[vitalychernobyl]

Just read through the whole thing (don't know why) - here is the synopsis:

It doesn't really talk about any ownership issues regarding the CEO - it's basically saying that [redacted] (an early employee) embezzled/mis-used money and when fired, started claiming he owned part of the company or was entitled to compensation.

According to the thing - [redacted] was hired a COO as an early employee with no equity, they claim he was unhappy, and that he embezzled a bunch of money by paying his girlfriend, getting bonuses, and misusing the company credit card (some of this he repaid). But once they found out, they fired him, and he started claiming he owned equity and/or was owed severance.

They want the money back, him made to shut up, and possibly drawn-and-quartered.

So it doesn't look like this is much broader than that .. again - according to the doc.

[throwaway4422]

Throwaway for obvious reasons. I was at a startup in the valley where they got one of the cofounders to work for sweat equity for over a year then got him deported to his home country to remove him from the picture (was reliant on employer sponsored visa. They 'accidentaly on purpose' didn't turn up to his immigration meeting). He managed to dodge this by enrolling on some bullshit PhD to get back into the country but then they screwed him with trumped up claims of embezzling company funds. All I would say is, don't jump to any conclusions with your interpretation of this case.

[throwaway4519]

Co-founders definitely do horrible things just to retain equity for themselves.

Another true story: A team co-founded a company together. They all agreed to be co-founders and split the equity as fairly as possible.

Co-founder X was put in charge of legal, since noone else wanted to do it. Unbeknownst to the others, X allocated a small pool of shares for everyone except for X, taking the vast majority of the company for himself.

When everyone received their share agreement, they did the division against the "total shares" listed in the agreement. Everyone's percentages came out as expected, since they falsely believed the "total shares" represented the total shares in the company -- rather than in the pool.

To illustrate this, X owned over 83% of the company, while the next highest co-founder Y (the CTO) vested < 0.33%/year. Amazingly, X and Y had both agreed to take identical pay (below living) and make identical sacrifices, i.e. quitting their jobs to go full-time together.

Y left after a year, having found out months prior and given X time to resolve it in (misplaced) good faith. X managed to get VC investment only a few months later -- by not mentioning that the company's CTO had quit only a few months earlier.

When the VCs found out about Y, X then informed Y he was never the CTO but a "freelancer" -- even though Y had joined with the intention of being CTO, performed all CTO duties, and was called the CTO by everyone involved. The other co-founders were informed to write they were retroactively "Founding Members" rather than "co-founders."

Of course, if the co-founders are experienced about business it would be difficult to pull this off. For example, you should insist on seeing the cap table even if you believe you know the percentages.

However, this happened to intelligent co-founders right out of college, who even had a parent's lawyer friend look over the contracts.

[azernik]

> who even had a parent's lawyer friend look over the contracts.

That lawyer needs to be sued for malpractice. This is their job.

[sah2ed]

> That lawyer needs to be sued for malpractice. This is their job.

Why do you think that? Perhaps you parsed "parent's lawyer friend" as "parent's lawyer"?

The former is likely doing a favor and would not be paid the full sticker price when rendering such a service since the transaction is not truly at arm's length. The latter is more likely to be sued for malpractice since you would be paying the full sticker price.

[jjeaff]

How much you paid would have no bearing. If you paid $1 but officially engaged any lawyer, friend or not, they would be fully liable for malpractice.

[azernik]

Yup, I misread that as "parent's lawyer". Yeah, if it's just a friend, uf. Sucks.

[JumpCrisscross]

> was reliant on employer sponsored visa

Start-ups are hard. Harder if you’re marrying their risks to immigration law.

What you described is legal. If a founder can’t navigate these hallways, they might be happier in some other role.

[CalChris]

Why would they hire someone for COO and not give this person equity? Sympathy for the devil and all but these people were asking for something bad to happen.

[milesskorpen]

Because — and this is amazing — NO ONE at Toptal has equity other than the founder: https://www.theinformation.com/articles/at-booming-toptal-no...

I find this sort of bonkers. Basically they all have contracts saying they'll get equity at the next round ... and the company is profitable and the CEO has no intention to every raise another round. So he currently owns 100% of the company: "As a result, even though it looks like a typical venture capital funded company, all of Toptal’s stock is in the hands of one person, co-founder and CEO Taso Du Val. Even Du Val’s co-founder and colleague for eight years, [redacted], has no shares."

That said, I do wonder whether there's some bigger story in the background (since [redacted] is referred to as co-founder in the Information article, and is getting sued in the parent)

[jerf]

Maybe I'm just slow because this occurs to me hours later, but this One Man, One Stock Grant thing is a terrible idea; if the employees know about it, and they surely do now, they have incentive to try to drive the company in such a way that it needs to take capital to survive, so they get their payouts.

This is probably not the most stable foundation upon which to build a company.

[rosybox]

If you don't have equity, are you actually a co-founder?

[PopeDotNinja]

> Because — and this is amazing — NO ONE at Toptal has equity other than the founder

Most businesses have a fixed number is of equity owners, including service business like Toptal. In most businesses like that, if you get any equity at all, it'd be unusual that you could keep the equity if you leave the company.

[dpiers]

Except Toptal is a “startup” that took $1.5mm in seed funding from investors like Andreesen Horowitz and promised employees equity.

[egdod]

Why he would accept the job on those terms is the more salient question.

[caymanjim]

I would take a solid salary over equity almost any day, having been burned by failed startups in the past, and/or left before my options vested. It'd be nice to get a solid salary AND equity, but I'm never going to work anywhere again where I take a pay cut in exchange for equity.

[rayrrr]

True that. Even a successful exit can lead to employee common stockholders (i.e. holders of stock gained through vested, executed options) getting screwed. Look what happened in Gilt Groupe's IPO, for example: https://www.vox.com/2016/1/19/11588918/gilt-groupe-is-a-caut...

[pault]

I agree, but you'd probably have a different set of expectations if you were founding a company.