Ask HN: Not feeling it from the CEO. What can I do? (equity split)
64 comments
Wow. What I can suggest is that perhaps you have misperceived the purpose and nature of equity.
When your venture was 0 months old, it needed a CEO to get it funding. Even if he played golf the whole time and lent only his name to the venture while you beat the streets to scare that funding up, he delivered on his job.
A CEO's job for a startup is not to be CMO or COO. It's to scare up money, and that money done got scared up. And now you want to move the goalposts.
Even if he's still out playing golf and you're still putting in 20-hour days, that doesn't mean a 50/50 split is unfair. It's what you agreed to, on the off chance you'd be anywhere near as successful as you are today.
Hate the game if you must, but your failure to understand the game has probably put you on the outs with your cofounder, and that has destroyed a lot of the value in the company, both yours and his. The whole purpose of a 50/50 split is to avoid this petty squabbling.
The correct advice is thus: Quit rocking the boat, roll back your hours to 8 or less (the company is not "yours" and never was), limp toward your first half-decent exit (either the company itself or just you), and focus on a new solo startup where you can be the CEO and CTO.
When your venture was 0 months old, it needed a CEO to get it funding. Even if he played golf the whole time and lent only his name to the venture while you beat the streets to scare that funding up, he delivered on his job.
A CEO's job for a startup is not to be CMO or COO. It's to scare up money, and that money done got scared up. And now you want to move the goalposts.
Even if he's still out playing golf and you're still putting in 20-hour days, that doesn't mean a 50/50 split is unfair. It's what you agreed to, on the off chance you'd be anywhere near as successful as you are today.
Hate the game if you must, but your failure to understand the game has probably put you on the outs with your cofounder, and that has destroyed a lot of the value in the company, both yours and his. The whole purpose of a 50/50 split is to avoid this petty squabbling.
The correct advice is thus: Quit rocking the boat, roll back your hours to 8 or less (the company is not "yours" and never was), limp toward your first half-decent exit (either the company itself or just you), and focus on a new solo startup where you can be the CEO and CTO.
Yeah, 99% of the time I side with the CTO in these types of posts, but unless the money raised was trivial (sub-6 digit) then just get to work. I get not wanting an idiot to lead the company, but that is something you work out with the investors, not something you bring up to the CEO directly. I fucked this up myself in a startup in the past so I get it, but for now just work as hard as you can to get to product market fit. If you really can't stand behind this guy, consider leaving the startup and starting a new one quietly with a better management team. The fundamental rule of startups is to only team up with people you've worked with successfully before. Otherwise you'll get unlucky with fit / competence.
I think at this point it might be too late as the boat has been rocked and by the sound of it, and OP response to another comment on this thread, I say it's tilting. If I was the CEO, and the person I hired and gave a very generous 50% comes to me with that kind of demand, I'd be realising I've made a mistake. It doesn't matter how good someone is. Everyone is replaceable, and sometimes one's perceived "incompetence" is only that - perceived. We have one side of a story and if I learned one thing from the internet is that every story is like a coin - with 3 sides.
He can try fix it by giving an apology, having thought over it and missed the value his colleagues contributed, etc.
I agree, seems the few others comments left at this point also agree.Whether it be a knowledge issue, a ego issue, or whatever, this person is wrong in their standing. Even if the CEO is a lazy, fruitless person, this persons job position would not exist without the CEO taking the initial risks. I'm curious to see how he responds, or if he even does. I won't imagine he will, people in cases where they are seeking approval generally don't respond well to criticism, mass criticism at that.
I feel this thread is also an argument for never doing an exact 50/50 split.
55/45, 51/49, 50.00001/49.99999, anything that allows a tie to be broken. It doesn't need to have any meaningful financial value there just needs to be a veto bit
55/45, 51/49, 50.00001/49.99999, anything that allows a tie to be broken. It doesn't need to have any meaningful financial value there just needs to be a veto bit
Except you're going to have to pay me a real salary if you expect me to take 49.99%. That last bit is worth a lot, not just in terms of actual power but also in terms of faith and personal dynamics.
Another option is a third founder. It's literally just a tie break if there's a stalemate that'll kill the company anyway. In that situation we'd be negotiating 0.01% of nothing
Edit: To additionally clarify, I never said it'd be me with the veto bit
Edit: To additionally clarify, I never said it'd be me with the veto bit
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<blunt>:
You have an over-inflated view of your own contributions, because, well, you're human, and we tend to view our own contributions as much more valuable (because we understand how complex and impactful they are, and we don't usually do so for other people's contributions).
My perspective, as a technical person who started doing startups in 2007 (as CTO in my first 2 startups), is running a successful company now (as CEO), and has advised a bunch of companies over the last 10 years, is that a 50/50 deal is extremely generous and if anything I would advise the CEO that he was too generous with you and probably set up this problem of your overinflated ego by doing that. Possibly this problem has sunk the company unless you're able to pop your inflated head balloon and get back down to earth.
Ideas aren't everything, but recruiting great people to work on your idea is part of execution. You got recruited 4 months in. You're an employee who somehow miraculously has as much equity as the founder. That is an insanely good deal and you are foolish and extremely greedy to be questioning it, especially at this point.
Now, about who wears the pants, which you mention in another comment - you need to clarify who wears the pants in what context. You're not an expert on everything, and neither is he. Obviously you have expertise in technical matters, and so it is reasonable that you will want to own technical decisions and have a strong say in product/vision decisions. But based on your post you sound blissfully unaware of all it takes to build a larger company (I notice you didn't specify how "successful" your online business was) so you should defer to the CEO on most of what it will take to get this to actually become a company. That's his job. And if you think he can't do it, quit.
You have an over-inflated view of your own contributions, because, well, you're human, and we tend to view our own contributions as much more valuable (because we understand how complex and impactful they are, and we don't usually do so for other people's contributions).
My perspective, as a technical person who started doing startups in 2007 (as CTO in my first 2 startups), is running a successful company now (as CEO), and has advised a bunch of companies over the last 10 years, is that a 50/50 deal is extremely generous and if anything I would advise the CEO that he was too generous with you and probably set up this problem of your overinflated ego by doing that. Possibly this problem has sunk the company unless you're able to pop your inflated head balloon and get back down to earth.
Ideas aren't everything, but recruiting great people to work on your idea is part of execution. You got recruited 4 months in. You're an employee who somehow miraculously has as much equity as the founder. That is an insanely good deal and you are foolish and extremely greedy to be questioning it, especially at this point.
Now, about who wears the pants, which you mention in another comment - you need to clarify who wears the pants in what context. You're not an expert on everything, and neither is he. Obviously you have expertise in technical matters, and so it is reasonable that you will want to own technical decisions and have a strong say in product/vision decisions. But based on your post you sound blissfully unaware of all it takes to build a larger company (I notice you didn't specify how "successful" your online business was) so you should defer to the CEO on most of what it will take to get this to actually become a company. That's his job. And if you think he can't do it, quit.
People who have never started companies undervalue how hard that is. CEO's job is literally using sales and recruiting to get outcome. He closed the funding and recruited you. If you think you can do that, then you should have done it, and you've already screwed up that outcome by touching this.
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I just did the gust survey, it says 100%/0% in my favor. He builds, I do everything else in addition to build, including building v1 by myself. He is also theoretically fungible, like you are. I made him a 50/50 partner for good reasons: the product is worth $0 until its not, and morale/loyalty/not making posts like this is more valuable to my outcome than a larger % of zero. The survey is bullshit.
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I have a great therapist (ex-biglaw) to help me overcome personal psychological barriers. We all face our ego and great leadership stems from overcoming this.
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I just did the gust survey, it says 100%/0% in my favor. He builds, I do everything else in addition to build, including building v1 by myself. He is also theoretically fungible, like you are. I made him a 50/50 partner for good reasons: the product is worth $0 until its not, and morale/loyalty/not making posts like this is more valuable to my outcome than a larger % of zero. The survey is bullshit.
--
I have a great therapist (ex-biglaw) to help me overcome personal psychological barriers. We all face our ego and great leadership stems from overcoming this.
You are confusing 2 different things:
1) The choices that need to be made for the company to succeed
2) How much equity you have or should get.
“The vesting schedule means the massive contributions will only help me if I see it through” ...errm, yes, that’s the point of a vesting schedule.
As noted by others, the way to succeed is to make the whole pie bigger (and therefore your slice also becomes more valuable, even though it’s the same percentage). You should assume that your equity slice will never get bigger in percentage terms, the investors want you busting a gut to make the pie bigger, not fighting over percentages.
Now, if you really think the CEO is destroying value I.e. making the pie smaller, and you can’t resolve it between you, then both of you need to talk to your board investors. The likely result is that one of you will be leaving the firm, and that person’s equity will return to the company since neither of you has hit your 12 month anniversary, assuming you have a standard vesting schedule.
I feel like some of this is due to cultural differences between academia where it sounds like you were clearly successful, and vc-backed startup world.
1) The choices that need to be made for the company to succeed
2) How much equity you have or should get.
“The vesting schedule means the massive contributions will only help me if I see it through” ...errm, yes, that’s the point of a vesting schedule.
As noted by others, the way to succeed is to make the whole pie bigger (and therefore your slice also becomes more valuable, even though it’s the same percentage). You should assume that your equity slice will never get bigger in percentage terms, the investors want you busting a gut to make the pie bigger, not fighting over percentages.
Now, if you really think the CEO is destroying value I.e. making the pie smaller, and you can’t resolve it between you, then both of you need to talk to your board investors. The likely result is that one of you will be leaving the firm, and that person’s equity will return to the company since neither of you has hit your 12 month anniversary, assuming you have a standard vesting schedule.
I feel like some of this is due to cultural differences between academia where it sounds like you were clearly successful, and vc-backed startup world.
Thanks. This is all good to hear and something I'm struggling to reconcile. In academia I was always keen to show and develop a real capability, as opposed to being the comfortable academic. I wrote a lot of code and some decent engines for the different techs relevant to my field... but that's not exactly the point. I've been increasingly keen to learn about startups/entrepreneurship and have engaged with mentors and local startups and incubators for years in prep of making the leap. A large part of my value is taking away the risk and showing investors and potential recruits that we can get it done. My academic job wasn't handed to me.
I've been in VC for ~10 years, and we see a lot of founder squabbles.
A lot of what makes for great companies is simple: a smart team in a great market, just plowing through things for 3-5 years.
That 3-5 years part is the one that trips up (a) startup newcomers and (b) people who were very successful in school. You get way beyond the "theory" of what you're building very quickly, and there is a LOT of dull blocking & tackling work.
To my ear it sounds like you are frustrated with the slow pace of the work and want to do things that are more intellectually interesting. This is more or less an anti-pattern at the ~1 year mark, and you might consider that your CEO knows more than you think, just not about the technical side.
I can't see a scenario where pointing to an online equity calculator is going to help, so don't go there. If you're convinced that the CEO is damaging the company, you should want them gone, not still around with a little bit less incentive to succeed. Mostly though, you should consider very seriously whether, for all your VR chops and accolades, you are even correct in assuming the CEO is not able, vs whether you are experiencing Dunning-Kruger or simply don't like them.
A lot of what makes for great companies is simple: a smart team in a great market, just plowing through things for 3-5 years.
That 3-5 years part is the one that trips up (a) startup newcomers and (b) people who were very successful in school. You get way beyond the "theory" of what you're building very quickly, and there is a LOT of dull blocking & tackling work.
To my ear it sounds like you are frustrated with the slow pace of the work and want to do things that are more intellectually interesting. This is more or less an anti-pattern at the ~1 year mark, and you might consider that your CEO knows more than you think, just not about the technical side.
I can't see a scenario where pointing to an online equity calculator is going to help, so don't go there. If you're convinced that the CEO is damaging the company, you should want them gone, not still around with a little bit less incentive to succeed. Mostly though, you should consider very seriously whether, for all your VR chops and accolades, you are even correct in assuming the CEO is not able, vs whether you are experiencing Dunning-Kruger or simply don't like them.
I'm going to share here my friend's insight which I think is applicable.
He said: New startups that have one brilliant individual often fail because these people often think it's all about them.
EDIT: After reading OPs responses on this thread, I have reinforced my previous impression, and in addition I now think OP is dishonest.
OP has made it clear that this is in part about power and thrills, not just equity, and that he was looking to leave the academia in search of such power and thrills.
In other words, when OP shook hands with the CEO already knew that he wasn't happy with 50/50 and CTO title, but at the time he thought that was the most he could get, and now OP thinks he can get more.
Completely dishonest, OP is just considering how to execute the power grab he had planned.
He said: New startups that have one brilliant individual often fail because these people often think it's all about them.
EDIT: After reading OPs responses on this thread, I have reinforced my previous impression, and in addition I now think OP is dishonest.
OP has made it clear that this is in part about power and thrills, not just equity, and that he was looking to leave the academia in search of such power and thrills.
In other words, when OP shook hands with the CEO already knew that he wasn't happy with 50/50 and CTO title, but at the time he thought that was the most he could get, and now OP thinks he can get more.
Completely dishonest, OP is just considering how to execute the power grab he had planned.
This might be an unpopular opinion, but are you sure you deserve twice as much equity? You're both going to be working equally hard on this startup for years.
The CEO took the risk of starting the company, came up with the idea, and raised VC funding - not trivial things to do.
I think this is the right popular opinion.
And formed a team / hired him.
I have been a founder of three companies that led to successful (>$100M) acquisition over the last 20 years. Always in tech / CTO role.
Reading your post and comments, it seems to me that your ego and reality are somewhat disconnected. Not to say that you aren’t good at what you do, but you have no idea what it takes to actually build a company. It doesn’t matter how good the tech is, you don’t have a company without all the other parts.
I would also like to call out your suggestion that equity balance can solve the problem. This really makes me question the sophistication of your thinking, and casts serious doubt on your abilities as a leader and team builder - a key skill for a successful CTO.
From what I’ve read here, my assessment of you is a low (leadership) potential, very high-performance employee. Not CTO material without a lot of growth quickly.
The fault I would see in the CEO is if he doesn’t recognize his mistake soon enough and fire you before your stock vests. I see no way for the company to be successful with you as CTO and the huge schism in the leadership team that already exists.
Reading your post and comments, it seems to me that your ego and reality are somewhat disconnected. Not to say that you aren’t good at what you do, but you have no idea what it takes to actually build a company. It doesn’t matter how good the tech is, you don’t have a company without all the other parts.
I would also like to call out your suggestion that equity balance can solve the problem. This really makes me question the sophistication of your thinking, and casts serious doubt on your abilities as a leader and team builder - a key skill for a successful CTO.
From what I’ve read here, my assessment of you is a low (leadership) potential, very high-performance employee. Not CTO material without a lot of growth quickly.
The fault I would see in the CEO is if he doesn’t recognize his mistake soon enough and fire you before your stock vests. I see no way for the company to be successful with you as CTO and the huge schism in the leadership team that already exists.
If you feel this way, you should quit and start your own company, raise money, recruit a team, and be CEO yourself. You’ll never be happy in your current position, and you’ll never understand what your current CEO did and does until you do it yourself. Good luck.
No, I don't think it can - you are being completely unrealistic about equity. The time for negotiating equity is before you incorporate or before you take funding; not 9 months down the line.
Frankly, if you pursue this equity issue - it is very unlikely to end well - you are likely going to destroy value in your business based on what? Some online calculator, put out as lead-gen?
I think you are confusing two issues - equity and leadership. Leadership is a perfectly reasonable conversation to be having; yesterdays CEO might not be the correct CEO today. This is probably 9 months too late, but maybe something like 'Founders Dilemmas' could help you.
Frankly, if you pursue this equity issue - it is very unlikely to end well - you are likely going to destroy value in your business based on what? Some online calculator, put out as lead-gen?
I think you are confusing two issues - equity and leadership. Leadership is a perfectly reasonable conversation to be having; yesterdays CEO might not be the correct CEO today. This is probably 9 months too late, but maybe something like 'Founders Dilemmas' could help you.
You were asked as a CTO to a very young (yet VC backed!) company. You knew very well that a large part of the success of the startup would depend on your expertise. You agreed to 50% equity.
What has changed that you feel you are owed more now?
What has changed that you feel you are owed more now?
You sound like a talented person with a lot to contribute to the company. You're going to help build a great product, and if you combine that with the talents of other people you'll build a great company.
That last part is the important part. A company is MORE than a product. Do a google search for Steven Blank business canvas. Product is just one column in the whole thing. It takes a lot of work to build a good product, and you'll want to best person you can get for it (sounds like you're him!) but at the end of the day, you will also need someone who is going to help get it sold. You'll need a sales team, a marketing team, relationships with partners, you'll need all sorts of non-product related things. They're necessary. Products don't sell themselves. They just don't.
It doesn't sound like you have any experience building a sales pipeline, marketing, or business in general. Your CEO is going to work on those things so you can put your effort on a great product. If you don't think he's up to the task, maybe you need a new guy... but don't diminish his equity. He has an important job, he deserves as much.
That last part is the important part. A company is MORE than a product. Do a google search for Steven Blank business canvas. Product is just one column in the whole thing. It takes a lot of work to build a good product, and you'll want to best person you can get for it (sounds like you're him!) but at the end of the day, you will also need someone who is going to help get it sold. You'll need a sales team, a marketing team, relationships with partners, you'll need all sorts of non-product related things. They're necessary. Products don't sell themselves. They just don't.
It doesn't sound like you have any experience building a sales pipeline, marketing, or business in general. Your CEO is going to work on those things so you can put your effort on a great product. If you don't think he's up to the task, maybe you need a new guy... but don't diminish his equity. He has an important job, he deserves as much.
> So even though joining this startup seemed ideal, I'm finding that the CEO is out of his depth and I can't follow him.
> I'd love to do this with the CEO in a lesser role.
Is this about equity or about who wears the pants?
> I'd love to do this with the CEO in a lesser role.
Is this about equity or about who wears the pants?
pants. Is it bad to address this with equity. Our handshake was based on equal equity and standing (I asked for a lot more than 50/50 initially and took the leap-of-faith to join forces), and that the job-titles were secondary... that's not really working out.
I've never heard of a CTO having more equity than the CEO. Do you think you're being slightly unreasonable in your expectations? 50/50 feels quite generous after they raised the round of funding.
CTO isn't the right title for my actual role. I've got the "map to the customer", many options for pivots with detail, I understand the customer from another side too (it's teaching tech... and as a former teacher that's also part of "not just a CTO").
It's tough tech. I've already done key tricky bits.
Another part of what hurt was rolling in more tech after the fact (after the 50/50 handshake). I've taken that out, we have clearer focus without it (and I feel better). Part of the problem is my hunger to take the CEO trail myself... from the beginning.
> Part of the problem is my hunger to take the CEO trail myself... from the beginning.
In signing up for a 50/50 split, you made your decision about this already. If you don't feel like your co-founder is pulling their weight, maybe figure out a way to change the division of responsibilities so that he is instead of approaching this like a zero sum situation.
In signing up for a 50/50 split, you made your decision about this already. If you don't feel like your co-founder is pulling their weight, maybe figure out a way to change the division of responsibilities so that he is instead of approaching this like a zero sum situation.
Since it's pants and not equity.
You both obviously want the company to succeed and also seem to think it will, you may just have different views on how to get there.
I think this could be solved over a pint of beer.
You both obviously want the company to succeed and also seem to think it will, you may just have different views on how to get there.
I think this could be solved over a pint of beer.
The chaos coming out of an equity battle will make the 2 of 2:1 worth less than making the thing successful. You have no power here, as you should know as a c-suite guy, so suck it up, work hard and wait.
There is no good outcome here.
You clearly don't have mutual respect for the CEO (not that you should or shouldn't necessarily) and in less than half a year find yourself in pretty fundamental conflict. In what amounts to a founder level role at a startup, if you aren't on the same page about almost everything, then it will blow up.
My suggestion is to find someone to take over your role and go do something else. The VR space requires too much grinding and grit right now to succeed while not having a great working relationship between founders/C-Level people.
You clearly don't have mutual respect for the CEO (not that you should or shouldn't necessarily) and in less than half a year find yourself in pretty fundamental conflict. In what amounts to a founder level role at a startup, if you aren't on the same page about almost everything, then it will blow up.
My suggestion is to find someone to take over your role and go do something else. The VR space requires too much grinding and grit right now to succeed while not having a great working relationship between founders/C-Level people.
Honestly as a technical founder in VR too I understand where you come from but you are wrong on this.
You don't get equity for having a good background, you get equity for being important to the business and damn you got the same amount that a guy that most likely handled a fundraising by himself.
At this stage they are investing in you more than you are investing in them yet you absolutely did not talk about what you actually achieved for them.
Worse only 5 month after signing you are talking about the demotion of your partner who from an exterior standpoint already contributed more than you both in time and in money gained.
I think that :
1) You are not the guy they need. I am sure that you are great but you are just too high maintenance at a stage that is too early for that.
2) You need to run your own show, you sound like the type of guy who have an hard time following others.
If you think that either doing it by yourself or associating with someone who is "CEO material" would be hard, then it can very well be an indicator that you currently are pushing your luck.
You don't get equity for having a good background, you get equity for being important to the business and damn you got the same amount that a guy that most likely handled a fundraising by himself.
At this stage they are investing in you more than you are investing in them yet you absolutely did not talk about what you actually achieved for them.
Worse only 5 month after signing you are talking about the demotion of your partner who from an exterior standpoint already contributed more than you both in time and in money gained.
I think that :
1) You are not the guy they need. I am sure that you are great but you are just too high maintenance at a stage that is too early for that.
2) You need to run your own show, you sound like the type of guy who have an hard time following others.
If you think that either doing it by yourself or associating with someone who is "CEO material" would be hard, then it can very well be an indicator that you currently are pushing your luck.
The CEOs job is to sell the vision. To investors, employees/recruits, and early customers. That's the job. Not to code or do sprints or stay up 3 straight days testing a release.
Sounds like the stereotypical clueless academic ego quite honestly. Asked for a response in writing? Using online equity calculators 5 months post facto? What planet are you living on? Maybe you are undercompensated and deserve more but the way you’re approaching this shows you are definitely not 2:1 CEO material. Reality check time.
I suggest reading the book E-Myth. It's superbly relevant to your case.
Technicians who start a company think that they are everything. Yes, you have the technical prowess but that means squat if you want to participate in market economy. If you want to be appreciated purely as a technician, academia is a better fit.
Entrepreneurs who start a company know that the product is not a company.
And a manager knows how to deliver results for the company not create the product.
Really good book...
Technicians who start a company think that they are everything. Yes, you have the technical prowess but that means squat if you want to participate in market economy. If you want to be appreciated purely as a technician, academia is a better fit.
Entrepreneurs who start a company know that the product is not a company.
And a manager knows how to deliver results for the company not create the product.
Really good book...
I think a professional mediator may help resolve this situation. Everyone should feel they are fairly compensated. From a technical person’s perspetive they are doing all the work. A business person often looks at a chief technical person as a key component of the overall business model. In my opinion, the most important question is will both of you do whatever is necessary to make this startup successful? A healthy cofounder relationship is essential to this. Could you have done this startup all by yourself? Remember half of a billion dollar company is better than a 100% of a broken startup. I would also encourage you to look at several Harvard business cases where there was tension between a CTO and non technical CEO. Many times a technical CEO would be moved to a CTO role. Once they sold that company, investors would be confident in them being the CEO a next time. In short, I would suggest thinking of this from a lot of perspectives before jumping to a decision. In general, a healthy cofounder relationship is critical to a startup and please resolve this now rather than later. Best of luck!
No, I can't do this startup by myself. He's done some great things already getting the company funded and finding me. (Hard words to say.) I left my academic job to experience the thrills and spills of founding+leading, that's something I feel like I've lost that is part of this. I'm striving to keep this real and face all the truths. I don't want to kill this venture, but know what I've felt growing over the past few months. Perhaps it's transient and I need a better focus on the bigger picture. (CTO vs non-technical CEO readings sound like a great move.)
> (Hard words to say.)
I would encourage you to reflect hard on this.
Personally, I would worry that you're finding it difficult to give your CEO/co-founder credit. I don't know you, so it is not for me to judge the reasons - but I think you should try and understand why you find it hard, and if that is a problem with you, a problem with the CEO or something else.
I would encourage you to reflect hard on this.
Personally, I would worry that you're finding it difficult to give your CEO/co-founder credit. I don't know you, so it is not for me to judge the reasons - but I think you should try and understand why you find it hard, and if that is a problem with you, a problem with the CEO or something else.
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It seems like you are in the product phase. So right now, yes you probably are more valuable. However, there is so much more to building a business than just building a product. When it's sales and business development time the CEO will be the most important.
If you are saying he will not be able to do this job well, that is a tough problem to have. However, changing the equity is certainly not the answer.
You need to ask yourself what is the best way for the business to succeed. Not for you to obtain the most equity.
If you are saying he will not be able to do this job well, that is a tough problem to have. However, changing the equity is certainly not the answer.
You need to ask yourself what is the best way for the business to succeed. Not for you to obtain the most equity.
> Can this work out?
You’ve pretty much set yourself and your company on fire with your public “negotiating strategy” here.
People have certainly been forwarding this thread to your investors all morning, it’s not like you tried to obfuscate anything here. This is not how a board wants to learn about problems.
If it’s not already toast, shut up and take notes because whichever investor helps you two work through this is a rockstar. You personally have more to learn from them than from anyone else you’ll ever meet.
You’ve pretty much set yourself and your company on fire with your public “negotiating strategy” here.
People have certainly been forwarding this thread to your investors all morning, it’s not like you tried to obfuscate anything here. This is not how a board wants to learn about problems.
If it’s not already toast, shut up and take notes because whichever investor helps you two work through this is a rockstar. You personally have more to learn from them than from anyone else you’ll ever meet.
Why did you join if the CEO is so-so? I think it can work out, if one of you leaves. Why are you so worried about his compensation compared to yours? If you feel you are undercompensated then demand more. If you feel like he is overcompensated, then question the board's judgement. It sounds more like sour grapes than anything the way you want to structure your equity with respect to the CEO.
If a share vesting schedule makes you feel like it's not your company, why not get rid of that?
Have both of you own equal 50/50 stock directly and without conditions — that's the only way to really feel like you're the entrepreneur. If he doesn't want to do that, it's a sign that you're not being trusted either.
Have both of you own equal 50/50 stock directly and without conditions — that's the only way to really feel like you're the entrepreneur. If he doesn't want to do that, it's a sign that you're not being trusted either.
Generally VCs won't let you do that and will occasionally make you re-vest shares you'd previously vested as part of a new round of investment.
Right — I actually missed the "has VC funding" part in the original question.
I don't think most VCs would feel great about one founder going behind their backs to get an absolute majority of equity after the funding is already executed. Since the OP is effectively looking to demote his co-founder from the CEO position, he should make sure the VC partner and company board understand what's going on if he takes any action.
I don't think most VCs would feel great about one founder going behind their backs to get an absolute majority of equity after the funding is already executed. Since the OP is effectively looking to demote his co-founder from the CEO position, he should make sure the VC partner and company board understand what's going on if he takes any action.
You have a point on the amount of effort you are putting in.
But, there is a larger point here - People come up with ideas left and right. It is often said "Ideas are dime a dozen". Not many people put in effort to take a risk and start something.
So, when someone joins a startup they have to understand what they are getting into. Is the founder good enough or he is just hot air? People take a huge risk in joining a non-technical CEO on tech-oriented/facing projects. The founder/CEO might not be up to speed on tech methodology. They might even be reading stuff off magazine covers. And then demanding that their software work exactly like what they have read. This can be frustrating.
Unfortunately, not much can be done about it.
But, there is a larger point here - People come up with ideas left and right. It is often said "Ideas are dime a dozen". Not many people put in effort to take a risk and start something.
So, when someone joins a startup they have to understand what they are getting into. Is the founder good enough or he is just hot air? People take a huge risk in joining a non-technical CEO on tech-oriented/facing projects. The founder/CEO might not be up to speed on tech methodology. They might even be reading stuff off magazine covers. And then demanding that their software work exactly like what they have read. This can be frustrating.
Unfortunately, not much can be done about it.
[deleted]
You agreed on 50/50 when you joined, there is no way CEO will give his equity to you. Would you do it?
[deleted]
Asking a forum filled with aspirational CEOs whether the CEOs should give up 2/3s of her equity to an employee doesn’t sound like a promising idea.
a lot of the comments are about the validity/tenability of your position, and while I overall agree with a lot of what is being said (unfortunately, the fact that an adversarial dynamic has been introduced strikes me as the hardest thing to overcome here, though still entirely possible to overcome) here's a few other things to consider:
1. you can lead without being CEO. early on in the life of a company, co-founders often share CEO-like responsibilities on strategy matters and each will separately own / be responsible for their own domain (so in this case, it sounds like you should own the technical part, and your co-founder may own sales, marketing, fundraising, etc.). i think at this early stage the concern regarding leadership can be managed without explicitly changing title - as CTO and co-founder you should have significant influence and decision-making, regardless of title or equity split. if the problem is that the CEO is trying to steer / control things that they don't have an understanding of that you DO have a much better understanding of, regardless of position / equity you should view your job as helping both your cofounder (and any other people on the team) to understand and get behind the strategy that your expertise and experience tell you is right - this is a big part of leadership, getting people to believe in your vision, and the substantive act of succeeding at that should be more important than title, especially at this early stage. don't think to yourself "I'm not the CEO so therefore I can't lead" - you can! especially if you have good logic / basis for your positions. now, if the CEO is intractable, doesn't understand and doesn't want to understand and you can't convince them or the team, I'd say it's not a good match regardless of position (and truthfully, while you may have good reason to consider your cofounder at fault, I'd also argue that the inability to communicate the strategy / expertise is a at a minimum a joint failure in communication, again, good reason to just call it, as understanding each other is key, esp. at this early stage). this is all to say: you should be able to position yourself as the leader on the things you want to lead, regardless of title, esp. at this stage.
2. the board decides who the CEO is, so they should be making the decision (but proceed with MAJOR caution). the board decides who the CEO is, so i hate to suggest this as it will get very messy, but if you really have deep conviction then you may also want to go to the board (which presumably you are part of, so that's good access). since you are VC-backed, there's a good chance you have a VC on your board, and they can act as tie-breaker - if not, you can still rely on investors who own a controlling interest of the investor's class of shares - even if you did a note, whoever is the "lead" or "leads" and have the most sway can help be a tie-breaker here. the board and investors should have the best interest of the company at heart, and if you can really make the case that the best thing is for you to lead, they can arguably help. the problem here may be that if the CEO led the fundraising efforts, their relationship will investors may be stronger (though I could be wrong here), and there's a good chance that going to the board / investors will only accelerate your getting pushed out. of course if you did the fundraising and own those relationships, it should be easier to make a change. the key thing here is to recognize that this is a big escalation, things will move quickly one way or the other (boards are trained to resolve founder disputes with total urgency), so only proceed if you have total conviction and are not afraid to be pushed out entirely over it. I've seen this go many different ways, and while most of the time this blows up the company, it seems like the company would have blown up inevitably because the board maneuverings were just a symptom of deeper underlying issues that could not be resolved. in a small minority of cases, I've seen this work out, usually because one of the founders gets pushed out and the company is able to recover - of course, works out means from the company's perspective, you could of course be the one who is asked to leave. a secondary effect is that if you lose at that level, those VCs will view you as a trouble-maker, and getting funding may be tough for your future projects (from those VCs, but also others as its a small world). again, this is really the highest escalation you can make, proceed with loads of caution and take into account the very serious risks, and view it as a last resort.
3. cofounders need to trust each other. overall, the key issue here seems to be trust: you don't trust that the CEO can lead, and I would assume at this point the CEO may not trust you to accept their position. while the adversarial dynamic may be impossible to reverse at this point, I think more than anything the only way for this to succeed with both of you involved will be if you can both learn to trust each other, cheesy as it sounds this is probably the most important things to have between cofounders, esp. at this early stage (you are both risking a lot betting on the other, trust and good faith is required). again, might be irreparable at this point, but I think now that you've aired your concerns, you can try to guide that into a productive dialogue that establishing trust of the other, acknowledges both your and the cofounders strengths/limitations, and perhaps you can both begin learning to trust eachother more - that being said, at this early stage where you may need to move fast, the process of developing trust will slow the company down and unless you have some serious financial padding (which you may), that time spent on building trust will be what allow your more already aligned competitors' teams (if any) to outrun you. that all being said, if you just don't trust them and you don't think you ever will, then I'd say either leave or think about option 2 above.
sources: worked with execs and boards of many early stage companies around these kinds of issues, as an outside attorney, general counsel and as a business exec.
1. you can lead without being CEO. early on in the life of a company, co-founders often share CEO-like responsibilities on strategy matters and each will separately own / be responsible for their own domain (so in this case, it sounds like you should own the technical part, and your co-founder may own sales, marketing, fundraising, etc.). i think at this early stage the concern regarding leadership can be managed without explicitly changing title - as CTO and co-founder you should have significant influence and decision-making, regardless of title or equity split. if the problem is that the CEO is trying to steer / control things that they don't have an understanding of that you DO have a much better understanding of, regardless of position / equity you should view your job as helping both your cofounder (and any other people on the team) to understand and get behind the strategy that your expertise and experience tell you is right - this is a big part of leadership, getting people to believe in your vision, and the substantive act of succeeding at that should be more important than title, especially at this early stage. don't think to yourself "I'm not the CEO so therefore I can't lead" - you can! especially if you have good logic / basis for your positions. now, if the CEO is intractable, doesn't understand and doesn't want to understand and you can't convince them or the team, I'd say it's not a good match regardless of position (and truthfully, while you may have good reason to consider your cofounder at fault, I'd also argue that the inability to communicate the strategy / expertise is a at a minimum a joint failure in communication, again, good reason to just call it, as understanding each other is key, esp. at this early stage). this is all to say: you should be able to position yourself as the leader on the things you want to lead, regardless of title, esp. at this stage.
2. the board decides who the CEO is, so they should be making the decision (but proceed with MAJOR caution). the board decides who the CEO is, so i hate to suggest this as it will get very messy, but if you really have deep conviction then you may also want to go to the board (which presumably you are part of, so that's good access). since you are VC-backed, there's a good chance you have a VC on your board, and they can act as tie-breaker - if not, you can still rely on investors who own a controlling interest of the investor's class of shares - even if you did a note, whoever is the "lead" or "leads" and have the most sway can help be a tie-breaker here. the board and investors should have the best interest of the company at heart, and if you can really make the case that the best thing is for you to lead, they can arguably help. the problem here may be that if the CEO led the fundraising efforts, their relationship will investors may be stronger (though I could be wrong here), and there's a good chance that going to the board / investors will only accelerate your getting pushed out. of course if you did the fundraising and own those relationships, it should be easier to make a change. the key thing here is to recognize that this is a big escalation, things will move quickly one way or the other (boards are trained to resolve founder disputes with total urgency), so only proceed if you have total conviction and are not afraid to be pushed out entirely over it. I've seen this go many different ways, and while most of the time this blows up the company, it seems like the company would have blown up inevitably because the board maneuverings were just a symptom of deeper underlying issues that could not be resolved. in a small minority of cases, I've seen this work out, usually because one of the founders gets pushed out and the company is able to recover - of course, works out means from the company's perspective, you could of course be the one who is asked to leave. a secondary effect is that if you lose at that level, those VCs will view you as a trouble-maker, and getting funding may be tough for your future projects (from those VCs, but also others as its a small world). again, this is really the highest escalation you can make, proceed with loads of caution and take into account the very serious risks, and view it as a last resort.
3. cofounders need to trust each other. overall, the key issue here seems to be trust: you don't trust that the CEO can lead, and I would assume at this point the CEO may not trust you to accept their position. while the adversarial dynamic may be impossible to reverse at this point, I think more than anything the only way for this to succeed with both of you involved will be if you can both learn to trust each other, cheesy as it sounds this is probably the most important things to have between cofounders, esp. at this early stage (you are both risking a lot betting on the other, trust and good faith is required). again, might be irreparable at this point, but I think now that you've aired your concerns, you can try to guide that into a productive dialogue that establishing trust of the other, acknowledges both your and the cofounders strengths/limitations, and perhaps you can both begin learning to trust eachother more - that being said, at this early stage where you may need to move fast, the process of developing trust will slow the company down and unless you have some serious financial padding (which you may), that time spent on building trust will be what allow your more already aligned competitors' teams (if any) to outrun you. that all being said, if you just don't trust them and you don't think you ever will, then I'd say either leave or think about option 2 above.
sources: worked with execs and boards of many early stage companies around these kinds of issues, as an outside attorney, general counsel and as a business exec.
also - all of the above applies to the CEO as well, so if you're not already talking to the non-founder board / investors, then I'd guess the CEO is (or should be).
ds2643(1)
Do this simple thought exercise: what happens if you leave the company?
You lose a funded company.
They lose (I'm inventing now) the only chance to get the product to work.
A VC would probably want to help you settle this dispute, to avoid wasting a) the money and b) the opportunity to have funded a successful company.
You lose a funded company.
They lose (I'm inventing now) the only chance to get the product to work.
A VC would probably want to help you settle this dispute, to avoid wasting a) the money and b) the opportunity to have funded a successful company.
All true. I've shared a large report that I wrote with a consultant to help unpick some of the detail. Superficially, the CEO is right. Scratch the surface, and I'm right. Who's right or wrong is moot(?). I like the thought that I can reduce my engagement with the CEO and focus on the work/relationships that I enjoy. At least for a bit.
Not sure why the downvotes. You might disagree with my contribution, but I was trying to help the conversation. If you downvoted my answer, can you please explain why?
Fire the CEO if you can. It seems like this CEO is one of the "who you know" ones.
When you do hire talented engineers they won't want a leader who exists out of nepotism, it has the potential to rot the whole company from the head(seen it more than once).
When you do hire talented engineers they won't want a leader who exists out of nepotism, it has the potential to rot the whole company from the head(seen it more than once).
"Who you know" can be really valuable. It can be based on past work relationships and reputation. And it can make raising money a lot easier.
That has a lot of value.
If the OP thinks he can do better than he should leave and start his own company, including raising funding. Problem solved.
That has a lot of value.
If the OP thinks he can do better than he should leave and start his own company, including raising funding. Problem solved.
From what I've seen it's mostly just incompetent people who were born rich or friends/family of board members.
Does it matter? Connections are connections.
Again, if you think you can do it without them, go for it!
Again, if you think you can do it without them, go for it!
After thinking about this I agree
The startup is complex VR software that I have 19 years experience in. I'm formerly a tenured academic leading a research group in this area. I've also worked on big-name projects as a SWEng in this area. I have won awards for my work and know the tech & product very well. I've also iterated similar "products" with customers. I have taught project management, founded a successful online business, a PhD in exactly what we are doing, and 10 years of building toward breaking away from uni to do this. So even though joining this startup seemed ideal, I'm finding that the CEO is out of his depth and I can't follow him. The startup has excellent potential, but relies heavily on new tech coming together meaningfully to meet the customers' needs.
I have raised the issue and presented a strong case for change. In the subsequent meeting about it the CEO was aggressive, so I asked for a detailed response in writing. It's really taking the shine off of the journey. I'd love to do this with the CEO in a lesser role.
I'm torn between; 1. suck it up and keep going, and 2. this is only going to hurt more and more so why empower them (it doesn't feel like this is mine enough to warrant the massive contribs I'm making to the vision and the product day to day). Part of why it doesn't feel like mine enough is that the vesting schedule means the massive contribs will only help me if I see it through.
I've used https://cofounders.gust.com to get some numbers. Even when I over-state his measures, and under-state mine, I come out with 2:1 in my favor.
Can this work out?