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Ask HN: We are shutting down our startup, I get our code. What now?
382 points by sad_cofounder on Dec 9, 2019 | hide | past | favorite | 211 comments
I'm a technical co-founder and invested a lot of time building our website, app, backend and CMS over two years.

My co-founder recently decided to shut the company down, focusing on what he/she does best rather than being reliant on tech/design loops by making our amazing designer create a Shopify site that he/she can manage him/herself.

Without going into details, it is fair but we will need to have serious talk once everything has settled so I can move forward.

Anyhow, as my payment for these past years, I get to sell whatever we have created, code wise, and get the dough for it.

The problem is that I have no clue how to properly handle a sell like this.

There is a bunch of new startups that has recently popped up, doing what we initially did with a caveat; they lack an app for it, currently hustling to make things work. So there might be a pretty good possibility for us to sell it.

To give you an idea what we are doing; an React Native app that sell and connect a very specific type of workshops with costumers over custom WebRTC Video chat(fork of React Native-based Jitsi Meet). What I can tell, I haven't seen another custom Jitsi-Meet integration yet that gives the ability customize the UI that we have.

We use Firebase as our backend and Stripe as our payment integration. Data entry / workshop scheduling is managed using a custom built CMS. We have custom emails + in-app notifications work through Firebase Cloud Functions.

Should I contact these startups? Anything I should do first, legally wise?

I'm clueless.




My own experience with these types of things is that the software is not worth much at best and most likely worthless overall.

Software without a market and customers already using it is basically worthless. If you were in a hot market and had clients a competitive startup might offer some decent money but it’d be mostly for the customer list.

One time that software can hold value is when you have a unique patent or have invented something that is truly new and revolutionary. Think scientific software algorithms or long standing problems where your code can be integrated quickly and solve a problem that isn’t something people can easily replicate with just some time.

For the most part the sounds of your code is that other people could replicate it fairly readily with just some time. I am not criticizing anything, just saying it doesn’t sound like you invented anything truly new. More like you guys put things together in a way to solve a problem which likely had value to people but not enough for the software to hold substantial value without a market and user base.

You can of course try and maybe you’ll get lucky. But I’d likely say you’d have better luck carving out a library or a complete product and open source it. Then sell consulting services around it and maybe host it etc.

The costs are sunk, your best bet is trying to use the software as leverage, not trying to sell it outright. At least that’s been my experience when I had companies fail before we had real traction. I did have one offer for like $5k on software we spent ~600k developing. I held the code and integrated parts into other projects that went on to make me money.

Good luck, and maybe you can prove my experience isn’t true today.


The problem is that you cannot get customers without software.

So every software STARTS as software without customers.

I assume that the market exists since this should be the reason for the project.

No code can be replicated easily. This is a myth spread by non programmers.

Software patents are useless since the Alice case. I.e. you cannot really patent software anymore.

Since I am not sure about the current state of the project I cannot give advice, but I would try and start the business actions asap. I.e. just continue with the original plan.


Well, that's not strictly true. Doing things that don't scale (a prime target for startups) tends to include things you are just pretending is software, but you actually do by hand.

It's entirely possible to have customers before implementing the software.


It might be possible to verify the market, but even then you will not get real feedback unless people actually pay.

I.e. the myth of a landing page as MVP is just that.


I'm not talking about a landing page. I'm talking abouy something that looks automated but is really powered by people on the backend and would never scale without actual software powering the product.

It's pretty rare, but it is a thing.

Take for example TillerHQ (never used an, but it seems like a genius product). You could MVP it as a form the collects bank login info and then has a person manually copy the bank statements into a spreadsheet for the customer. Highly dicey due to privacy concerns, but it illustrates my point perfectly.


Why do you assume the market exists? They are two years in with - best I can tell- no customers. I


I do not. However, dev time is no indication of the lack of market. As I said before, you cannot sell nonexistent software.

The fact that the business side partner forked the company indicates that there is a market.

The question is whether the code contains unique features of the product. IF yes, I would proceed with the software.


This is just plain wrong. You can sell non existing software and use those funds to actually create it. Same as you can sell non existing real estate, or anything really


Well. You can also create a small lab that can do full blood analysis from one drop.


I thought this may be a good place to tell a relevant story.

I created a company with 2 co founders. I quit my day job doing support for a company in a specialized b2b accounting software industry, and started competing with them soon after.

A year of development later and we had some barely working software, and had already snagged our first client by promising them the second part would be done in the next 3 months. We hustled and got it done enough and just keep 1 step ahead of what was needed.

3 years later, we have around 10 clients, and are almost about to make a positive month and start paying off debt we incurred, towards being profitable. We sold shortly after for around 6 million split 3 ways, and had the option of doing what we were for good pay. We had been living off savings and debt for the last three years so that sounded mighty fine.


People sell non existant software all the time.


I suspect the biggest thing you get by 'walking away with the code' is that they can't sue you for immediately using the same techniques in your next venture.

So the question is what's the 'hedgehog' in the Venn Diagram between the old tech, the thing they would be willing to work on next, and what might be available/they can do themselves.


The code is usually worthless elsewhere. Too many variances to make it work straight off the shelf into another company's stack and requirements.

But the skills to consult and integrate other companies to do the same if priceless. Actually no, it is $1000 per day...


I was a technical cofounder who built a company on Firebase+Stripe like you did. When we were acquired it was for the loyal customer base we built in a niche space, and the relationships we had painstakingly built over several years. The CEO of the acquiring company gave us valuable insight that the value of the code we built was not even a minor factor in the acquisition price/decision. Our first project at the new company was to migrate our customer data and backend to their infrastructure on AWS. Unless you have built something proprietary that solves a technical challenge in a meaningful customer-facing way, which seems unlikely based on your description, I would suggest moving on. Best of luck to you on future endeavors!


I had the same thought. OP talks about authored code, but then lists all the pieces that are glued together into a solution.

That takes some customization, but he's not talking about a software product, he's talking about what amounts to a professional services integration of several existing products. Consulting gigs like that can make you money for your time, but the end result is too specific to the situation with too few lines of original code to have much/any value.

If OP hasn't been paid for his work and it's being suggested this software is his pay, then I'm going to agree with other posters and say his co-founder is just dumping him and walking away with anything worthwhile, including the percentage of the corporation OP had which might be worth $$$$ or $0 in the future depending and leaving him with worthless code... and if there's a no-compete written into the sunset agreement for him, he probably can't even use the code, sell it, or consult with it.


A similar thing happened to us. The technology always seems great and innovative (and it is), but the moment a replacement is found, it becomes instantly worthless.

...and so it becomes a huge gamble to pay for technology that doesn't have an active an immovable revenue stream.


Indeed, recurring revenue and customer relationships are what gives a company its worth. It's the hard bit for lots of modern startups, which could be cloned by a couple of devs in a relatively short space of time.


I was thinking that.

For the price of hiring a react developer to make modifications + the cost you are better off letting the react developer only build what you want


> My co-founder recently decided to shut the company down, focusing on what he/she does best rather than being reliant on tech/design loops by making our amazing designer create a Shopify site that he/she can manage him/herself.

It sounds like your co-founder is trying to fire you and leave you with the code, which is not needed because it can be done with Shopify now.

> Should I contact these startups? Anything I should do first, legally wise?

Don't sign anything regarding the breakup of your company. Consider your founding documents very carefully. What do you own according to these documents?

The breakup of a company is a negotiation. Maybe not a very pleasant one, but potentially every bit as important as the founding negotiation.

You will probably want to run your question by a lawyer.


Agree. This sounds like an "interesting" way to simply remove all other equity holders, now since the co-founder doesn't believe they're required anymore. Start new company, transfer all the good assets, leave the trash for others. This after putting in the time to help strategize and determine market fit. (Unless OP was literally 100% uninvolved in that side, in which case maybe this is justified...)

OP says they value the friendship, but friends don't screw over friends like this.


mmm shopify will be interesting to see how that turns out for the other founder


Care to expand?


Its not great out of the box - rather a WIX type of solution in my opinion.

A non technical person dumping there technical people and going it alone is as they say "a brave choice"

Does rather depend how dependant on organic they are.


Hey! First off, I'm really sorry... no matter how cordially things end, it's always hard to see something you cared about and worked for come to an end.

As far as your options, I agree with everyone here who says you likely won't have much luck selling the code. People rarely buy code; they buy customers or revenue. It doesn't seem like you have either, and I don't have much to add there.

BUT! You do actually have something you can sell... your experience. Your last two years weren't a waste. We've hired founders at my company before, and they're great... they have an amazing mindset, are great at making things happen, and tend to be ambitious. These two years of experience are going to make you very valuable to someone. Like you said, there's a bunch of companies out there doing something similar. They don't need your code, but they'd love your experience. You've spent years understanding the space, thinking about the market, and getting a first-hand technical understanding.

I'd think of it that way... this is an amazing resume for you. You'll be able to turn this into money, just not the way you're currently thinking!

Good luck :)


I'm sorry. NO. Just No.

Speaking as someone who not only invests in websites but authored some early studies on the fair value of micro-sites (back in 2012) that deal is utterly bogus.

The value of the business is in the traffic and audience, not the code. To be honest, getting rid of the legacy code and moving the site onto my standard platform is a major goal of the early integration process. I do not pay for code (sorry).

What you have been handed is the back-end of a potential product, the market value of which is unproven (since you haven't been given the customers). While I'm sure the technical quality of the work is excellent, there are multiple strikes against it from a business valuation perspective. Fight for your share of the store profits.


It doesn't seem like there are any customers? And it definitely doesn't seem like their cofounder "gets" the customers... if the site is being shut down and the code is being given away, then there aren't really customers anymore. And nothing said above makes me think there are any customers or revenue currently.


Indeed. From what I can tell, it sounds like an e-commerce company is bifurcating into:

- A B2C Shopify store, with the former traffic / audience

- Some kind of e-commerce platform (not yet a business)

To your point, if they were not already actively trying to market the code as a platform, this is an EXTREMELY hard reset for the second project and your best hope (if you're going to continue this path) is negotiate an acqui-hire.

Speaking as an investor again, the commercial side of the second project sounds like a potential goat rodeo. You're basically dealing with the sales cycle for selling a B2B infrastructure product (specialty e-commerce backbone) to small companies...

Guessing at the market size, you would need an average installed price north of $5 K to make a business viable which means you need a B2B outside sales team. Given that you're selling to startups, suspect getting above $100 K ticket price is a challenge. Strong likelihood of issues with customer acquisition costs > contribution margin.

Again... hand waving BS about the business I haven't seen, but much caution would be advised. The other guy definitely grabbed the crown jewels of the remaining business.


Sad Co-founder here, first, thanks so much for all the (still incoming) answers. This is invaluable for me to be able to fully learn and move forward from this experience. To answer some the overall questions I've seen;

* The company will be completely shut down, no more b-corp.

* I own < 50% of the company

* My co-founder will continue based on our last pivot minus my technical knowledge.

* I would love to be able to chill on this for a while, but my co-founder want to move forward and close our old business down by the end of this year so that he/she can close all tax/business stuff.

* My co-founder invested money to pay our designer / product owner, I invested my time.

* We had no real customer traction due to our (now in retrospect, bad) decision to pivot away from the app we worked hard to release, not maintaining it and work on v2 of it instead. It sucks because through my co-founder, we had serious reach through social platforms such as Instagram, but we also knew the initial business model couldn't scale so we had to pivot.

* Deep inside I knew our code would be a hard sell and I see the bigger picture now. Thank you all for zapping me out of it. I do think that cross-platform WebRTC integration has some value, but as some of you point out, my knowledge is probably more valuable than the code it self. I will reach out to all of you who have pinged me. I might be up to join as a contractor for some time, to help out with knowledge transfer / maintain the code.

* Since my co-founder will still work within the same market, I can't open-source the code without causing friction I'd say. So might not do that.

* I consider my co-founder a really close friend so it is of high importance for me to keep our friendship intact. For us to be able to do that, I need to figure out what is fair so all of your comments really helps!

I'll keep on answering questions as they come. Again, thank you all for your answers.


Normally, you already own the code, as it property of the entity. If she decides to walk away, she can sell her shares (has to offer you, if that’s in the founding doc) to you.

The thing is, you created what was expected. She didn’t produce what was expressed from her.

If she’s doing the stuff of your last pivot, you’re basically getting fired. You worked 2 years on it without pay.

Getting equity in the new venture will be difficult, but it might be easier to get cash for not getting in the way might or not claiming some anti-competitive clause.

This is also better for you, as the CEO isn’t able to sell anyway, and that will probably not change in the new venture.

Don’t just sign to get fired so you get something that’s already yours. If she thinks the code is worth selling, she should be doing that herself


As others have said, it doesn't sound like you're getting much of value. At this point, you might even ask instead for a big fat one time paycheck, if that's possible.

But, since you asked specifically what you could possibly do with the left over code, I believe Shopify has a market of add-ons, so I would look to see if you can't salvage some of the code as a Shopify add-on and sell it there. Maybe your ex co-founder can even become your first customer of it.

https://apps.shopify.com/


Yeah, spin up a bunch of modules for different ecommerce platforms that integrate with your platform. See if your ex-co-founder will be your first customer, if they still need the service the software provided. It might actually turn out to be a fruitful relationship to have such a close feedback loop for shaping the software into something customers want. Just be careful not to accidentally build them a custom plugin only useful to them specifically. Charge them accordingly if they ask for big features. A lot of customers to SaaS products are willing to help fund feature development as custom work in addition to the recurring payments..


Technology lawyer here! Not your lawyer, just a lawyer generally. I will preface this comment with the caveat that: (1) you can't (and shouldn't) rely on any of what I am about to say; (2) none of this constitutes legal advice; and (3) laws vary from jurisdiction to jurisdiction (and I am not familiar with your specific jurisdiction).

> Anything I should do first, legally wise?

This is a tricky situation from a legal standpoint and you should contact a lawyer to get some advice for you in your personal capacity. Transferring ownership of code isn't always as simple as saying "this is now yours!". You will want to find someone who can draft an agreement to assign the rights in your code from your company to you. In some jurisdictions, if multiple people assisted in writing the code, there may be additional steps you have to take to secure your rights in the code. You mentioned that you wrote the code, but a lawyer will hopefully be able to take a look at your specific circumstances and give you some advice on what you need here.

> The company will be completely shut down, no more b-corp. > I own < 50% of the company

You're also probably going to want to get any lawyer you hire to look at the documents that established your company (including any articles of incorporation or a partnership agreement) or your employment agreement with the company (if you have one). These documents may be important for your receipt of the rights to the code, and also for determining what your rights are with respect to the assets of the company after you wind it up.

> The problem is that I have no clue how to properly handle a sell like this.

Again, a lawyer can help with this (not to sound like a broken record) once you have a buyer lined up. You'll need to draft and negotiate an agreement to sell the code, which a lawyer can assist with.

In terms of what to look for in a lawyer, try to find someone that does commercial technology contracts and has experience selling software. Not all Intellectual Property lawyers do work with software/technology, so you will want to try to find someone in that niche area. Pricing for drafting an agreement generally scales with how customized the agreement is. Depending on your specific circumstances, you may be able to get away with relatively generic agreements, which can help keep costs down.


> * Since my co-founder will still work within the same market, I can't open-source the code without causing friction I'd say. So might not do that.

You were not paid to keep this code under wraps. You don’t owe anybody any favors. If they didn’t want you open sourcing it, they should have valued the code and bought it off of you.

Teach them a lesson. Release the code. Otherwise people will just walk all over you all your life.


> Teach them a lesson. Release the code. Otherwise people will just walk all over you all your life.

That's a very simplistic heuristic for living. Let me ask this: to what end?

In all likelihood, maintaining a good relationship is of greater value than "teaching them a lesson". Most times the only person you can meaningfully teach is yourself.


It goes both ways. The other founder dropped him and left him with nothing but a useless codebase, he can’t even get any kind of recognition because he’s expected to not release the code he wrote. He’s been fucked.


What would be the benefit for the author from releasing the source code?

Open Source projects can be quite a lot of work to maintain and the demands from people using it for free can be both unfriendly and exhausting.

Plus, a lot of big companies make a lot of money off using free open source projects internally to fuel their closed-source SaaS offerings.

As for releasing it just as a way to exact revenge, I'm not sure that can produce much good. It sounds more like a surefire way to alienate the local startup community. So it could block you out of profitable future business ideas.


Don’t feel you can’t release an open source project because you don’t want to maintain it. The way it usually works is one person starts a project by making the huge initial effort and releasing it, and then interested maintainers will come out and provide updates where they see fit.

The guy with the open source always has the higher ground. No one loses reputation by giving free code to a larger community.


I did release an open source project, but then eventually I removed my contact info and added a note to ask people to please stop emailing me with their problems, because I was getting way too many requests for help from self-entitled users who thought that i was somehow required to support them in using my free tool.

Another time, I fixed an open source tool to work correctly in the cloud environment that my company was using. They then listed my patched version in their wiki and made it sound like it was an officially supported tool on their platform. The result was that I got flooded with requests from their customers, so I had lots of work helping their customers but I received no cut of the revenue.


It appears to me that you prioritize the friendship over the financials, which can be a valid decision. If that's the case, you might just have to accept that you worked for free to nurture or sustain this friendship.

But if this is about a girl, then I worry that you already lost. Even today, most women still subconsciously expect their boyfriend to be able to provide for them, if it becomes necessary. For that criteria, a boyfriend that cannot successfully negotiate deals to his favor is an unsafe choice. That's why guys who pretend to have complete control do so well.

That said, it seems like you got one very good lesson on accounting for software development here, which will help you avoid similar issues in the future.

When I do free work, I always send invoices and then simultaneously grant the start-up a timely unlimited credit on the amount. That way, they don't have any cash flow issues, which is the main worry for any startup. But you'll be listed as "payed in $ X in working time" in their bookkeeping, which means both you and them and their investors know precisely how much money to send your way to pay you off.

The only annoyance with having invoices in their books is that you have to pay profit taxes on the owed amounts. But of course you get those taxes back should they tank and not be able to pay you anymore.

But overall, I believe that most CEO and sales types will not value anything that isn't listed in their finance books. So make sure you show up in their term sheet with a high $$$ amount next to it, or else they won't take you seriously.

Oh and in most countries, the tax and legal stuff is really cheap. I would be surprised if that is anything more substantial than a tactic to get you to commit quickly.


You really don't understand what's going on here. Your cofounder is screwing you out of your ownership stake by reincorporating a new company and firing you. There is no difference between the "old business" and the "new business" besides the fact that you are being cut out of your equity. You need to first and foremost get a lawyer. If you ask in this thread, I am 100% sure someone will give you a good referral. Run, don't walk towards getting a competent lawyer on your side.

Second of all, don't say you "invested your time" -- you worked for free. There's a difference. If your cofounder is actually a really close friend, you have very unfortunate taste in friends. After all, it's you who cares about keeping the friendship intact, not them. What kind of a friend has their friend do free work for two years and then unceremoniously cuts them out? You don't have a friend. You have someone who dangled the idea of friendship in front of you to exploit you for your labor.

As far as business partners go, they're no good. Whether they were paying with their own money or not, they failed. The two jobs of the business cofounder are to bring the product to market successfully and get traction, and to raise money. You worked for free and they're not going to even cut you in on the new business, despite the fact that you're the only one who has the full technical history in your head?

I don't see signs that you have, but you should learn a valuable lesson from this. The first is not to work for free, even as a cofounder. The second is to be wary of and generally avoid cofounding with friends because a cofounder relationship is a business relationship first and foremost in a high risk new venture that will likely end in failure. That means you need to be ready for the working relationship to be burned, or you won't be able to make the right decision when things get rough.

This is a sad story as old as time. I myself went through something similar about 6 years ago. It was very challenging and caused me no end of grief. But at the end, I was forced to recognized that I was exploited and that business partnerships are not friendships and vice versa. People go into business to make money, not to ensure everyone that works at the company gets equally compensated. If you see an exception to that at early stage companies, it's great but it is certainly not the rule. Remember that and be very careful.

To end on a good note, I'll leave you with some advice. You've had to learn a lot by taking the risk of trying to start something from scratch, even if it failed. That experience, while very costly, can be quite valuable. Take that experience towards a job at a reasonably stable company that's making money. While you won't get those two years of your life back, you can at least recoup the time you spent on that experience and parlay it into faster and more lucrative growth at a bigger company. Do that for a while and see how things work at a healthy company that's in hypergrowth. Once you see what things should look like, and how they formed, you'll have much more realistic expectations on how to get there should you decide to make try to make this journey again. You'll likely have the executive team from that company, the VCs who invested in it, the money you made working there, the experience you got executing, and of course, a much better network of people to go through the founding journey with. That was my experience.

Best of luck. Remember, you can survive this. And, it can and does get better.


Listen to me, Mr Sad.

Once you have rights to your code (and use a lawyer), you should use it for the benefit of yourself.

Open sourcing it is your decision, based on what's good for you.


What about the name, website, marketing, contacts etc.? Is that just being given up or is transferred to the new company without you?


A lot of people are saying code is not an asset, so story time:

In Ancient Days, Ampex was the king of video tape recording and magnetic storage. They created a system for recording documents onto video tape, and then later a system for recording documents into mass storage. The software engineers on this project created a database system to manage the storage. When the project was inevitably cancelled, they allowed the software engineer to keep the code from project Oracle.

Of course the value depends on the what the code accomplishes, and what new ideas you can leverage it into.

[1] https://www.cia.gov/library/readingroom/docs/CIA-RDP80-01794...


Are you hinting that Oracle Corporation came out of some database code that was developed at Ampex? I couldn't find anything about Ampex or the CIA on Oracle's Wikipedia page [1].

EDIT: The Wikipedia page needs to be updated! [2]

[1] https://en.wikipedia.org/wiki/Oracle_Corporation#History

[2] https://ce399fascism.wordpress.com/2010/08/02/oracle-corp-na...


+1

Code is an asset, and can have monetary value.

The problem is it's hard to know if op's code is actually useful or not. If it is, then they should be able to spin it into something else that does make money. Show that it's generating revenue, and then that'll be the value of their business.

From there, op can be as flexible as they like: hiring freelancers and running it in their spare time, selling it off, getting investors, working from home in an area with low cost of living, etc.

If OP can't make money off this thing, then that's a very bad indicator because it means other people can't really make money off of it. If OP needs more resources like a large sales team to make this profitable, then the value of his code to the overall business is lower and they shouldn't expect as much and maybe just write the entire thing off as a bad lesson (which honestly sounds like the case here).


The thing is, though, that many modern startups don't make a distinction between doing an integration and writing software.

It sounds like OP did the former, which means there's not likely an original product to sell, just a custom assembly of other products that form a system. That's a worthwhile thing to build and can be a money maker, but it's not an asset itself.

If you take away the installs of the products that make up your solution, then look at what's left... that's the asset that's being offered to OP. It might be something worthwhile, but most likely he's being offered it because he has an emotional attachment to what he's built, and they think he will take it without looking too closely.


Of course you are clueless. Only a complete idiot would accept code, of no obvious value, that he had himself written as payment for two years of work. Not only that, but you are now going to waste further time and, possibly money, while your co-founder recruits another idiot to work for free. No, doubt, you will reject this interpretation of events, but that is what has happened. You might get a job (hopefully paid) where you use your skills, but selling your code for money does not seem very likely. Perhaps I have got this wrong, but that is how this situation appears to me.


Can we refrain from calling people "complete idiots"? Especially people who politely ask for advice right after experiencing failure? Thanks.


The OP needs to hear the truth, it's a very succinct way of emphasizing the depth of the mistake.


It's a subtle difference, but I would say a change in phrasing is what's needed.

Rather than "you are a complete idiot" it should be "You are acting like a complete idiot" or better "In this instance you've been duped/fooled, you're being taken advantage of"


that's patronizing. There's an honesty in pointing out that someone is an idiot without treating them like a child to boot.


Thanks for being blunt, sometimes you need to hear it like it is.

As you say, I will reject this interpretation a tad, but that is because I have knowledge I cannot share here. But some kind of idiot, that I have been. Just need to analyze it pinpoint what kind.

Also, would you mind to share a story when you have been a clueless complete idiot and what you learnt from it? I think that would counter the tone of your comment and help others that being blunt can be helpful.


That's not much of a rejection, why not reject it more than a tad?

Instead you have accepted that you were some kind of idiot and are inviting me to demonstrate my own superior levels of idiocy, which is completely idiotic, isn't it?

What kind of person does that - seeking out complete idiots online?


Welcome to the internet, sir!

More seriously... I see what you did here, and I applaud his polite response.

Discuss.


Hey! I'll jump in here. You seem to have a good head on your shoulders and a willingness to grow from your missteps.

Areas to grow would be 1. Learn how to negotiate. a. I had a friend convince me to code out an online store for them. A month and a half in they changed their mind and I had a 80% complete site with 100% useless code and I get $0 for my late nights and dedication. Fail. Never again. No free code. 2. No friends & family discounts (you're a highly skilled doer... Don't get short changed) 3. Crank out the skeleton of the product and get customers using. Always MVP. a. Friend: "I have this great idea" Me: codes big projects with half way fleshed out functionalities, but unusable as a whole Project: slows to a stop and dies with 0 customers and 0 motivation. Done this twice. Rookie move. Don't waste your time making things pretty before you make them work. 4. Don't be just a code monkey, learn the business and if you are a co-founder grow out of the "just dev" role. a. As devs, we are really capable at technical skills and awful as negotiating deals, getting clients, understanding business needs and such. One of my co-workers gets paid 60k and works overtime with no additional compensation.. he made the business owner 1.6 mil last year. No bonus, no raise. He sees none of that. Out grow the dev role, my friend.

But at the end of the day, despite what feels like a fail or a lack of wisdom, take a little self assurance in the fact that you did a thing and you tried something and saw it through. Now just learn and do it again. Best of luck man


+1 that the code is, unfortunately, most likely worthless.

My company has one chief competitor.

If that competitor went out of business and offered me their source code, I'm unlikely to pay for it. Code tends to be highly coupled to the specific assumptions, structures, workflows, architecture, and environment it was designed for, unless the team has gone out of their way to make it reusable. Most often, it would be easier to rebuild the same functionality from scratch than integrate someone else's code into your product.

What is valuable are the more generalizable and often intangible assets my competitor has accrued:

1. Its relationships with potential clients. 2. The lessons they've learned in building the business so we might avoid them. 3. Their employees.

Do you have any of the above to offer to companies tackling similar problems?

That said, isolated parts of a codebase can be useful, if it's easy to reuse and solves an extremely challenging problem and has required a large amount of investment to develop and mature. If such a part of your codebase exists, you could try finding a buyer for that.


Code is not an asset. Code is a liability. Nobody wants to purchase a liability.

Code is inflexible. Code has bugs and vulnerabilities and patent infringements and licensing issues. Code needs lots of maintenance.

The value is in the people who know the code. That's you. If you sell the code, you have to go along with it.


I second this. Code without people expertly familiar with it is a liability and a risk, with unbounded/unknown associated long-term cost of training, further development if possible, or a rewrite (in which case starting from scratch anyway), and maintenance.

..Then perhaps it can be recommended for the OP to "sell" the code together with the expertise/team/himself as a package?

If I were in a situation where my company needed a solution that he describes, I might be interested in such a package: fully functioning software with a domain expert (who has proven able to put together and lead a team).


Right. But you need the code to be in business. Anything a business operates to make a profit is a liability.

What existing code gives you is time and risk reductions.


Maybe, maybe not. A codebase that hasn't been integrated into your development process and is completely unknown to the development team is as likely to slow down your company as speed it up. At least if you write it from scratch you learn a lot while writing it, you have deep knowledge of how it works, and your team isn't pissed off that they need to suffer through someone else's legacy software.

I've seen plenty of ground up rewrites work, but I have almost never seen legacy software moved to a completely new team successfully.


The other guy seems to believe that the business can survive with a designer and a shopify site. Maybe he's wrong, or maybe the existing customer base and relationships are the real value here and the code is worthless.


> making our amazing designer create a Shopify site that he/she can manage him/herself

This statement sounds like your co-founder is just getting rid of you because he realised a designer can do better than you and won't need shares of the company. You validated the market for him and he doesn't need you. This is the reason I always tell idea guys to pay me or go and learn programming themselves and implement their ideas.


Every developer has a folder of projects that ended up nowhere. This will be a big folder. That’s it. You lost your time... Expecting you can squeeze something out of failed project will just increase this time. Don’t burn your emotions.


I know this isn't what you are looking for but...

Is the stripe integration in react-native? If so, I think it would be great to open source it and publish to npm. There really isn't a good react native stripe library out there, the only one I have dealt with is tipsi-stripe[1] which is poorly documented, poorly maintained and inflexible.

If you really don't want to open source it, I'd love to chat about buying it off you.

[1] https://github.com/tipsi/tipsi-stripe


Agreed on this, on both points, actually. Releasing it open source could be great marketing for your startup, or selling/licensing it could work out great.


Off-topic, but just curious, are you allowed to have other, non-authorized Stripe frontends without voiding the PCI compliance, or is that not what this is?


My guess is that the code/app will not be as valuable as you hope (unless there are existing customers that you get to inherit with this transition).

Take a loss on this startup and move forward to something new.


Since the overall tone here is so negative, I would like to point out that a) you can sell source code and b) some people do work on their amazing hobby projects without outside feedback and it still works out OK and c) helping people with their coding can be very rewarding personally

But where people here are correct is that in most cases, source code by itself will fetch a lower price than the customer contacts, email marketing lists, pre-qualified leads, ad designs, etc.

That said, we did sell source code at a good price a few times, but that only worked because:

1. The company buying it had overpromised to their customers and were contractually bound to deliver, so purchasing my whacky half-finished source code was cheaper for them than paying the penalty for not delivering on time. As part of the deal, we were also hired for a month to integrate their CI into the app and ship it. After they dodged legal responsibility this way, I believe they never used the source code again, but instead hired a team to rewrite everything from scratch. So they paid us purely for the time savings.

2. The software being sold had been featured on national TV together with a major Hollywood movie studio praising it. This started out as helping people for free and then we built without any feedback what we thought the market needed. But it was a ridiculously unbelievable stroke of lucky events that led to us sending a feature-limited version to studios and them using it and promoting it among themselves.

3. The source code being sold was rumored to contain an algorithm doing content-based image retrieval (think Google Images search) more efficiently than the largest publicly available search engines.

4. The source code was sold at a big loss. It would have cost 5x the price to hire a team to build it again.

It doesn't sound like you're famous yet or like you invented the next big algorithm, and you probably don't want to get paid scraps either, so your best bet if you insist on monetizing the source code would be to find the one medium to large company that urgently needs this video chat to work or else they face horrible consequences. Only then will you get a good price.


Seems like you should just reach out to the startups and see if there is interest. If there are multiple interested, try selling it as a white label service. Otherwise sell it outright with a multi-month contract to help with the integration.

If there's no interest though, then any upfront work you do now will be wasted effort.


Put it up on github has your portfolio. Link to it from your linked in profile. Enjoy a job with steady pay, benefits, paid vacation, and no stress.


In terms of acquisition value, the codebase ranks dead last behind talent, product, engaged users, company brand, patents and just about everything else. Even very successful products are almost always rewritten when acquired by a larger company.

Depending on what your co-founder is walking away with, you may want to negotiate a better exit. If there is nothing else, then more than the code work on selling yourself to an interested company.


You need an assignment of IP for the code. Otherwise the copyright and thus, ownership stays with the company or whomever wrote the actual code.


Think about it this way. The person who knows the most about your code and application, is most qualified to sell it, and has the best relationships with the best fit potential customers, thinks it is worthless and wants to go in another direction.

Code is cheap. Your legacy from this startup will be experience, not code. Move on and start fresh.


+1, code is cheap, the ability to write code is expensive.


Code is worth nothing.

Dump it and start something new.

It's a sunk cost.

I've got vast amounts of code from previous projects. All worthless.


I'd suggest contacting accelerators and other early-stage startup fund aggregators to see if any of their companies have a need, either to replace a prototype/PoC level product or are engaged in a pivot that would be sped up by acquiring your software.


Depends who you know.

A bunch of Reddit employees broke off years ago and started a company called Imzy, the CEO decided to shut it down and took ownership of the source code, which he then sold to someone (I want to say techcrunch) for precisely 1 million dollars.


I read that Imzy raised $11M, so selling the IP for $1M when they shut down seems necessary to recover money for the investors. Honestly it surprises me they could even get that much for a failed company’s code base. Unless you are saying the CEO personally got that cash? That sounds more noteworthy.


Yes the second thing. The CEO personally took that cash.

Source: I worked with one of the cofounders of Imzy and he spilled all the tea, that's the best I got though.


It sounds like the investors screwed up by giving away their claim on that IP.


According to the CEO (assuming this is them), they had most of the investment money left. They shut down quite quickly.

https://news.ycombinator.com/item?id=14411586


I read they had $8M of $11M left, so a big hole to fill for the preferred stock.


Is it a two-sided marketplace? I am currently building one. If you're willing to adjust it to meet our requirements, let's talk!


The code without the team is not interesting to any potential buyers, unless it's a work of art that any team can pick up quickly, are you included in the package? (you weren't clear about this and changes everything.).


To everyone saying that code is a liability and not an asset, and that it's worthless, how do you explain that there are online marketplaces making millions by selling "code" online, such as ThemeForest, CodeCanyon, Unity Asset Store, etc.

I guess it is harder to make a platform and just sell it exclusively to a client than making a platform and offering it as a product for many other developers. In this case though, he might just be able to sell a few hundred copies of his code for like $100, which is not a lot of money, asuming the platform is fully functional.


There are lots of people saying the code is probably useless and I’m among them, but you’re far from it. That is a difficult, modern stack that lots of people would need help implementing. You’re clearly quite skilled, and the consulting and labor markets would reward you handsomely. Use it as a sales tool to get a healthy stream of base income. There is always another startup if a job isn’t for you. Your location is increasingly irrelevant. Hopefully you can apply those valuable skills to a problem you enjoy solving.


I’ll add that cross-platform webRTC integration may be a strong thing to open with; it sounds unique and of value to those who would know it’s even possible.


I don't feel qualified enough to advise. But here is what I did after folding my startup

1. I used it as a very expensive resume. Costs me a few hundred dollars in running costs on AWS but pays back regularly by helping me win new consulting clients.

2. Mine was a travel startup so had few reusable modules e.g. booking engines for various GDSs (Sabre, Travelport and even Expedia's API). I manage to sell these with little modifications to a few companies that were building things from scratch. After initial sale and a minimal support period, further support was charged at consulting rates.

3. Initially I thought that I would be able to sell the whole development stack specially the user management, email verification, security, PCI compliance payment solution stack etc. But never found any takers for that part of the code. Don't really know why.

4. I initially folded my startup because of lack of experience in sales and marketing. But I am plugging those holes in my competence and I might resurrect this startup in a couple of years from now. I am glad that I never gave up my rights to any part of the code or technology.

Not sure if any of above is relevant to your particular case except #1 which could be useful if you decide to do consulting/freelancing in future.

Edit: formatting / typo


I would argue !@#$ that. You are a co-founder and as such are entitled to a % of the entire business. This includes code, property, contacts, clients, and any IP.


I suspect that selling the code to another company, even a small one without too much established tech, will be pretty difficult. If you were able to find someone to buy it, at the very least I expect they'd want you to work with/for them for a while to help with integration, handoff, and support. So you'd have to be ok with that. But it certainly doesn't hurt to try to shop it around.

I'd definitely suggest that you chat with a lawyer first so you can be sure that you're protecting yourself properly, both from your old co-founder, and from any people you might show the code to.

Are you required to sell the code as a part of your separation from the company? If not, you might consider starting your own company around it, if you still believe in the product.

Ultimately, I don't think you're getting a great deal here. If you don't have a prior agreement that gives you anything more liquid, you might be out of luck (since your co-founder is winding down the company, you soon won't even have an entity to file a complaint against), but "code in lieu of cash" isn't a great payout.


Gut feelings: 1) software isn't likely worth anything 2) use the experience as a resume builder 3) I'm surprised by so many people thinking this isn't a common exit at dissolving the company.

That said, maybe worth contacting these other startups. I double they'd pay for the existing source code to just launch. But, it might make you a good hire you for them.


I hope you’ve already come to terms that you will probably see no return on the time you invested in the past two years, and that you are not simply still in the denial phase trying to squeeze something out of your efforts.

If you sell your code, the most it would probably fetch is somewhere in the low three digits, and it would probably be snapped up by someone who doesn’t care about the business they just want to have a beefy open source project as part of their resume or portfolio (which is basically the smart way to get open source credibility without toiling for years to no end, think about it, 300 bucks buys two years of open source experience).

If I were you, I’d beat them to the punch and open source your project and move on with your life, let others maintain it and maybe make it into something great.


unfortunately - this is probably correct. don't fall victim to the sunk cost fallacy, as this is the most expensive way (time) to do so.


If you can't find a way to a) sell the software and b) don't have the passion to use it alone, here's something you could consider.

Pull the code apart and find the interesting ways you've built it, then create training videos on how you did it and sell it as a course.


> My co-founder recently decided to shut the company down, focusing on ~SIC~ create a Shopify site that he/she can manage him/herself.

What value does your software provide over Shopify? Whatever the answer is, thats is how much your software is worth. Your partner has decided that the value add of the software isn't enough to justify the cost of you, sorry.

It sounds like it's a simple CRUD app that can be mostly replaced by shoppify focus on what sets it apart, who would want that feature and what value they would assign to that feature.

You could try whitelabeling the product and sell it as a platform and try to compete directly with shoppify, but it seems like the business people just don't see the value in your software.


I think you should definitely reach out to those startups to see if they'd be interested to buy it. Maybe you could package it more as a software consultancy service where you'd customize the code to fit their needs. Since lots of startups already been using software house to bootstrap, I don't see why they wouldn't be interested in your code.

Having said that, I don't think this would be easy feat though, especially considering you've spent 2 years building it, the price might not be something affordable for early-stage startups.


> To give you an idea what we are doing; an React Native app that sell and connect a very specific type of workshops with costumers over custom WebRTC Video chat(fork of React Native-based Jitsi Meet). What I can tell, I haven't seen another custom Jitsi-Meet integration yet that gives the ability customize the UI that we have.

I'm sorry I cannot give you advice for your future endeavors, but if your code ends up shelved, please consider sharing your Jitsi Meet customizations with us (I'm one of the Jitsi core devs) so we can improve the SDK.

Best of luck!


Unfortunately, the only payout you will get from this situation is experience, you were sold vaporware, it might have been an interesting project for you, but for your cofounder his idea could fit into a shopify store.

> There is a bunch of new startups that has recently popped up, doing what we initially did with a caveat.

this is also a huge red flag, if there are many companies already investing in doing the same, why would they take your codebase? best case scenario would be to get a job on the same space now that you have: experience.


>I get to sell whatever we have created, code wise, and get the dough for it.

Many, if not all of whom you pitch your product for and are interested to buy it would ask you to work for them. Even if that doesn't happen, get prepared to handle lot of support calls; so factor that into the price.

>Anything I should do first, legally wise?

Invoice from your company that they are selling to you, for some token amount. Perhaps a legal binding agreement should help as well. Get advice from a proper legal counsel.


I bet you had a lot of fun writing all this custom stuff. Unfortunately the value of a custom something with custom framework and custom this and that is approximately zero.


You can sell the code, but it's going to take work and a bit of luck to find a qualified suitor.

Startups with the resources to purchase likely have the resources to build themselves. And the inclination.

Your best bet is to prospect for companies who might consider the IP for a secondary product that compliments their core offering. They'd likely want code + customization + a maintenance period. It could be worth it.

Send me a note if you'd like to discuss further.


I think it's a hard sell, you can contact those competitors and see if there is an appetite to buy an existing product in order to get to market quickly but depending on how mature that product is I can't see there being much of an appetite.

What's your co-founder walking away with? If they're walking away with cash and your walking away with (non patented) IP then you got the short end of the stick.


The code may be worthless without customers. Can you take some of the underlying infrastructure and pivot it into a different app?

As others mentioned, be sure you have clear and unhindered rights to the code and IP.

Otherwise, take your knowledge and skills and do consulting work (maybe for one of those competitors). Even if you walk away with no remuneration, you have great hands-on experience in a production environment.


You can try to sell them your app, but nobody will want it. A pile of code without the people who built it is next to worthless, and even with the people who built it, a product that doesn't have 'secret sauce' isn't worth anything.

If you open source it today, and give it away completely for free, you will be lucky if one person forks or stars the repo, then never looks at it again.


Set it aside for a month or two or six and allow yourself the space to gain some perspective.

You’re probably too “in it” right now to make good decisions.


Selling code will be hard, maybe nearly impossible. One option, especially if you see other companies popping up trying to do what you already have, is to join them.

Set up a good demo of what your code does, then approach new companies and offer to provide it to them either for a fee for service (best) or by joining them. Good luck.


1. There are many freelancer gigs at freelancer.com and other freelancing sides where people are looking for a custom CMS. You might be able to sell your solution to them, though you might still need to customize it slightly for their needs.

2. Open source it and add a donate link.


> Open source it and add a donate link.

I believe this is the only plausible answer.


Put it on CodeCanyon if you want. There's a lot of similar software there that get a lot of sales.

Also make sure you have paperwork in place that gives you right of IP. Given that the past IP was owned by your company, this is not merely a handshake and email.


Another option for you is to submit it on SideProjectors to find someone who wants to buy (disclaimer : I run SideProjectors). https://www.sideprojectors.com


After you figure out what to do with the code and vestigial structures of your startup (lots of advice here), what are your plans?

A lot of readers are probably keen on owning a business and your reality check can maybe turn into good advice for others.


> ...create a Shopify site that he/she can manage him/herself

Not trying to be snarky, but I genuinely prefer "they" and "themself" for talking about a generic other person like this. Also less keystrokes.


I just can't believe I can't believe this I just signed up or because I loved it too much that's just our luck! if I had a lot of money I would invest in you guys big time!


If you are shutting down the company, I would make the effort to upload all the code to GitHub or GitLab with the agreement between you and your co-founder.

It would be a pity if that code goes lost


I have some interest in talking to you about what you have created. We might have a use for it. Send your contact information to info@localnursery.ca I will reply.


Move on and get an agreement you can use it privately to showcase when you look for a new job. I did that exact thing and it greatly helped in interviewing.


If it doesn't generate cashflow, it probably isn't worth anything. I would just forget the codebase and focus on how to create value somehow else.


What's your intent? Sell the rights outright or sell it as some sort of service? Do you want to create a new persistent business out of this situation?


Contact me at thomas@firstprinciple.co would love to talk with you about what you've built and see if it would make sense to continue the work on it.


Sounds like you have free rein to productize some of your IP here. Might it make sense to turn any part of what you've built into a SaaS business?


Shop your code around; that you didn't find use for it doesn't mean somebody else isn't in need your code solves and could pay for it.


If you can't beat em, join em.

I am not sure of the details, but if you can make a Shopify plugin which others can use you could make some money out of it.


The code is the most value part. You can sell it or you go open source and find a community to extend the life of your project.


Why not just use they, their, themselves?


Sounds like you should contact a lawyer.


Do I want to work with someone else's code? Heck no!! Sorry, I don't mean to offend you that your code might be buggy or can be written poorly, it's just because I like to build things myself, plus I am not gonna invest my time to understand someone else's code because I will be using that for a whole lot of a time.


Sounds interesting. I work at an ad agency. Is it something that brands would pay for?


Hey,

I might have a potential usecase for your code. Please contact me using the email in my bio.

Thanks.


I’m interested in this tech. Email’s in my profile.


- Write, sign and notarize an agreement that the code is either duplicated or transferred to you.

- Decide who gets the data: users, you, someone.

- Sanitize servers and services by trying to overwrite data with junk values before canceling.

- Cancel monthly services and free services.

- If it was good, don't let the team relationship go to waste. Talk with whoever's left / worked-with previously about doing something else.

---- Then and only then ----

- Do "consultingish" work or solve a problem you have to find a problem worth solving.

- Sell something good people want before you invest too much time/money/mental health building something too much.

- Keep it real: building "your amazing idea" without a feedback loop gathering critical data from paying/potential customers is #fail.

- Someone though will have to step-up to be the sales/buzz builder or one will need to be found (hopefully, someone you've known for some time or a friend-of-a-friend). No useless "idea guys" allowed.

- Sales/buzz person or someone will need to be the captain of the ship ultimately in-charge of everything.

- Iterate fast, executing based on feedback and sales numbers. Prefer the best one you can get into if you can. (YC, hihi.;)

- Everyone at the beginning gets equal equity vested over 3-5 years. First employees should get ~1% equity, more if it's an employee-owned co-op.

- Don't pray for funding, sales/profit cures all.

- Raise funding only if you could definitely grow faster with more money.

- Skip accelerators unless you need a network and/or are relatively inexperienced.

- When you get big enough, incorporate (California or Delaware C-corp). If it's s consultancy, LLP or LLC. https://clerky.com


Good advice. Remember, people may not care about the code as the company is folding. But if it turns into something and money starts to flow then people's memories become foggy.


> Sanitize servers ...

A side note here: that can be impossible on a cloudy service where your data may have moved between many nodes over its life, and difficult to guarantee in other circumstances. On future projects consider encryption at rest for all data then all you have to worry about is destroying all copies of the relevant keys. Still try a wipe at the end of course, in the name of security in depth, in case there are keys errantly floating around out there.

If you are performing a secure wipe, don't go OTT with 37 sequenced passes (if your threat model "requires" that then you have other matters to concentrate on!) don't make the final stage zeros: fill the volumes with cat pictures/videos, or if you are feeling evil use shock images instead. Give the cracker that tries to poke around something to look at!

> ... and services by trying to overwrite data with junk values before canceling

Also impossible unfortunately, though again you should try if only to show due diligence. Always assume that once your data is out there it is out there for good. Just like a delete is not often a real delete (just a soft delete where a "deleted" flag is set), an update often only affects the current value leaving it and any previous values still present in history or audit structures.

(not that I'm saying this piece of your advice is bad, I just feel it just needs a few caveats to be explicitly stated)


Yes. Do the best you can. Especially if they use something like paper_trail on Rails or other soft deletes. Maybe ask to the vendor to search/purge databases/files and overwrite free disk space manually too.

For certain types of data and with experise, it might be wise to run your own servers (colo) and encrypt the drives. After surviving to a certain scale, you'll want to save money by running hybrid bare metal+cloud anyhow. Then, you'd have control to nuke your servers (DBAN), local snapshots and encrypted backups. Hybrid infrastructure should allow pinning systems to prevent migrating to or sending snapshots to third-parties.


> Do the best you can.

Aye. While guaranteeing the information is absolutely gone is often impossible, you should at least do what you can make it more difficult to retrieve or be accidentally revealed.

> and encrypt the drives

If you are using VMs then full disk encryption within the VM will work just as well, and most cloud services can offer effectively the same thing with their containers.

You just have to be very careful with key management, which in some cases may be inconvenient (blocking restart until you intervene to provide keys, if you don't want them stored on or directly accessible by the same provider) depending on how paranoid you feel the need to be. Of course if you are truly paranoid, by character or by contractual necessity, keys in memory on shared infrastructure even temporarily could be an issue at which point you need "dedicated cloud" resource or colo/self-host for the affected parts of your apps/infrastructure.


I'm a little confused because this doesn't seem to answer the question OP is asking: how to sell the code he's been left with as a part of the wind-down.


You should note that OP actually asks three questions: #1 What now #2 Should OP contact the startups #3 What to do first, while also adding they don't know what's involved in selling a resource like this.

If they wanted a detailed question of what to do AND WHY, they could pay a consultant. A consultant would go over around the same points as duelingjello, but also explain why. As an Internet forum answer, it honestly goes above and beyond.

The answer basically strips into two -- first get rid of any and all 'ball and chain' from the old company, existing customers setups and data. Then put the IP to work, making money.

The answer does skip over the general unasked question of "Can I just sell the code?" to which the answer is generally "no." You'd need an existing enterprise or source that knows the code, wants the code and can use the code, which in the modern age is just not going to happen: Startups come and go and everybody wants to make their own solution. Most engineers I know would look at "existing code" as bloat or a hindrance in general, and would look at it as "a sales team problem." If anything, you'll get peanuts for selling the actual code itself.

Building a new enterprise that has a technical team to handle the code and a sales team to sell the code, potentially with an existing customer base sounds like a much better plan. Does it involve risks? Yes. Does it still answer OP's question of wat do? Absolutely.


Sad to say it, but a bunch of code from a failed startup is probably nearly valueless without context. I think that motivates an answer based on extracting value from it combined with the context on it that a founder has.


Oh, agreed, but it would have been nice if the top-rated comment in the thread actually explicitly said that ;)


My takeaway was don’t try to sell the software you have. Try to find a problem someone has (and will pay you to fix) and try to fix it.


It costs $500/yr to run an LLC (Incorporation/renewal fee, registered agent, and a P.O. Box), unless you have no assets and don’t plan to have any assets in the next 2 years then I would strongly recommend incorporating before you have any sort of liability.

All it takes is one oops at a client to have a $1m judgement hanging over your head. LLC (in your state, don’t get fancy) sooner than later. Business insurance is typically another $500-800/yr for software startups, but I wouldn’t recommend that until you have something to protect (like money in the bank)


It costs $500/yr to run an LLC

Your advice to register an LLC is very good. I’ll add:

1) Costs are very state specific. And if you register in the state you live in you can act as your own registered agent and eliminate a lot of the yearly fees. In my state I can register directly for $90 with the Department of State (of my state, not federal) and there are no recurring fees.

2) Follow the rules by keeping all finances separate or you might as well not have registered the LLC.


Do not skimp on your llc. I said $500 to protect yourself. You can go the cheap route but then your name is associated with your business and scams come out the woodworks. Plus it’s hella unprofessional and You may miss out on contracts because you don’t meet their vendor reqs


Do you happen to know how much for a Delaware C Corp?.

I.e. not the formation, but year to yeat maintenance?


You also need to maintain out-of-state business registration in the state you reside. I would not get fancy until you can afford a CPA to ensure this is all up to date


For the pure maintenance of the company we spend like 300-400 bucks.


Do you need a CPA or do you use tax software?


We use Vcorp Services


Unless you’ve studied it, you might be surprised to learn that as a principal an LLC is not offering you the kind of protection you imagine. It basically protects investors. IANAL but was surprised myself when one explained it to me.


Maybe you misunderstood? The LL in LLC stands for limited liability after all. Other than your capital contribution, and assuming no fraud or incompetence, there will be personal liability protection.


I don't know about LLC but in Germany there is something very similar called GmbH. Which does provide you with limited liability for many _but not all aspects_. So always consult a lawyer with specialization in that area about liabilities not covered. I have heard about startups which founders did run into some of the non covered liabilities leaving them with a large amount of dept which they could have partially avoided as far as I heard.


„So always consult a lawyer with specialization in that area...“ as german as it gets...


The core of this is financial liability. Whether that is extremely helpful, or just somewhat helpful depends on the context. I can't think of many cases where you wouldn't want to have an LLC, or Limited Company (UK), or whatever the equivalent is.

Creating one can help enforce some separation too: different bank accounts, different AWS accounts, etc. This feels pretty good, unless the company is some tax dodge which also places increased transparency on some things.

Whatever someone does, they can make a fair attempt at running their business professionally and it will limit significant risk and liability. This means taking boring paperwork and bureaucracy seriously. It means recognizing mistakes and fixing them before they get serious. Good companies don't generally get sued and lose. You can also seek outside advice so that you make better decisions. When you take reasonable measures these will get recognized when you are in a situation.


Ok, I’ll google it for you. But I do encourage you to talk to your attorney so you can pay for her bad news like I did.

“ Personal Liability for Your Own Actions

There is one extremely significant exception to the limited liability provided by LLCs. This exception exists in all states. If you form an LLC, you will remain personally liable for any wrongdoing you commit during the course of your LLC business. For example, LLC owners can be held personally liable if they:

personally and directly injure someone during the course of business due to their negligence fail to deposit taxes withheld from employees' wages intentionally do something fraudulent, illegal, or reckless during the course of business that causes harm to the company or to someone else, or treat the LLC as an extension of their personal affairs, rather than as a separate legal entity. Thus, forming an LLC will not protect you against personal liability for your own negligence, malpractice, or other personal wrongdoing that you commit related to your business. If both you and your LLC are found liable for an act you commit, then the LLC’s assets and your personal assets could be taken by creditors to satisfy the judgment. This is why LLCs and their owners should always have liability insurance.”


That makes sense though, and is what I always thought. Proctects you as an honest and competent employee of the company from liability, assuming you're acting in good faith, from the actions of the company. Why on Earth would anyone think it's a blank check for any behavior?


And the same is true of S and C corporations. There is no legal structure that is going to protect you individually from wrongdoing.


This is not just about breaking the law. Being negligent can cause personal liability. This is the kind of liability people often think the “LL” protects them from.


Piercing the corporate veil is a thing, though. I don’t know the details as I’m neither a lawyer nor a company owner, but my understanding is that you have to keep your and your company’s assets and activities completely separate, which requires a level of discipline that many people don’t have.

Similarly, as a single-person company, any action that could cause liability was presumably performed by you, personally. That makes it much easier for a litigant to sue you personally instead of/in addition to your company.


The second can only occur because of the first. It’s also why I said keep a bank ledger :)


Absolutely true, and it is true regardless of whether you use an LLC, S, or C Corp.


If none of the more complicated strucures will provide the liability protection that you're going to need, there's also the possibility of doing business as a sole proprietor/DBA. You get no protections at all, but the reporting requirements are much reduced (in some cases, just filing a 1040).


All good advice. I'm especially a fan of:

> If it was good, don't let the team relationship go to waste. Talk with whoever's left / worked-with previously about doing something else.

Some of my best times at work have come from the relationships left after the company crashed and burned. Companies disappear, people don't have to.


> First employees should get ~1% equity, more if it's an employee-owned co-op.

I would be interested if anyone knows more about how the co-op idea would work, also assuming you took investment. Would a corporation be formed as well as a co-op, and the co-op would be a shareholder in the corporation?


As far as I know, if your company has 10 employees, everyone owns 1/10 of the company. If you hire someone else, everyone, even the new person, owns 1/11 of the company.

The idea is: shares aren't devided by capital, but by heads.

But you can usually add some clauses to the contracts, that people have to work for some kind of period, before they are considered "comrades".


1 By definition equity and dividends must be shared equally between all members of a coop 100 members = 1%

2 Structure the way I have seen this work the coop owns the company (or a controlling interest) which employs the members of the coop

Coop structures can get complex normally most countries have special laws for this and it can be tax advantageous.

Coops can take outside investment but they have to maintain 50% +1 shares to remain a coop


There are many ways to slice the pie, and I would offer that a better way would be to give profit percentage instead of equity.

When it comes to making decisions many employees won't care too much about the direction, and will slow down the process.

Give your employees a fair share, but keep ownership amongst the founders.


Most sensible people are going to want shares, also not having shares is counter to the whole HN SV ethos


This list will help me with all the steps I need to consider now, later and in the future.

Thank you duelingjello. I have a lot to learn and it's becoming obvious I need some time to grow and this will definitely help me.


The second half of this is just great advice for all startups.


Great advice. I think you just wrote the howto for doing a pivot.


Richard?


Karen?


> Anyhow, as my payment for these past years, I get to sell whatever we have created, code wise, and get the dough for it.

Yikes, it sounds like you are walking away here with virtually nothing.

If I were you, I would fight for ownership in whatever is next for your cofounder. If that means it is a Shopify store, that is fine, but you should get X% of revenue, profit sharing, something out of this.

The code you have now is ultimately worthless and is not a good 'payment' for the time and energy you invested into this company.

I do not think the current arrangement you have outlined is in any way fair.


As a co-founder, you accept the risk that if your company fails, you get nothing, and you might not get compensated for your time. That's just how startups work. High risk, high reward.

Therefore it's ridiculous to say OP deserves a % of revenue/profit/equity of their co-founders next venture. There's no legal or ethical basis for negotiating this.


Assuming it's an entirely separate venture, sure.

But from the OP it sounds like the cofounder might be continuing in the same line of business, but wants to "pivot" and jettison the now-dead weight of the technologist.

If this is the case it seems plausible that his contributions and R&D are still relevant, even if they're throwing out his code, and so perhaps he's entitled to whatever stake he vested over those first two years.


This makes sense to me. If it's entirely unrelated then yeah totally. But if they're doing a shopify store to sell these workshops then I think OP should get some points


If the co-founder is taking any code, data, or customers to the next venture, then it seems fair the other co-founder should get something out of the new venture.

If the co-founder is taking just knowledge, best-practices, know-how, and life experience, then the other co-founder does not have any legal basis to expect anything.


Exactly


Both of us are missing a tremendous amount of context on the situation. Both of us could be equally way off base.


Yeah agreed, but I think the other comments should help OP figure out what applies to their situation.


Wait... what!? Why would this person get a percentage in someone else's next thing? I agree this OP isn't getting much out of this, but it doesn't seem like there was anything more to get. I don't understand why they should get a part of a completely separate thing their ex-cofounder is doing.


The post isn't clear, but I read it as "The cofounder has decided to shut the company down and hire the designer for a new venture in the exact same business doing the exact same thing, except using Shopify instead of a custom tech stack, so they don't need a technical cofounder anymore," which is basically "The cofounder has decided to downsize the other cofounder whose skills were no longer needed." If this is true, OP at the very least provided market validation/research/etc. If the new venture is relying on business relationships or branding from the old, then the claim is much stronger. If so, OP can say, look, you basically want to fire a cofounder and take their ownership stake but you don't want to fight this in court, neither do I, I will settle for you taking some of my ownership stake in exchange for going away quietly.

If the new venture is actually completely separate (or no more related than "In the process of trying to launch business X and failing, I realized that a very different business Y would be more profitable"), then yes, I agree with you.


I tend to agree with your thoughts but I would add this: If the cofounder is shutting one entity and starting another to do essentially the same thing, you don't want a piece of that pie. Count yourself lucky that all that happened is that the company failed and go to the next thing. If he's willing to do that, he's got next to zero character.

As for the code, I wouldn't touch it after the original company ceases. The code belongs to the entity that created it and when its gone, the code is gone. If you start something new from this code and it becomes successful, guess who is going to come out of the woodwork and want a portion of it? Yes, the same guy who likely would deny you anything from his new venture.

I've been in this situation and when you've written so much code, and it's good. It's painful to separate from it. I also flip houses and there are times when it's time to just sell the house already and I almost feel sad that I'm not going to get to work on it anymore. Sometimes I feel remorseful that I won't get to see all my good work after its sold. But here's the thing, if I don't sell it, I won't replenish the capital I need to do more. And in the software sense, if I don't move on from a project after its done, I will continue to mentally and physically labor on a work that is producing nothing. And if it does do something, you'll forever be looking over your shoulder for that cofounder who will sue you for a portion of it.

All this said, there are a couple of alternatives you can consider.

#1 is to simply agree with the founder that the company should open source the code base. This gives you the benefit of letting future employers, cofounders, coworkers, etc seeing your work. And this benefits him too as being associated with the project. it puts a coda on the project so that the work you did doesn't just disappear into vapor.

# 2 you should consider both signing separation agreements and put it in writing that everything is over and there are no claims on work product, intellectual property, etc.


> If you start something new from this code and it becomes successful, guess who is going to come out of the woodwork and want a portion of it?

This is literally the reason lawyers exist. It’s not hard to draft up an agreement where the former co-founder transfers all rights and ownership and relinquishes any claim to the technology.


Agreed I was just trying to help the person achieve a bit of zen. it’s nice to think you can get him to sign something but chances are he’ll interpret it that the code is worth something and dig in...As they say in arendelle ... let it go, let it go...


> OP at the very least provided market validation/research/etc

Exactly and this market validation has value for the "new" company. It's also not clear whether or not OP got paid during their two year jolly.


Revenge of the nerds


> If I were you, I would fight for ownership in whatever is next for your cofounder

Depends on whether the cofounder is using the current company's assets towards the next venture (and it seems like the answer is no, so there is really no basis for that ask).


Bear in mind that assets includes market research, customers, branding, and any vendor relationships


This is a terribly unethical viewpoint.

Just because your startup is worthless doesn’t mean you get a percentage of your cofounders next business. That’s ridiculous.


The implication here is that maybe the cofounder's 'next business' is the same business with a different back-end and that the market presence and customer base (which absolutely are assets of the current business) are being carried forward. If this is the case then the OP has a valid claim to any profits generated by those assets, or to being bought out.


This is not true at all.

The business's legal entity is being shut down and closed. The OP only has claim over assets of that business. If he agrees to certain assets being given to the other partners, he has no claim for the future use of those assets.


Of course, if that's part of the split (you take the code you wrote, I take the customers I sold to) then there's no future claim. The way I read it, there was no discussion of that, but maybe I'm wrong - after all we don't have much to go on here.


Yes that’s a fair point. We don’t know all the details.


It's not ridiculous at all if it's in the same niche doing the same thing.


Ownership is bounded by legality. As long as someone starts a new company completely from scratch (without using any of the resources from the prior one), then you have no ownership claim to it.


No, but you can accuse them of fraud if they start essentially the same company without you in it.


Yes it is.

The business's legal structure is being closed and shut down. OP only has claim over how the assets of that legal structure are distributed.

If his partner goes on to start a new business in the same niche to do the same thing, legally and ethically there's nothing he can do or claim.


I agree with this, it seems like you don’t have much IP that would be worth selling.


Strongly agree!

Companies are so keen to keep their own code, but most don't realise it would be useless to anyone else.


Right, it’s like used underwear. A daily driver for one person doesn’t mean it’s a fit for someone else, and even if it is there is no appeal.


Given the right circumstances there could be a lucrative market for used underwear. Not mine, but someone’s. Does the same analogy apply to codebases? Probably.


It was the plot of one of the seasons of Orange is the New Black.


http://rewear.ly/ is available...


Actually, there is a market for used underwear. Look up the rag trade - industrial rags and the like. They shred old fabric for use in workshop and industrial applications.

The more you know...


Hahaha! You made me laugh. And you are right!


Useless until its not.


It's very much context-based. The cofounder doesn't have to give up shares of the company if it's a new company.


[flagged]


Maybe lay off the chemicals for a while.


The first thing you do is to figure out how much your trove of user data is worth, both to advertisers and also on the blackmarket.

I keed, I keeeed.


If you contact those other startups, I'd try to get some cash upfront and a "big wheel" position with them. Get paid, dump it on them, give yourself two years to work through with them and let go emotionally and then with that cash and experience get on to the next.


I'm making some assumptions here but I'm guessing you meant "Customers" not "Costumers" and also you have been putting in a bunch of work for the past two years on your project with little to no income from it or any other source.

Unless this IP or "Code" was written by someone else let it die on the vine with the rest of the company, write new code for your own project, use your experience to make improvements to the new code and start fresh, it sounds like you were using pieces of gpl code anyways.

Why would you bother taking the risk of creating a unicorn only to have your pokects picked by your "cofounder" that quit, then sues once it becomes profitable?

No matter what agreement you made, even if you get it notarized, your risking much more than if you just knuckle down and do the work again yourself.

Besides it's always easier and faster to do it a second time.




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