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I along with 3 other people created a concept for an innovative Ecommerce platform as part of a 5 week startup pre-incubator. We had a great run and on demo day we won the audience and panel of investors favorite vote. Now that we have a promising offering, branding, soft prototype, wireframes and meetings with investors lined up my teammates are saying they no longer want to work with me and are moving forward with the venture without me.

I have tried to reason and compromise with them but they refuse to come to any arrangement that involves me as part of the company. They expressed no problems with my performance during our time together, but in fact repeatedly praised me for my work. I believe that they simply want the control and equity and have joined forces to push me out.

I have pretty much given up on the idea of reconciling because my former teammates have proved to be dishonest and untrustworthy, so I feel like my best option is to leave the project with a percentage of founders equity.

I have a couple of questions that I would appreciate any help in answering:

  1. Do they have the legal right to take over the venture and intellectual -property we co-created without my consent or permission?

  2. What percentage of founders equity should I request? Keeping in mind there are 4 original founders (1 has now chosen to take a back seat until further notice because of his demanding full time job), 2% equity goes to the incubator program and that I am being forced into this position against my will.

  3. What clauses should I be sure to spell out? I know that I will request the same dilution as the other founders, but are there any other specifics I should be sure to spell out?

Thanks for taking the time to read this. I have no experience in this arena and am fighting a 3 against one battle so any advice would be very helpful.

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Three words: CONSULT A LAWYER. Dont waste your time here. You wont get relevant answers. This is a legal question, get legal advice. From a legally qualified source. – NetTecture Aug 19 '11 at 19:47
Have you signed any equity agreements, such as a restricted stock purchase agreement? – Doug Bend Aug 26 '11 at 4:09

6 Answers

I'll take a contrarian approach. If 3 out of 4 founders say they don't value your future contributions, you should take a hard look in the mirror and ask why.

What parts exactly did you contribute? Are you a developer? I'd guess not. Designer? Marketing? If you were great at brainstorming the initial idea, but that's all you did in 5 weeks, then that's a classic deadlock: you are attached to the idea, but the rest of the team wants to kick you out.

That being said, you probably should be able to negotiate something (equity) in exchange for letting them run with the baby. An advisor who gives a few ideas 3 times a year gets 0.5%. The most I would consider, without more details, would be 5%.

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Yeah, right. Lets justif theft. Not saying he should not go, but hey, just takingsomething you dont own is frowned upon REGARDLESS of the reasoning the thief puts up. -1. – NetTecture Aug 26 '11 at 7:15
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@NetTecture: There's a big difference between saying theft is justified vs take this opportunity to review your value, and I see Alain saying the latter. Lots of people in the startup space get over inflated egos in addition to greedy, and need a reality check. – BMitch Aug 26 '11 at 14:05

First question, before what to ask for, is how much can you prove you did? Do you have have a body of proof of your contribution? If you didn't have any agreements leading up to the creation of "whateveritis," can you show your contribution to it. Wireframes, design docs, ppt, code, anything?

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You need to provide more information on what your role was, what you contributed and what you verbally agreed to in the beginning. Then an attorney can provide you some sound advice.

For example, copyright law provides protection when the expression of an idea is fixed in a medium. This means that if you wrote software that was not a work product, you own it. They would need a license. Same is true for any other expression of an idea that became part of the venture.

Again, it's too much gray area to answer with the information that you have provided.

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Agree completely with Sharon Drew. The original poster really needs to quantify their contribution to the effort.

What I fear is that this was a "skunk works" project and everyone pitched in without much regard for formalities, communication or written timelines - that's what an incubator is all about, after all.

In a normal project you'd have an email trail that could be used to reconstruct the roles that everyone played. This is probably not the case here unless the project management tools that were in use support this.

The O.P. needs to document their contribution. If they can't describe it, then eyewitnesses may need to be called in to document that the O.P. played a continuous role in the project inception.

Just guessing but a value for the project as it now stands would probably have to be calculated. This would be based either upon prorated contribution, or upon a fraction of the entire pie (IE, five members, each member's stake is worth 20%.)

And then the O.P. should be bought out based upon their share of this value.

That's just one model. Another model might be to pay the O.P. a fair market labor rate for the time they spent working in the project.

In any event... get an attorney.

The team mates sound incredibly stupid to have done this "ambush", considering that they want to take this project to the next level.

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At this stage the company consists of "branding, soft prototype, wireframes and meetings" ... How much is that worth?

The answer is Not much: It's essentially a well fleshed-out idea, and ideas aren't worth much more than the paper they're written on (try to sell an idea w/o execution to a VC).

How much would someone buy the company for, right now? How much of that worth did you contribute? If, as assumed above you are the graphic designer, then you'll be entitled to much less than someone that contributed a novel algorithm...

Of course, the converse of that is that you should feel free to go forward with the idea on your own, too... And divide 100% of the equity as you see fit.

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Looks like you didnt enter into any initial agreement or arrangement designating yourself as an equal owner/ partner in your start-up. Without any legal documentation, it will be very difficult to prove your participation in the e-commerce venture. Is the potential investor aware of your contribution in the development process?

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