The whole concept of co-founder as a "title" is a bit ridiculous. In the beginning, when companies are small and things are literally getting built from the ground up, when customer relations are KEY, every single employee who contributes is, for all practical purposes, a founder. Things get dicey when the people with "founder" in their title start getting big egos, start getting cocky, and think that they have the sole authority to go around getting rid of people they don't "like" in order to intentionally screw them out of their equity and thus keep their positions of power intact.
This is a long-running problem in management science: CEOs surround themselves with "yes men" (or "yes women") -- people who worship the ground the CEO walks on, people who tell the the CEO how "great" he is, etc. The CEO assures that these "yes men" are paid handsomely to keep the CEO in his role. See also: http://www.cbsnews.com/8301-505125_162-57533674/the-evils-of...
Early-stage employees who _don't_ have the "founder" word in their title, but who still contribute(d) pivotally to the team are oftentimes "let go" right before their stock vests. These early stage employees are often paid _far_ below market rate for their experience and education, but promised equity with a slightly accelerated vesting period. Early stage employees work themselves to the bone, and right before they are able to realize their ROI, they are "let go." This is a slimy, insidious thing that anybody working for a startup should be keenly attuned to.
I convey this knowledge from firsthand experience. I am absolutely certain that the CEO who manufactured falsehoods in order to screw me out of my fair pay and equity is an unethical scumbag who lacks the maturity and the moral fortitude to be running a company.
If you're an early-stage employee in such situation, here's what I did, glad I did:
(A) Don't sign _anything_. If you are an employee of an early stage company, think of yourself as an employee founder, even if you don't have the word "founder" in your title. You built or helped build the company where it is today; you have a legal stake in the company
(B) Request an extension of time to review your "termination" paperwork. They usually try to make you sign something within 7 days. Ask for 30 - 45 -- or just ignore the deadline. Especially if the severance they offer you is insultingly low and doesn't contain any equity
(C) File for unemployment insurance IMMEDIATELY. If they're firing you without due cause ( almost always the case when their motivation behind firing you is to screw you out of your equity ) you are entitled to collect UI -- you paid for it, you deserve it. File for unpaid overtime as well. http://www.dir.ca.gov/dlse/faq_overtime.htm Think about it like overtime is OK, as accumulates in stock, if they screw you out of your stock, they're screwing you out of your overtime, which is illegal
(D) Don't worry about what people think. If you were fired because the company is trying to screw you out of your equity, there is no reason to be ashamed that you were fired. It happens WAY more than people realize -- the slimy underbelly of greedy people and shoddy ethics
(E) Don't give up hope! There ARE good people and good companies in the Valley -- there are companies that hold on to their early stage employees and let them realize the fruits of their hard work, companies and execs who don't try to screw the worker bees out of their efforts. I've interviewed with a couple of them, and am not giving up. When I first started working at the company that I used to work at, I would arrive at ~7 AM sometimes. Another employee (@mjallday) would also, and I remember telling him: "I'd still want to be working, even if I was a millionaire." This is _so_ true, and why I haven't and won't let one bad experience ruin my faith in humanity
Early-stage employees who _don't_ have the "founder" word in their title, but who still contribute(d) pivotally to the team are oftentimes "let go" right before their stock vests. These early stage employees are often paid _far_ below market rate for their experience and education, but promised equity with a slightly accelerated vesting period. Early stage employees work themselves to the bone, and right before they are able to realize their ROI, they are "let go." This is a slimy, insidious thing that anybody working for a startup should be keenly attuned to.
I know this has happened in the past, but I find the idea that it's a common practice to be dubious. You used the word "oftentimes". I take issue. I don't think this happens often. How many data points do you have to share on this?
You were let go before your cliff, that is, at the end of year one, for no reason other than to deny you one year's vested options that you'd have to pay to exercise?
Yeah, it seems odd that there are startups who know enough to do 4/1 vesting with a cliff, but also don't know enough to not abuse it this way.
The most unpleasant "founder disputes" I've ever seen have been in partnerships, not silicon valley style startups with vesting, and usually result from not having anything documented.
I'd be willing to say most "valley style" startups don't do this cliff-fighting options thing, which is why it's so astounding when it happens. Even what Zynga and Skype are said to have done wasn't outright "take stock away from someone right before a cliff since it has appreciated".
This is a long-running problem in management science: CEOs surround themselves with "yes men" (or "yes women") -- people who worship the ground the CEO walks on, people who tell the the CEO how "great" he is, etc. The CEO assures that these "yes men" are paid handsomely to keep the CEO in his role. See also: http://www.cbsnews.com/8301-505125_162-57533674/the-evils-of...
Early-stage employees who _don't_ have the "founder" word in their title, but who still contribute(d) pivotally to the team are oftentimes "let go" right before their stock vests. These early stage employees are often paid _far_ below market rate for their experience and education, but promised equity with a slightly accelerated vesting period. Early stage employees work themselves to the bone, and right before they are able to realize their ROI, they are "let go." This is a slimy, insidious thing that anybody working for a startup should be keenly attuned to.
I convey this knowledge from firsthand experience. I am absolutely certain that the CEO who manufactured falsehoods in order to screw me out of my fair pay and equity is an unethical scumbag who lacks the maturity and the moral fortitude to be running a company.
If you're an early-stage employee in such situation, here's what I did, glad I did:
(A) Don't sign _anything_. If you are an employee of an early stage company, think of yourself as an employee founder, even if you don't have the word "founder" in your title. You built or helped build the company where it is today; you have a legal stake in the company
(B) Request an extension of time to review your "termination" paperwork. They usually try to make you sign something within 7 days. Ask for 30 - 45 -- or just ignore the deadline. Especially if the severance they offer you is insultingly low and doesn't contain any equity
(C) File for unemployment insurance IMMEDIATELY. If they're firing you without due cause ( almost always the case when their motivation behind firing you is to screw you out of your equity ) you are entitled to collect UI -- you paid for it, you deserve it. File for unpaid overtime as well. http://www.dir.ca.gov/dlse/faq_overtime.htm Think about it like overtime is OK, as accumulates in stock, if they screw you out of your stock, they're screwing you out of your overtime, which is illegal
(D) Don't worry about what people think. If you were fired because the company is trying to screw you out of your equity, there is no reason to be ashamed that you were fired. It happens WAY more than people realize -- the slimy underbelly of greedy people and shoddy ethics
(E) Don't give up hope! There ARE good people and good companies in the Valley -- there are companies that hold on to their early stage employees and let them realize the fruits of their hard work, companies and execs who don't try to screw the worker bees out of their efforts. I've interviewed with a couple of them, and am not giving up. When I first started working at the company that I used to work at, I would arrive at ~7 AM sometimes. Another employee (@mjallday) would also, and I remember telling him: "I'd still want to be working, even if I was a millionaire." This is _so_ true, and why I haven't and won't let one bad experience ruin my faith in humanity