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.
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.
* 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.