Ask HN: Co-Founder pivoting, what are my options?

[weusedto]

Hello, a co-founder and I started a company in December of 2021. We’ve built an MVP that runs well, and have created a lot of content and built a presence in the community we aim to solve a problem for. We do not have any paying customers or a meaningful non-paying user base.

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.

[hkhanna]

I've counseled a number of founders on co-founder breakups.

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.

[MattyMc]

> When I asked my co-founder for rights to use the existing code in my new venture, he refused, citing concerns over sharing IP.

OP seems to imply that their co-founder intends to use much of the existing code base they've developed over the last 6 months for the proposed pivot. If that's the case, it doesn't seem like co-founder would be open to resigning as an employee and director and creating a new code base from scratch, especially considering that the co-founder seems to have control of the existing company.

[weusedto]

Thank you for these super helpful comments.

This is correct, my co-founder isn't pulling out all of the existing code, he wants to have a "product" at the center of the staffing agency, and is planning to re-use some stuff. He would not be open to resigning, and I think because he wrote the code there is a level of ownership he feels, regardless of the value being limited (or 0 - as many have noted).

[lumost]

If this is a breakup situation, it's also possible to highlight that the OP would not be effective in the new company - and that maintaining the existing corporate structure would be suboptimal for the other founder.

Now, there is a separate question here of why the other founder wants to use this code in their new venture. Are they interested in the branding etc. from the OP? Is the staffing agency truly orthogonal? There might be "interesting" arrangements to be made for a new corporate structure via affiliate marketing etc.

[trapexit]

Your co-founder's code is mostly worthless at this point without the continuing involvement of the co-founder. Developers have their own idiosyncratic coding styles, and without a multi-member dev team providing continuity of design, I expect that a new developer would rewrite it as the product evolves.

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.

[djsamseng]

Also want to second this. The team behind the code is much more important than the code itself.

[sciclaw]

FWIW, figuring out what to build is often more difficult that building a product. It would probably take much less than 6 months to rebuilt the product given the knowlege you've gained along the way. Maybe it's worth getting a new technical partner or hiring some devs and re-building the product. Perhaps you can ask your co-founder to let you use the current product and pay for support in the meantime while you find a team to build the next version.

[cloogshicer]

That's correct. If the co-founder is gone, the source code has lost most of its value.

I wrote about this in more detail recently: https://hiringengineersbook.com/post/autonomy/

[weusedto]

This is a great point. I had thought a little about this but wasn't sure to what extent this code would have value with a different technical partner. Thank you!!

Agree on the lack of traction - I'm not convinced it's dead yet, but I recognize there will soon come a time when it is time to put this behind me, I'd just like to try a little harder before doing so.

[Phlarp]

>My co-founder has written all of the code

>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

[Shindi]

I kinda disagree with this. Depends what percentage of the company OP has. Growth + marketing + content are critical functions despite what the HN crowd thinks.

[simmerup]

Getting the tech sold is one of the hardest parts. A soft skills partner with the right connections is worth their weight in gold

[striking]

Sure, but if they don't have a majority of the company and are being told they can't use the existing code and can't invest the time/resources to reproduce it, does it really matter how critical those other functions are?

[bbulkow]

Op has 0 percent is how I read it. Op has options.

[JamesBarney]

I don't think Op has options. He said no one's shares have vested. You can't have a company ownership only made up of stock options.

I think they both own restricted stock units that are repurchased by the company at nominal values if the employee leaves or violates certain terms.

[tediousdemise]

Likewise. If their co-whatever wrote all the code, they sound like the employee. Bosses, visionaries, and founders typically don't write code, they delegate it to people who do.

Being an "idea person" is not comparable to being an "implementer." Truly exceptional individuals can be both, but I'm willing to wager that this whole venture was OP's idea, thus making him the "one true founder."

Diplomacy would be best for OP, but they shouldn't close the door on exploring their legal options. Especially if they have anything dated or timestamped that clearly establishes them as the originator of the idea or concept.

All in all, this is a valuable lesson for OP and they will walk away from the experience with wisdom to help them in their future ventures. Best of luck, OP.

[chadash]

> Bosses, visionaries, and founders typically don't write code, they delegate it to people who do.

So would Bill Gates, Mark Zuckerberg, Larry Page and Sergey Brin not count as bosses, visionaries or founders?

[tediousdemise]

Proof of counter examples does not invalidate that statement. I could just as easily mention non-technical founders such as Steve Jobs, Reid Hoffman (LinkedIn), Tim Westergren (Pandora), Aaron Levie (Box), or Sean Rad (Tinder).

And just a reminder for you, per https://news.ycombinator.com/newsguidelines.html:

> Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith.

Edit: Response to swatcoder since I am rate-limited to 5 posts per day:

I really appreciate your response. Intuition is the perfect way to put it.

I am aware that the burden of proof lies on me, since I made the claim. I am 100% being intellectually lazy by not seeking out data to support my claim. My intuition is just a hypothesis that could very well turn out to be incorrect.

I am wagering that it is correct, just as other people are free to wager that it is incorrect. Downvotes seem to be a harsher way to express that, but your comment is much more constructive.

[swatcoder]

You're being downvoted and debated because you're relying on an intuition that many people here don't share, and there's no quantitative data that could conclusively validate or invalidate the claim you've made.

At any time, there are tens of thousands of startups bubbling through their first 6 months or year of development. The composition of who's an "idea person" and who's an "implementor" will be in pretty much every permutation you can imagine.

Now, it may be that the few startups that grow to conquer the world had a certain composition in their early years, but that really has nothing to do with the company the OP is involved in.

[cortesoft]

Your comment said:

> Likewise. If their co-whatever wrote all the code, they sound like the employee. Bosses, visionaries, and founders typically don't write code, they delegate it to people who do.

I think it is a fair criticism to your comment... the comment made it sound like writing code precludes someone from being a founder/owner. Pointing out examples where founders/owners wrote code shows the statement isn't true. The fact that the other cofounder wrote all the code has no bearing on whether they are a real founder or not.

[mountain_peak]

Music groups tend to have the same issues; it's rare to find a band like U2 that equally shares credit regardless of who is doing what, which normally builds resentment when one or more members are seen as sole contributors (or 'stars').

It's also equally rare to find a group where each member can split off and form their own successful group (e.g., The Beatles, Genesis). The 'right' answer is that's it's usually somewhere in between. Freddie Mercury and Mick Jagger failed at solo careers because they didn't have their friends to tell them that their music stunk. Of course Top 40 has been broken into a formula that primarily benefits music companies, but that's different story.

In the same way, you and your business partner may have relied on each other to achieve a whole that is more than the proverbial sum of the parts. Your partner's new venture may fail without someone such as yourself, since it really is a common blunder by technical people to underestimate the value of sales and other soft skills, and your venture may fail without strong technical backing.

As usual, you can throw money at the problem to see what works, but in my experience when people 'grow up' organically as opposed to in a lab, the resulting bonds are much stronger.

All of that said, my former business partner surreptitiously formed another company and lost interest in our shared venture, which ultimately killed what was a great niche product. I consider myself a fairly average coder, but he was brilliant, and although I could have bought him out and maintained and expanded the codebase, it wasn't fun anymore, so we sold to another company and went our separate ways. Regardless, I had fun and learned a ton along the way, and that's part of the journey.

[swatcoder]

> he holds a majority of shares

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.

[rovingEngine]

Something I’ve found helpful: imagine you were starting from scratch today. Is this still THE problem you would want to work on? If not, move on. You’re right that 6 mo is not a lot in the grand scheme of things. Sunk costs suck, but there’s no getting them back.

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.

[weusedto]

I've been thinking a lot about running this using no-code and/or simple Google tools...thanks for mentioning that, and the avoidance of the co-founder conflict is probably the most echoed advice in this chain, so I will keep that in mind as I handle this.

[basisword]

You both want different things. You've only been doing this 6 months. Move on. Forget about it and move on. There is nothing worth fighting for and the stress it will lead to is not worth 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.

[tmp_anon_22]

> with nothing to show for my time

If you haven't learned a ton of stuff during this process you've been doing it wrong. That experience should be invaluable to your future career prospects.

[weusedto]

Thank you both...I can't explain how much I've learned in this time, completely agree, even with it seemingly going to 0, I am far ahead of where I would have been had I not chose to take this risk.

[tmp_anon_22]

The only constant in life is change. Wish you the best on your venture as long as its not a crypto scam.

[Brajeshwar]

I'm not sure if this is the correct advice but here is how I'd do if I were in your positions. Create a working MVP using no-code tools (they are all over these days) and try to get dedicated users or better yet some paying customers.

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. :-)

[Shindi]

+1 you are way more technical than you realize OP. The code your cofounder wrote is basically worthless if you don't have an engineer to maintain it anyways. I recommend no/low coding it. If you provide a way to contact you I can reach out with some free advice if you want. Happy to help out a fellow founder

[olalonde]

Some insight as a developer: re-writing an existing app is significantly faster than developing one from scratch. What took him 6 months to code might take someone else only 1 month to re-write, especially if they have access to the original source code, data models, etc.

[codegeek]

I read some of your comments to others and based on that, here is my suggestion:

- 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.

[MattyMc]

Many people in the comments seem to confuse what it means to be a co-founder, have ownership of a company, and have control over that company's direction.

- 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!

[Shindi]

Damn, that fucking sucks, but good for you for pursuing the mission. 6 months is not super long as it sounds like it takes 12-18 months to get to PMF.

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.

[weusedto]

Thanks for this. I think he plans to leverage little pieces of the code in his new project, but it's essentially value-less at this stage. I also think as he wrote the code and has put so much time into it there is likely a strong sense of ownership and high level of value assigned (regardless of its true value).

The 12-18 months to PMF is really why I'd love to push it a little further and see what comes out of it. I think doing so without a product is possible, and based on a lot of the comments that seems to be my best path.

[jbverschoor]

Have you really put the same amount of time in it?

[troelsSteegin]

I would look to some respected third parties in order to present and test your respective business bets. Maybe that would help each of you reassess risks and returns. What do your judges think the potential is for each?

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.

[edp]

Is there any way you could offer to _buy_ the code from your cofounder ? If he/she believes there is no value in it (hence the pivoting), there shouldn't be any problem.

[weusedto]

I had thought of this. Unfortunately I think his price will be exorbitantly high based on the time he put in. I also am not convinced that there is really much value in the code itself, it just puts me slightly ahead of square one in a new venture. Based on some comments it sounds like the code without the developer is actually quite worthless, so I'm coming around to it being OK that I don't have any rights to it should I leave.

[prirun]

IANAL, but here's one way to at least discuss it with him.

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.

[JamesBarney]

> When I asked my co-founder for rights to use the existing code in my new venture, he refused, citing concerns over sharing IP.

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?

[brudgers]

We do not have any paying customers or a meaningful non-paying user base.

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.

[icedchai]

Ask him to license the code for your new, related venture. Offer to pay him a percentage of revenue for that license. The risk here is the code isn't that great, so you're licensing something you're going to have to replace anyway.

[weusedto]

Yeah I think you nailed it with "licensing something you're going to have to replace anyway." It doesn't make sense to fight/pay for something that may not have any value.

[icedchai]

Yeah, probably not worth wasting your time. Most code, outside of larger orgs with tons of documentation and structure, is worthless without the people who can operate and understand it.

[nerbert]

Sounds like you're walking away with a good lesson about finding the right cofounder and being aligned on the vision :) Probably not ideal in your current state of mind, but very valuable.

[weusedto]

Amazing what you only learn by doing. I read so much on this and heard so many stories, but going through it really taught me so much on what to look for, what to think about, and how to structure these things.

[iancmceachern]

If your co-founder "decided" without you, you aren't co-founders and he/she doesn't view or respect you as a true partner.

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.

[mgl]

I may be able to help with recreating the app logic faster than usual, so that you keep the growth/marketing momentum. How can we contact?

[gtm1260]

If you truly believe in them, as a person, irregardless of their new idea, I would stick together and find a way to make it work.

[jbverschoor]

You failed your marketing/growth part. You have a minority stake if vested. Your cofounder doesn’t want to work with you anymore and starts something else.

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.

[bbulkow]

You are not a co founder, you are an employee. hint. founders get shares, employees get options.

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.

[carlgreene]

Where does it say the OP has options and the co-founder has shares? I think he explicitly said his _shares_ haven't vested yet...

[d3ckard]

If it needs to vest, it’s not a share.

[tzs]

According to the post, neither of them have vested shares:

> 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.

Unvested shares are still shares. All that being unvested means is that the shares are subject to conditions such as a repurchase option that gives the company a right to buy your shares if you leave the company.

Unvested shares still have the others rights of shares, such as voting and sharing in dividends.

[carlgreene]

Vesting is just receiving the full rights of the share, option, or whatever over a specific amount of time.

If you start a company with someone you don't (er, shouldn't) just automatically get 50% of the company. That would allow you walk on day 3 and still own 50%. Instead you receive the ability to leave with your shares on a vesting schedule so that you have skin in the game.

[kanwisher]

YC and every other Vc recommends founders to vest

[Phlarp]

Based on the OP it seems like one founder had shares and the other 'founder' had options still waiting to vest.

That's a pretty clear cut power dynamic no matter what the VCs recommend.

[orthecreedence]

"None of our shares have vested" seems to imply they both hold options, with the other founder holding a majority of the issued options.

[weusedto]

Yes this is correct - apologize if I wasn't clear with this. From what I understand and my previous experiences at startups it was a standard vesting structure where ownership vests over 4-years with a 1-year cliff (or at an acquisition event). On day-1 neither I nor my co-founder had any shares vested.

[metamuas]

Stay true to your path, dear sir: you have conquered one quest, only to question another. The path ahead is fraught with forks in the road, but stay true to your ossified idea and question yourself as you do others.

[mountainriver]

How far apart are the target markets exactly?

[weusedto]

There is likely overlap in the target markets and even in the goals/desired outcomes, but the business models are different.

[dustingetz]

Trade your equity for the IP (both are worth zero), and talk to a lawyer