<story><title>Ask HN: How to leave a startup when you own a third of it?</title><text>I&amp;#x27;m leaving a startup I founded due to disagreements over team&amp;#x2F;strategy. I worked on it for about 16 months.&lt;p&gt;We are 3 co founders and we have 33&amp;#x2F;33&amp;#x2F;33.&lt;p&gt;I want to quit it in 2 months and we are currently in the process to raise 500K for 25% before the end of the year.&lt;p&gt;Is it reasonable for me to keep 10% of it. - They think it&amp;#x27;s way too much.&lt;p&gt;Sell to them 10% right now - How much??&lt;p&gt;Sell 13% of it after the 500k raised - How much??&lt;p&gt;Thanks!</text></story><parent_chain><item><author>anovikov</author><text>If i was an investor, i&amp;#x27;d see it as a red flag indeed. I&amp;#x27;d think: &amp;#x27;so this guy left the boat being a founder, giving up most of his share, so probably he knows that the company is going to tank and don&amp;#x27;t want to waste his time anymore, and he definitely knows a lot more about it than i could potentially know being an outside guy&amp;#x27;.</text></item><item><author>nealbozeman</author><text>Investors will not see his 10% ownership as a red flag any more than they will see a non participating investor owning 25% of the business as a red flag. In this case, he&amp;#x2F;she delivered 18 months of value that led to a 1.5mm pre money val.&lt;p&gt;The most fair option is already mentioned - to maintain your 33% that makes all three of the founders equal as of today, and then allocate a new share allotment to dilute you out over a new specified vesting period.&lt;p&gt;If you want to show future investors good will, ask to maintain a seat on the board.</text></item><item><author>lisper</author><text>If you had done this the Right Way from the beginning you would have had a vesting agreement that specified what would happen in a case like this.  A typical vesting agreement would have vested your stock over a 48-month period, so after 18 months you would have vested 33% x 18&amp;#x2F;48 = 12.375%.  So 10% is not unreasonable.&lt;p&gt;However: having 10% of the company owned by a non-particiapting founder is a big red flag for many investors, and would be a significant obstacle to the company&amp;#x27;s success.  So you might want to consider settling for significantly less than 10% simply because you may end up making more money in the long run.  10% of zero is still zero.  If I were setting up a company today I would have a back-loaded vesting schedule: 10% the first year, 20% the second, 30% the third year and 40% the fourth year.  On this schedule, your share at 18 months would have been 4.95%.  If I were you, I would offer to take that.&lt;p&gt;If you&amp;#x27;re raising $500k for 25% of the company, that means you think that the company is worth $1.5M now (because the company now plus the $500k would be worth $2M).  So your share on a flat vesting schedule is about $180k, on the back-loaded schedule it would be about $74k.  If you want to cash out you should offer to sell for significantly less than those numbers because you want everyone to think they&amp;#x27;ve gotten a good deal.  You never know when you&amp;#x27;ll want to do business with someone again in the future.  A reputation for being reasonable is worth a lot more than $180k.&lt;p&gt;You need to decide what you&amp;#x27;re doing &lt;i&gt;before&lt;/i&gt; you approach investors because you need to achieve clarity on what you&amp;#x27;re selling them: is this a company with three founders, or a company with two founders and one ex-founder (and is the ex-founder willing to sell and if so for how much)?</text></item></parent_chain><comment><author>austenallred</author><text>It&amp;#x27;s not just about the signaling, it&amp;#x27;s about very practical realities that come to light when you need to &lt;i&gt;use&lt;/i&gt; that equity. If I were an investor and I saw 33% of shares with a former co-founder I&amp;#x27;d walk immediately. If I were an investor that saw 33% of shares with a former co-founder and then 25% gone in an initial $500k raise I would run, not walk.&lt;p&gt;There&amp;#x27;s just not enough equity left to incentivize, create an options pool, hire, raise future rounds, etc. It is a &lt;i&gt;Huge&lt;/i&gt; red flag, and the likelihood of success decreases dramatically.&lt;p&gt;I tried to raise once with 28% of the company being gone from our seed round, and it was a major, major concern. If this company ever needed to raise again, they&amp;#x27;d be dead in the water. Therefore, the founder ends up with 33% of nothing instead of, say, 5-10% of something, and it&amp;#x27;s in his or her own best interest to take a smaller piece.&lt;p&gt;Now 5%? Maybe 10%? That stings, but at least it leaves the company something to work with.</text></comment>
<story><title>Ask HN: How to leave a startup when you own a third of it?</title><text>I&amp;#x27;m leaving a startup I founded due to disagreements over team&amp;#x2F;strategy. I worked on it for about 16 months.&lt;p&gt;We are 3 co founders and we have 33&amp;#x2F;33&amp;#x2F;33.&lt;p&gt;I want to quit it in 2 months and we are currently in the process to raise 500K for 25% before the end of the year.&lt;p&gt;Is it reasonable for me to keep 10% of it. - They think it&amp;#x27;s way too much.&lt;p&gt;Sell to them 10% right now - How much??&lt;p&gt;Sell 13% of it after the 500k raised - How much??&lt;p&gt;Thanks!</text></story><parent_chain><item><author>anovikov</author><text>If i was an investor, i&amp;#x27;d see it as a red flag indeed. I&amp;#x27;d think: &amp;#x27;so this guy left the boat being a founder, giving up most of his share, so probably he knows that the company is going to tank and don&amp;#x27;t want to waste his time anymore, and he definitely knows a lot more about it than i could potentially know being an outside guy&amp;#x27;.</text></item><item><author>nealbozeman</author><text>Investors will not see his 10% ownership as a red flag any more than they will see a non participating investor owning 25% of the business as a red flag. In this case, he&amp;#x2F;she delivered 18 months of value that led to a 1.5mm pre money val.&lt;p&gt;The most fair option is already mentioned - to maintain your 33% that makes all three of the founders equal as of today, and then allocate a new share allotment to dilute you out over a new specified vesting period.&lt;p&gt;If you want to show future investors good will, ask to maintain a seat on the board.</text></item><item><author>lisper</author><text>If you had done this the Right Way from the beginning you would have had a vesting agreement that specified what would happen in a case like this.  A typical vesting agreement would have vested your stock over a 48-month period, so after 18 months you would have vested 33% x 18&amp;#x2F;48 = 12.375%.  So 10% is not unreasonable.&lt;p&gt;However: having 10% of the company owned by a non-particiapting founder is a big red flag for many investors, and would be a significant obstacle to the company&amp;#x27;s success.  So you might want to consider settling for significantly less than 10% simply because you may end up making more money in the long run.  10% of zero is still zero.  If I were setting up a company today I would have a back-loaded vesting schedule: 10% the first year, 20% the second, 30% the third year and 40% the fourth year.  On this schedule, your share at 18 months would have been 4.95%.  If I were you, I would offer to take that.&lt;p&gt;If you&amp;#x27;re raising $500k for 25% of the company, that means you think that the company is worth $1.5M now (because the company now plus the $500k would be worth $2M).  So your share on a flat vesting schedule is about $180k, on the back-loaded schedule it would be about $74k.  If you want to cash out you should offer to sell for significantly less than those numbers because you want everyone to think they&amp;#x27;ve gotten a good deal.  You never know when you&amp;#x27;ll want to do business with someone again in the future.  A reputation for being reasonable is worth a lot more than $180k.&lt;p&gt;You need to decide what you&amp;#x27;re doing &lt;i&gt;before&lt;/i&gt; you approach investors because you need to achieve clarity on what you&amp;#x27;re selling them: is this a company with three founders, or a company with two founders and one ex-founder (and is the ex-founder willing to sell and if so for how much)?</text></item></parent_chain><comment><author>empath75</author><text>Or you might think that he got in over his head and decided to step aside and let the other guys manage the business.</text></comment>