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.

If you want to show future investors good will, ask to maintain a seat on the board.

There's just not enough equity left to incentivize, create an options pool, hire, raise future rounds, etc. It is a Huge red flag, and the likelihood of success decreases dramatically.

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'd be dead in the water. Therefore, the founder ends up with 33% of nothing instead of, say, 5-10% of something, and it's in his or her own best interest to take a smaller piece.

Now 5%? Maybe 10%? That stings, but at least it leaves the company something to work with.

It's more likely what annovikov said, the one leaving has serious doubts about the strategy but got out-voted.

Think of it as two separate companies: Startup A, which you co-founded, and which ended up dissolving, you seeing nothing for your efforts (other than whatever salary you managed to scrape out); and then, Startup B, which you bought a huge number of shares of for the amazing price of $0/share, and now get to smile as those shares appreciate, like any investor. It just so happens that Startup A and Startup B are the same company at different points in their life, but that shouldn't change your views toward the two situations.

This would be a red flag whether he accepted 33%, 10% or 5%.

The question is, is the flag "more red" if he has a higher percentage.

That is absolutely a red flag. If someone owns 25% of the business, they better be working to grow, improve, or otherwise assist the business on a daily basis. If nothing else, out of self-preservation to protect and grow their investment.

If they're a 1% investor, that's a different story.

If it's 25% and the angel doesn't appear to have angel experience, you can bet that future investors are going to want to interview the angel!

- understand the industry;

- understand the go to market/sales approach; or

- understand the current stage of the company and what it takes to move to the next.

And within each of those, they should have relationships, information, and strategies that accelerate the company in some way. It's not just a "look at my linked in and tell me who you'd like to meet" but a focused "I know A, B, and C who beat the problems that you're dealing with. let me get them right now and see if they can offer advice" and then a while later "Oh, you need X. I know a guy who does that. I'll get back to you."

Investors will likely push for a recapitalization to reset the cap table and remove the outstanding equity all together.

Is it still generally the case that the entirety of the options pool for employees is well under 10% (more like 5%)? If that's the case, I get that it may be limiting for the investors, but hiring & building a team is pretty "cheap" from an options standpoint I believe.

I would say he should stick to 12%. It's derived from an industry standard. VCs who have a problem with this are, pardon my french, greedy assholes.

There are plenty of places for handwaving and hope in startups already. The ownership status of a departed founder should not be one of them. That should be crystal clear.

This really puts a giant question mark on why anyone would bother with a non-CEO founding role. Startups are hard enough as it is, adding to it the potential of losing all your equity because you had a falling out with the CEO makes it almost not worth the trouble.

Engineers getting into partnerships with domineering business types should definitely watch out for this and evaluate their options. At least when you work for Microsoft and leave after 2 years, they cannot claw back what you earned over that period of time.

That's why you set up terms up front. If, when they decided on a 33/33/33 split, they also decided on a vesting schedule, they wouldn't have this problem. The OP would get some percentage value based on math, from contract terms they all agreed to when they started.

If you're losing all your equity after over a year of work just because you had a falling-out with co-founders (or investors), you didn't do your homework.

So which side are you arguing on?

What exactly is this standard? Haven't heard it before. (serious question)

edit: from the parent:

A typical vesting agreement would have vested your stock over a 48-month period, so after 18 months you would have vested 33% x 18/48 = 12.375%

Assuming that they're taking the high road and that the potential investor is well aware that a founder is leaving over a disagreement regarding strategy, which I sure hope they are, the investor is walking in with eyes open and is making a bet that the person leaving is incorrect. That seems to me to be perfectly reasonable.

If you want to be generous (as the person leaving) you can certainly offer to let the investor or co-founders buy you out at the same valuation the investor is getting.

If you want to be extremely generous and a little creative, you can ask for an amount of money that would make you feel you hadn't been cheated in exchange for all of your equity stake. After all, you disagree with their strategy, so perhaps you are skeptical that the equity is worth anything and would rather just get decent back-wages for the work you've done and wash your hands of it.

In that case, perhaps you can just ask for something like $200k for all of it and call it a day. If I disagreed enough with the company direction to leave, I might call that a huge win relative to putting in years more effort and eventually getting nothing at all out of it!

You have to settle on some kind of amount. And then you can be flexible about the payment of the amount - it could be over 36 month or someting.

My experience was it took 3 years with layers, lost friendships - and in the end we enden exactly the same place - same amount and everything. I sold 50% of my stake right away, and should have keep the rest. Big mistake.

My recommendation would be to find an amount - yep - it's hard. But it will only get worse from now.

The investors buy up 99.99% of the company for $500k at a $1 premoney, and then give out 75% of the company to current management in order to incentivize them to stay.

I am using extreme numbers here to make the point, but current management almost always gets a carve out.