[aneth3]

If the early shareholders invested significant time and effort into the business, I don't see why it's 'right' for them to give up their shares. While they are certainly entitled to do so, pressuring them to drop even their 0.5% seems unethical to me.

If those early founders actually did not contribute much in those early days, I would revise this opinion. However as it stands, it seems akin to asking an early financial investor to return his equity. If I give you $50,000 and you pivot ten times, I should still own a piece of your company. Same goes for early founders.

The early founders had already agreed to diminish their share to 1% combined. Pressuring them to go any lower seems greedy and unnecessary assuming they invested significant time and energy over a long period of time, even if it was for an earlier idea.

Unlike most of the comments here, I'm not sure this was a class act. Given that the early founders voluntarily gave up their equity, I suppose the continuing founders deserve some benefit of the doubt.

I don't think I would have agreed to give up my last bit of equity as I would feel 0.5% was fair simply for being a part of the early team formation, ideation, and apparently discarded product development work. I would probably be annoyed by the offer and ignore it.

[antonber]

As the Anton of Ariel and Anton in this post, the logic behind returning the shares is based on the fact that the business should really have been restarted with a fresh cap table rather than keeping the old cap table in tact. The old cap table was maintained for reasons of convenience, and given that the company has a completely different product, focus, code-base, team, etc etc, I only have shares in this company on the basis of the poor decision to not launch a new company.

Also - Paul and Tal are awesome guys who have been hard at work for 4 years without any input from me. I think Ecquire will be a great success, and the divestment of my shares has nothing to do with my perception of the company's potential.

[aneth3]

You are certainly entitled to give up whatever equity you like, and perhaps you are a better man than me for not feeling you deserve such a minor stake. If you feel you did the right thing and fully comprehend the situation, it is not my place to challenge your decision. I'm only expressing my thoughts, and my feeling that this is not the way to handle pivots with former co-founders anymore than it is a way to handle pivots with investors.

I don't know how long and hard you worked, how related your work was to the ultimate direction, whether you participated in early fundraising, advised the continuing founders, etc. All of those could impact my thoughts on this. Going on the assumption that you worked long and hard - you contributed to the ultimate direction and team and you earned something.

"Pivots" are all the rage in startups these days. Why is it any more acceptable to ask for vested founder shares to be returned than to ask for shares to be returned from early cash investors or advisors? Does YC return shares to founders who pivot after leaving YC?

I think it can be fair to renegotiate stakes according to impact, as it appears you did to get down to 0.5%, but eliminating clearly earned stakes entirely seems rarely justified. Re-incorporation makes sense in many cases, but in others will open the new company to accusations of fiduciary violations largely for the same reasons.

[wtvanhest]

The problem is the "size" as in number of participants, in the Cap table rather than what people are getting paid in the event of an exit.

All else equal, you want less people on your cap table for each round. Big cap tables increase complexity.

I wouldn't be suprised if the current CEO were to pay them on the backend regardless of his dance.

[edit] I shouldn't guess what the CEO that I do not know would do, but I would expect myself to reward them later, just not contractually. This is really relationship/person dependent.

[pbreit]

Is that really true? Two original founders with 0.5% each?

[aneth3]

Two former cofounders with a combined 1% of equity should not have any effect on the future of the company. Even if it did have some minor impact, those shareholders earned and deserve their shares. Companies regularly give shares to advisors, board members, employees, friends, landlords, etc...

I could be off a bit, but I don't think "extra" shareholders become an issue unless their stake is large (>5%) or there are a large number. Regardless, two minor former cofounders hardly seems a significant burden, and eliminating their stake for minor convenience is suspect.

If this was the justification used by the continuing founders, they were either ignorant or taking advantage of their former partners' ignorance.

> I wouldn't be suprised if the current CEO were to pay them on the backend regardless of his dance.

I wouldn't count on it. This is not generally human nature, nor is it compatible with the behavior reflected in this article.