[gnicholas]

> our CEO has been instructing our third-party accountant to issue themselves advance payroll for like 13 weeks

Does this mean that for the last 13 weeks they've been one week ahead, or something else?

How much does the CEO's advances affect your 8 weeks of runway? In addressing this situation, I'd be mindful of the fact that the company won't exist if you run out of runway spending all your time on this issue. It's a frustrating situation, but legal bills can eat up runway pretty fast. The best possible outcome is to get some lawyer friends to help you figure out a slam-dunk case and get the CEO out without protest. But IMO (as a founder and former SV lawyer), this is pretty unlikely.

[micecof]

Sorry for the confusion - they have advanced their payroll for a total amount of 13 weeks (accumulated through multiple pay stubs), while they have requested still getting paid weekly like the rest of us. So their behavior seems like they are trying to max out the values before they check out.

Their advances will probably last us another 2 weeks, and we only have 8 weeks of runway left because we are at the end of our pre-seed incubation program, and we are about to raise our seed round with our lead investor in a few weeks.

I can't agree more that this will eat up our time and resources very fast, but we also want them out before we pitch to our lead investor for the seed round. We have already spent a week investigating this issue ever since we noticed something wrong, so we have a very narrow time window for us to take actions, ideally by early next week.

[gnicholas]

Thanks for clarifying. Where did your funding come from, and are those funders aware of the situation? I would tend to agree with others that you may just need to start over. Of course, you want to make sure the CEO is out of this entity, so that he/she doesn't later claim that NewCo appropriated technology/IP from OldCo, and that he/she is owed a chunk of NewCo.

[micecof]

The majority of our pre-seed funding comes from a US-based VC firm with an uncapped SAFE. And our investors haven't been made aware of the situation yet, but we are thinking about informing them on Wednesday this week.

Thank you very much for the suggestion, we have also thought about starting a new entity, but we are not so sure on how to transfer our assets (SAFE note, domain, IP, employees, customers, code bases, etc) to the new entity, and how this would affect the relationship with our existing funders.

What do you think the pros and cons would be?

[gnicholas]

I would suggest talking with your funder ASAP. They will know how to deal with this and will be motivated to help. They can also pressure the CEO in a way that you cannot.

It may blow things up, but I think it's your best chance at survival. Just my 2¢ as a guy on the internet with an opinion!

[llamaimperative]

I mean… I think you should assume there will be no seed round for this company as it’s currently incorporated. Your incubator program should really be working through this with you though.