Ask HN: Should I branch off my startup's technology into a separate company?

[laundrysheet]

My two co-founders and I own a profitable home services company that runs on a proprietary technology platform that I've built. Over the past two years, I've put the majority of work into the startup, with most of the effort dedicated towards building and maintaining the platform. However, over the course of the past year, my two co-founders have begun to take a backseat in the operation of the business. We've had many late night conversations about this but it doesn't appear to resolve any of my concerns. It's been extremely demotivating for me while I still continue to invest the same chunk of effort into building out the platform. Sometimes, features and fixes are delayed simply because of the occasional resent I carry. However, I have a proposal that I'd like to bring to the table--branching off the technology into a separate company and licensing it to the home services company to use for free. I feel this would greatly motivate me again to work on the platform--it's a win-win situation in my eyes. If this were to happen, there is still software development needed on the home services company to interface with the platform. What are your thoughts on this? Should I give equity to my co-founders within this new company? We did hire a short-term contractor to work on the platform which never surpassed $5,000.00. The rest of the work was done solely by me. Interested to hear some feedback on this since this has been brewing in my head for awhile!

[mod]

Depending on how you've set the business up, the company may (and probably should) own the code, which would essentially make this not very feasible--without a rewrite, anyway.

I've been in your shoes, in terms of co-founder not pulling his weight (it was family, too--oops!), and I did not find a resolution. I ended up ceasing work on what I think was likely to become a very nice lifestyle business (we were already ramen-profitable), because I was going to have to do all of the work.

I could re-create the tech (I built everything), but I haven't, partially to avoid any bad feelings, partially because I'm doing other things.

Given that you hired a contractor, and that presumably your technology is your whole company's value (you seem to think it's almost all of the work that's been done), I'm not sure why it'd be okay to take that elsewhere, except by virtue of "these guys don't deserve it!"

The correct answer to "these guys don't deserve it" is to have clauses to handle that in your business documents--vesting, cliffs, etc. It's almost certainly not "take the technology and run."

You might be able to sort-of blackmail your co-founders into accepting your deal, but I imagine it's going to be approached in that fashion. "I want this to happen or I'm done building things" seems to be where you're at, and that's really not okay. (Edit: I think it's not okay to demand the technology. I think it's fine to demand their time, and perhaps a revised agreement where they all have to put in time to vest shares!)

Don't get me wrong--I side with you. I just think the best option is probably to not continue, or to continue at a capacity that you're comfortable with, given their work input.

That said, I've been fucked in a few business ventures now, and perhaps I'm erring way too far from where the money is. I don't think I have any regrets, I'm proud of how I handle myself--but I don't have any money, either!

[wayclever]

Question: Have you and your co-founders each executed an agreement assigning all right, title and interest in and to any IP to the company? If so, the code isn't yours to take, and it makes no sense for your co-founders to give away any IP rights (copyrights and potential patent rights).

Your narrative tends to cast your partners as distracted by other business ventures, it seems that you are searching for a way to disengage. If they were savvy, they would not agree to your proposal. The code base is company property (that is if you have completed the process of corporate formation). You might believe that your contribution in teh form of code disproportionately exceeds your co-founders contributions. Had you actually formed a company, assigned the IP to the company, determined the value of each founders contributions in addition to any IP (cash, equipment, space, expertise, time commitments) you would be able to foresee how your co-founders will respond to your proposal.

IF I'm incorrect and you have filed articles of incorporation, drafted bylaws, and executed agreements issuing founders stock, then I suggest you consult with your outside counsel (you know, the attorney(s) who drafted all those agreements for you) to help ensure you don't f_ck up the operations of your "profitable home services business".

Suggest you ask yourself the following "why am I walking away from a profitable business? Especially when I committed to building that business with my co-founders?"

Maybe you have realized you don't get along and so you want out. In that case, offer to purchase the code base, and agree to payment terms that provides enough runway for you to generate revenue and pay for the code base over time.

Finally, you wouldn't be "giving" equity to your co-founders. You would be issuing equity in exchange for the "home services company" assigning all right, title and interest in and to the code base and any associated IP to your new company. If your platform is adding value, it makes little sense for them to agree to an assignment. Instead, they should offer to license it to your new company for royalties, equity, and continued development.

Summum Bonum.

[santiagobasulto]

I think that you already have your answer :) You want to do it, do it. I saw your submissions, this is the second time you post this along with "What to do if co-founders are distracted by other business ventures?". If you're not happy, just try to do whatever makes you happy. Your time is valuable, don't waste it being dissatisfied.