes, the greater the bias. If you succeed, the more likely they are to demand what they feel they deserve, from their perspective.

They might be the type of personality to let it go; but if they are litigious, it's better to know it before there's real money on the table. If they're not litigious, they won't mind signing a release or making a deal.

Every situation is different, but getting legal advice isn't just about the money at current value, it's about the price of potential litigation, your peace of mind and ability to produce in the future, and the cost of the spectre.

[naivedeveloper]

Thanks, you and others have said similar things. I think how I should pursue this now is to:

1. Give him a little time to turn things around. Be perfectly clear about the expectations and keep asking him about his progress.

2. If he still doesn't seem motivated, try to convince him that it's better if we separate. Draw up a letter of separation and get him to sign it.

3. If he refuses to do that, try a buyout as dsr_ suggested.

4. Worst case, offer some small stake.

I'm really hopeful (1) happens but this gives me a plan to try and resolve this quickly if it doesn't. Grateful for everyone's advise here!

[naivedeveloper]

No, we're not generating revenue. This is actually why I want to resolve this issue now. If we launch with him having not really done much of anything in the last 6 months and we do have revenue he's going to be entitled to it.

[scandox]

When I was about 27 and had my own business I sat next to a billionaire at some charity dinner (in Ireland this can happen fairly easily - not because of the number of billionaires - which is low - but because of the tiny social scene).

Anyway he asked me about my business. Then he said: "Do you have a business partner?".

I said "Yes I do".

He said "Get rid of them".

[gtf21]

What is this anecdote supposed to tell the OP? I can only assume that the intent is to imply a link between this man's advice and his wealth, but data isn't the plural of anecdote.

[scandox]

Well I'm just relaying the advice of a somewhat successful man, which I didn't take. But to expand I think what he meant was if you're confident that you can do it and you mean to do it, then don't halve the responsibility. Take it all.

[gtf21]

I really don't agree. I'm pretty confident in my ability to do what I do, but having a cofounder has given me a useful critic (amongst other things). Having gone through this stuff, I would have wanted to have done it on my own. *

> just relaying the advice of a somewhat successful man

This is a fallacy. Unless it's backed up by really good reasoning, I wouldn't take someone's advice seriously _simply because_ s/he has been successful at _something_. There are too many factors at play and way too much context to make it meaningful unless it obviously translates to the situation at hand. I can't think of a plausible reason why having a business partner is, 100% of the time, a bad thing (which is what is suggested in this anecdote).

* caveats: "having a cofounder" is obviously not a panacea, and may not be a good thing if you don't have the right relationship (which seems fairly clear from the OP)

[scandox]

I'm not arguing. I'm "relaying". He's more successful than I am. He gave me the advice. Looking back I regret not taking it for a variety of reasons. Everybody's going to be different.

[insulanian]

Agreed​ - business partner usually implies compromises.

[gtf21]

Yeah and compromises/disagreements sometimes mean the difference between barking up the wrong tree and seeing the flaws in your own argument.

[mod]

> I absolutely do not want to launch this product if I've done all of the work but do not have 100% equity.

You haven't done all of the work.

Given that the technical work is not complete, I'm not sure it's really a big deal that the non-technical work is not complete. You haven't given us an idea of how much non-technical work remains.

Get the MVP ready, and then if your partner is not ready, ask him for a timeline or something. Let him know your concerns.

Quit thinking about "getting rid of him," it's very premature.

[naivedeveloper]

I don't know how much non-technical work remains. If I knew that, then that would mean that I'm in charge of both technical and non-technical work, with him acting as an employee and not a co-founder. That I can't count on him to "own" his area within the company is precisely the problem.

[weego]

That's not what knowing implies. Why don't you know? You claim to be committed to your idea yet only know half of what is going on and thus only half of what it is going to take to launch?

If you're so keen to get rid of him why do you not already know what he's not doing and needs to do?

How will getting rid of him help you if even you don't know what you need to do to make this work?

There's 2 of you, you don't have and can't afford to have silos yet.

Naive developer indeed

[naivedeveloper]

I know some of what he's not doing, because it's things we've been talking about for several months. But of course I don't know every single non-technical requirement. Isn't the point of having a partner to split up the work? If I did all the research into what legal requirements we have within our field, etc. then I'd be doing all of the work, instead of just most of it.

[skraelingjar]

I can empathize, OP. I started a company with a good friend almost a year ago. I run tech, he does business. A few months in, and I moved 1000 miles away and have been building a client base on my end, while he has done nothing to help us grow in his location. However he has done his part outside of that. We had a frank discussion and decided while we're happy to work together, this isn't something he's interested in pursuing. I paid him back everything he's invested in the business. We agreed that instead of splitting it 50/50 I would pay him a flat fee to continue what he's doing while I take the rest. Keep in mind we're doing less than $20k/yr in sales. I considered removing him from the legal structure but it's not worth my time.

Like with any relationship, you need to talk about it with your friend. Not what you've done by "alluding to it", but by being straightforward. "You don't seem interested in our company. I don't want to continue like this. Is it time for you to leave the company?" Yes it may be a difficult discussion but can it really be worse than what you're putting yourself through right now?

[naivedeveloper]

Thank you, glad to hear others have been here before. That sounds like exactly what I should do, I even like the way that you phrased it.

In your situation did you write up a partner termination agreement?

[skraelingjar]

No, I couldn't be bothered. It was essentially a handshake deal. Sure, I'm not protected legally, but there's no way this company is going to make a huge amount of money. We've been friends for almost 10 years, I doubt he would do anything to jeopardize the business.

We have to refresh our paperwork with the state this September and I'll either remove him then or dissolve that business and incorporate solo in the state I have moved to.

[redm]

Co-founding a startup (or with multiple partners) is a very personal thing. People get emotional about it and there's almost always someone working harder, which causes discontent to grow over time. Eventually, you have to split or the party who provided more substance feels cheated. To make things worse, the value is often very subjective.

There's no easy way to handle this. It sounds like you are going to move on without him so just tell him that, offer him a small piece of the business and take the rest. If he doesn't want to cooperate, you can always just start a new entity and continue on your own.

Co-founder choice is the hardest and most impactful choice a startup can have. At a minimum, I try to craft an MOU that states what each person's responsibilities are, and that they contribute meaningfully over a 3 year vesting period. That ensures if either partner drops out, they transfer the equity to the partner continuing forward. That said, because of aforementioned reasons, even that is a mine-field.

[cocktailpeanuts]

It doesn't sound like you actually have a "company". Or do you?

If you didn't incorporate yet, then you owe each other nothing. Maybe your friendship will end, but that's still separate from an actual business.

Then again, I don't know if you yourself are that committed either. A month and a half off from work to prepare a speech means you're not fully committed. If this was because he's not doing much work either and you got demotivated because of that, then this entire relationship is a cancer and you should break up as soon as possible because it sounds like you will be more motivated without him.

[dragonwriter]

> It doesn't sound like you actually have a "company". Or do you?

> If you didn't incorporate yet, then you owe each other nothing.

Anything that does business is a company (incorporation is needed to form a corporation, which is a specific kind of company; the term is often also used for forming a LLC, another particular kind of company); if two people have joined together with the intent of making a for-profit enterprise but with no formal agreement, it is a partnership.

See, e.g., the first couple paragraphs of this piece, even though the whole piece is focussed on unincorporated nonprofit associations: http://www.nolo.com/legal-encyclopedia/what-an-unincorporate...

And, even when informally formed, partnerships do have consequences while they exist and steps that need to occur to finally end them. Particularly, getting rid of a partner in such a situation generally means dissolving the partnership. Here's one guide, but definitely not complete info for all scenarios: http://smallbusiness.chron.com/dissolve-informal-partnership...

[eplanit]

I know IANAL, but I don't think you are either:

"if two people have joined together with the intent of making a for-profit enterprise but with no formal agreement, it is a partnership."

No, it's not. What is "joined together....but with no formal agreement"? You can't take that to the bank, or to the court house.

[dragonwriter]

> I know IANAL, but I don't think you are either

I'm not, but I did pass Corporations (which, despite the name, covers all manner of business entities) before I left law school, so there's that.

> No, it's not.

Yes, partnerships absolutely can be formed why mere combination with a common purpose and no formal partnership document. In fact, much of the law of partnerships arose out of courts deciding how to resolve problems where people had done that.

> What is "joined together....but with no formal agreement"?

A relatively common situation that potentially creates a legal mess when it falls apart, or some third-party makes a claim involving the business.

> You can't take that to the bank, or to the court house.

You probably can't take it to the bank, because banks hate dealing with legal uncertainty and will demand that you resolve it first. You absolutely can take it to the courthouse, and many people have; of course, you'd usually do better to have a written agreement in place first, but that's often clearer in hindsight.

Moreover, other people can take you to court for it (including based on the conduct of your partner), so if you have formed a partnership by cooperation that you no longer want to have, you absolutely do want to make sure you have effectively dissolved it.

[ahakki]

At least here in Switzerland this is definitly a legal business arrangement that you could go to court over. Proving your claims will be more difficult than if you had a written formal agreement, of course.

[naivedeveloper]

Thanks for your reply. No, we do not have a company. We delayed incorporating to avoid expenses before the product was ready. Now that the product is close to being ready I'm fine with incorporating, but don't want to do so if my co-founder isn't invested.

> Then again, I don't know if you yourself are that committed either. A month and a half off from work to prepare a speech means you're not fully committed.

No, that was simply a mistake. I'm not going to take on any such side commitments for the foreseeable future. I recognized the mistake and course-corrected.

[cocktailpeanuts]

If you really did make up your mind, I suggest you first talk to a lawyer about your potential decision.

Then when all things are clear from the legal side, first try to get this to work (if you still have any hope for this guy). Sit down with him and honestly talk about what you have in mind, and tell him you want to make this work. And make him commit to several things by certain time.

Or you could just tell him you want to split up. (Again, after talking to a lawyer).

You wrote 100% of your code and there was no legally binding document that transfers your ownership so I think it should be fine, but really really I suggest you talk to a lawyer if you are serious about this business. It's worth the money.

[gnicholas]

You could incorporate, both contribute all of your valuable IP and whatnot, and receive shares on a vesting schedule. As part of incorporation, you establish ground rules for number of hours spent on the project or milestones to hit, such that either of you can be let go (and halt vesting) if the targets are not hit.

This will not be inexpensive to set up (a couple thousand in legal fees), but if you're ready to launch and want to clean up your legal situation, it could be worthwhile.

Right now you would likely be considered to have a partnership, and you each have rights under that (which vary from state to state). If you go off and build this on your own without a document that your friend has signed, you'll be on shaky ground if he/she comes back after you've become successful. For what it's worth, I am a former lawyer (but never specialized in this particular area of law).

[jkaarma]

With my startup just last week we concluded a deal where one ot he co-founders lost his substantial stake in the company and retained a very small percentage of the company. We've been working on the company full time for a year now.

The mistake we made was that we didn't make a shareholder agreement in the beginning when we started out that would clearly outline the responsibilities of each person and what they would have to do in order to keep their equity stake. As the company has evolved it has become clear that one of the founders is holding too much equity compared to the value he is creating for the company. Thanks to our investors we came to an agreement where he was bought out and retained only a small stake in the equity and is staying on part time and there's no bad blood. However if we had created a SHA in the beginning then it would have been very easy now to just legally take away his equity and go forward. So definitely make sure founders' responsibilities are outlined in a legally binding way before you get in business. However from what you're saying I would suggest that you don't get into business in the first place because everything about your company is still ahead basically and if you're getting into with someone who is showing lack of commitment already then it's most likely only gonna get worse in the future. If you own everything about the product already then just take it and walk away.

[naivedeveloper]

If you don't mind, what is the percentage that you gave him? Part of my really hates the idea of giving any stake, but if that's what it takes...

[Kequc]

It depends what you've signed, and what what you've signed says. All good contracts describe what happens in the worst case scenario and backwards from there. If it isn't one of those contracts it depends on the court, if it went to court. I'd imagine since it isn't yet earning money it wouldn't go to court soon.

It might be a good idea to seek a lawyer for a sit-down, that will cost you a little bit of money but they can give you a better overview of your situation. Send all paperwork you have ahead of the consultation.

It could boil down to be as simple as discussing the issue openly with him. That you want to keep working on it and that if he doesn't, would he mind signing it (whatever it is) over to you. If so, it's easy.

No matter what happens, if you feel that he is isn't the best partner to have on the project it's going to be easier to deal with now than it will be the longer you leave it.

[djrogers]

Sounds like you don't have an equity plan yet - I'd start by proposing one to him. Propose a 50/50 split, but between technical and non-technical, then explain that if you need to add an additional non-techincal founder it will have to come out of his 50%.

This conversation can lead a number of good places - 1) he gets motivated and things go back to the way they were at the beginning, 2) he agrees to add a third person and split his share, 3) he decides to walk away, perhaps with a small share of equity for work already done.

[rdli]

In any startup, it's crucial that founders have open lines of communication. There are a lot of decisions to be made, frequently under stress and with imperfect information, and you need to be able to communicate to figure things out.

So, I'd say that 1) you need to sit down with your co-founder and talk about things and 2) if this is going to be a long-term thing, you both need to spend a bunch of time upfront talking about your communication styles and commit to open lines of communication.

[smt88]

Stop communicating with him via phone or in-person. All of your communications need to be email/SMS/chat, which will provide documentation in case of a legal dispute.

Then talk to a lawyer.

[dsr_]

Offer him a buyout based on the first year's revenues. Or a flat fee, but delayed until you have revenue to pay for it. Or anything, really, but make it clear that you don't think he's as committed as you are to this, and you want to take the risk and gather the reward.

And if he says no, dissolve the whole thing and go find something else to work on. Odds are good you would have pivoted to something else anyway.

[naivedeveloper]

That's a great idea, thanks for it.

[kkotak]

If you think the project is still viable, has potential to make money, and you can find another non-tech partner - Draw up a contract rewarding him fairly with equity for the work done. Move on. A reasonable new partner should/will understand and appreciate your fair, mature way to get out of a difficult situation and pushing on and you both will stay out of future litigations.

[jpn]

I really like the Dynamic Equity Split paradigm. Essentially, it comes down to:

1. Recording the contributions of each founder. 2. Assigning weights to the contribution. 3. Distributing equity based on the totals.

Check out this video for more detail:

https://www.youtube.com/watch?v=G7kgEbXmBFc

[siegel]

Clearly you need to create an entity and assign your IP to it. But the question is what his role will be, if any, or if he will get an equity in this new entity.

Is there ANYTHING of value he contributed? If so, would you be willing to give him a small equity stake in the new entity for him to walk away? That's the cleanest thing to do.

[19eightyfour]

I would just like to point out the following that might help you. You say you haven't decided to split or not, yet your question clearly specifies the split. You're simply asking how to do it. Could this be telling?

It's always hard to make a break.

[dyeje]

Like most things in life, this is a situation best handled with a frank conversation.

[magicsquare15]

Good question. I'm dubious of partnerships for this reason.

[sogen]

Get new website, pivot, forget about old website.

[smt88]

...unless that's something OP could be sued for. There's no way to know without reviewing the communications and agreements (either verbal or written) between the two founders.

Which, again, is why it's insane to try to get legal advice from internet strangers.

[nandorsky]

You need money to sue. Unless the company is worth millions it would be financially irresponsible to sue over something that has no value.

[smt88]

OP is pursuing this because he expects the company to have value someday, which means the potential for a lawsuit is a problem.