As others have mentioned, you might want to try to pull the business out of the company and get a better sales rep, with a more appropriate single digit or less equity.
This kind of ego trip happens all the time in companies, when a sales rep closes a deal for X$ and they believe they just made the company X$ profit, fully ignoring not just all costs, but also every single contribution from everyone else at the company that put them in a position to even try to sell whatever was pitched, and everything that will be needed to deliver it.
That's perfectly fine mentality for a sales rep, but no for a CEO. Which seems obvious.
One Sales exec thought it was hilarious to petulantly insist that our products be "zero cost, perfect, and shipping yesterday", dismissing out of hand small stuff like iron triangle, budgets, P&L, schedules, etc.
Another Sales exec, troubled by our excessive salaries (read: below market), denigrated our dev and ops teams by saying "All y'all do is type on the computer all day. How hard could that be?"
Etc.
(I don't know that engineering lead orgs are any better, overall. I've yet to experience the mythical balanced combo Sales, Engineering, and Support org.)
This isn't just some philosophical thing, I've worked at tons of places that have gone out doing ridiculous partnership attempts (e.g. an Italian telecom company) based on this misunderstanding.
It's painful but in general I'd try to move on and be thankful that you were able to end your journey with that CEO early, after only a year and a half! Life is too short.
Still it's worth the effort to do a few legal consults to know your options. Litigation is one, but it's emotionally draining and could drag on for years. How good was your bookkeeping? Did you have a vesting agreement? Did you sign away your IP? Did you sign any non disparage agreements - you could be sued for damages, especially if those communications are written.
Furthermore, even if YC valuation were sky high (which it isn’t), it’s not synonymous with success in any way - it’s not even an indicator. You know what is an indicator, though? How well the cofounders get along.
There is even one case of a yc company where the cofounder went off and made a complete clone of the company a year later. Then an intern of that new company went off and made a third clone within a year. I just checked and all 3 are dominating the market and still running.
For my own story, I partly blame myself as the signs of this type of person are pretty obvious in retrospect. I was able to do much more with another company 6 years later while my cofounder ran an mvp I built with 10 customers I got with millions of funding right into the ground.
Good for this guy on finding out and acting quickly. It would have been so much worse with millions of dollars on the line. He has a good attitude, I hope he realizes he could start a similar company if need be or approach a competitor.
What are the signs?
In short, they're an asshole.
If you have a bad detector for these type of things (like I did) ask your friends. Every single one them knew before I did.
If your cofounder fires you and you keep 45%, you're basically getting half the value for none of the work. Aside from the pride, this is actually very favorable. Probably the best way to handle it is to realize you own half of this thing, and offer to write a resignation letter to minimize the drama, swallow your pride, and hope all your eng team doesn't quit.
Potentially talking to YC/investors would be good because they might be able to talk the CEO out of such a huge mistake.
Posting on reddit, not so good. Eng employees will read it and potentially leave, turning your 45% into less value.
Yeah. If nothing more subtle is possible, they can always take a round that dilutes the heck out of everyone's stake and have an agreement in place to 'make whole' some of the current team with extra stock grants or options.
This assumes they do not have a vesting schedule.
A friend was the co-founder & CTO of a company that was doing quite well...or the CEO was telling everyone that.
In an investor meeting, the CEO inflated numbers, and deflated the amount of salary he was taking, etc. Just basically lying.
After the interview, my friend contacted the investor and told him flat out that the CEO had lied and that he didn't want to be involved in that environment and he was therefore leaving the company.
The investors response "let me know when you get on to your next thing, I'll be very interested to talk". I'm not positive, but I think the investor did invest in the next start-up.
I've seen SO many founders lie during pitches where there was absolutely nothing on the line, just to make themselves feel bigger.
It's a major problem in the industry, but you can stand-out by taking the moral high road and being honest.
I suspect this company won't go very far if this is the way they treat people. It's a hugely valuable lesson for you.
On and up to the next great thing!
> We get accepted and he calls me on to a meeting with the other founder just 2 days ago and essentially tells me that in order for him to quit google and be fully committed to our company he thought he deserved more equity so that he could feel like he’s valued here. CEO and COO proceeded to tell me that at that point i was less valuable than them and how my skills and expertise where subpar to theirs so I didn’t deserve the equity I had.
Basically, my advice is to register trademarks, domain names and incorporate the company with the same name, and try to get everyone who is on your side to quit.
It's not sabotage, at this point it's certain the startup will fail. You are just making a failed company fail in a week instead of maybe 6 months.
Not a lawyer here but get counsel and do not do anything to harm the other company harming you.
that's why all the nonsense badmouthing was happening and why it was so sudden and allegedly not based in reality. they had to do that in order to justify to themselves that taking CTO's shares was valid.
humans are piles of shit, as a species. we really don't deserve to last, in my opinion.
Check the operating agreement or bylaws, some changes require either unanimous vote or gives all distinct voters equal weighting regardless of percentage of the company
For example, issue 100x the existing share base, and distribute them to employees (as compensation) and sell them to existing investors (except him) at way under market rate.
I bet the same logic is how him and the CEO wound up with 50% to begin with
I bet it was the CEO that originally suggested varying percentages which was probably more correct and is now acting on it. The reddit post said they fought/debated over that.
I actually do find it offputting when founders are equal, it means they avoided/cant deal with confrontation or they have no idea how this sector works and just tried some out of touch pleb logic.
So yeah he is playing by a totally inefficient set of rules and got screwed
1. This company will fail
2. YC invested a lot of money in it (a room full of employees)
3. The author admits that his company lied about their sales to get investment
That seems like a bad position to be in…
(Something similar happened to a friend of mine who lost a $300k final payment because their friend/roommate took it and fled the country.)
That wouldn't have solved the problem here, however, where blowing up the whole company is the best outcome, as you don't want to be in business with greedy, dishonest people. Building inside of a crab bucket is a huge waste of time.
Once the product is ready to launch, A bad technically founder could find a cheaper CEO. Once the first deals are in a bad CEO could find a cheaper technical founder.
The vesting strategy encourages thinking about founders as employees that can be replaced rather than as partners.
It's very rare you can fire your dev team and get away with it, your product will not be good enough for years on end while you learn and grow. On the flip side customers will wonder why their point of contact is now gone if you fire the main contact they were dealing with. Plus how are you going to get more of these customers now?
The vesting keeps everyone honest and in for the long-haul.
Also if your co-founder thats doing sales can't close without a product, you should get someone who can that is a very bad sign.
Don't be friends, or get "in-bed," with greedy, selfish a*holes. Sales is notorious for attracting people with win-lose, psycho/sociopathic tendencies that would destroy a venture because they can't help themselves. In the end, their myopia and morale-murdering behaviors win 95% equity in a dumpster fire where they poured the gas and they threw the lit match. They're losers. Avoid these kinds of people as much as possible.
