Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that doesn't always work out. Sometimes you find more money and success than you could ever dream of, and other times you waste 11 months.
Here's my thought process. You and your cofounder aren't going to be able to work together after this. The company has no money and no value, so you're trying to get your portion of something that doesn't exist. Them raising money to pay you just kills their chance at ever being successful... plus, who would give a company money just to pay someone out? Same goes for accelerating vesting on the 40%... there's no way they can build a company when someone not involved owns a huge stake.
You could spend time and money trying to right this injustice. And yeah, it is an injustice. But the worst thing you can do is tie your identity to this. There's not much upside to fighting it; all you'll do is spend more time, money and energy you could be using to start something new.
I've had this happen to me before, so I completely understand what it's like. You feel helpless and shitty and like you wasted a ton of time. Rather, do your best to put it behind you, and focus on what benefits you got out of it.
Did you learn about a new space that will make you extra valuable to another company? Even just having a founder mentality will raise your value to a startup. Did you learn things you would do differently? You can start another company, and do it better this time.
I know it sucks. But I'm 99% confident you won't get anything out of this, so it's best to just walk away. It's cheesy, but "success is the best revenge." Your relationship with this company failed, but you haven't. Don't tie your personal journey to this one company.
Good luck, and my emails in my profile if you want to talk!
I am not a founder but this does not seem like sound advice. In a month, that 3% pittance becomes 10%. Also, it does not seem that the company has no value at all, if it is primed to make money. The extrinsic value on the 40% is worth negotiating over and not giving it up and walking away. Nobody should do that unless there is gross misconduct or negligence involved.
I’m spitballing here but maybe a middle ground is to convert some percentage of shares to equivalent to the seed investor shares. Assume, for the sake of argument, he was at one year and due 10%. Convert those share to the same terms as the seed investors.
No cash upfront, equity is somewhat preserved and the rest becomes a source of potentially passive income.
Note. He has to leave. The situation is now untenable.
Depending on how the investor looks at this that is not a run race, it may very well be the investor that sides with the OP and together they may be able to kick out the aggressor.
Unless his agreement has anti-dilution, or a favorable termination clause, the Technical founder owns nothing. The investor & founder can fire him/her, then dilute their vested shares to 3%, 1%, or even less.
Meanwhile, at most the company can generate $5K a month in revenues. That’s not a business, that’s a part time job with a partner you cannot trust.
Also, seen from the other side: They made a contract offering 40% in four years (conditionally) - most importantly only relevant when the company/idea survive that long and are thus profitable/worth something. Why should they suddenly pay this (or a meaningful fraction?) out after one year? Or give an "outsider" 40%, which will most certainly be difficult to explain to future investors?
a standard vesting schedules is 4 years with a one year cliff.
That means that after one year the person will have vested options worth 10% of the company. they will then accrue more options every month until they've fully vested their 40%.
That doesn't mean they'll only get 40% after 4 years.
And typically when you are terminated without cause a good vesting contract will foresee in that and trigger the 'accelerated vesting' portion of the contract. Ditto with an early sale and possibly other trigger conditions.
What "40%"? The entire point of the vesting agreement, bog standard in every competently run startup, is that he doesn't have 40%. In fact, if he's leaving less than a year in and his partner has the contractual authority to sever his employment, what he actually has is zero.
IANAL, but my understanding is that in order for the company to keep ownership of your designs, code, and other IP, you'd need to get some sort of consideration for that work. If you've been paid at least minimum wage then that counts as consideration, but if you haven't then you need to negotiate something reasonable in situations where a founder leaves the company before their 1-year cliff. 3% is fine, 0% wouldn't be fine though, unless again he had been getting paid. This is the reason why startups are always supposed to pay each founder at least minimum wage, even though normal employment laws usually don't require an owner of a business to pay themselves anything.
In the UK, founder agreements and similar with IP clauses are signed as deeds, not contracts. I understand the salient legal point is that a deed does not require consideration.
Typically: in the case of a liquidity event or if there is a termination without cause in order to gain control of the co-founders shares. Those terms are pretty common, and without having seen the vesting agreement we shouldn't make any guesses as to what is in there. Leaving can be many things, and co-founders typically don't have the authority to fire each other at will without grave consequences.
If he/she has these protections, they would not have posted asking for help. Truth is they likely have very few options, can be terminated any time the shareholder & founder want, and whatever shares they own will be diluted to 3% or less if they choose.
People are rarely aware of all the details of their contracts. I know that must sound funny to those who won't sign anything without reading it and understanding it but it is't rare at all for someone to be handed a 'standard' contract and signing it without fully understanding all the implications. Hence my first advice to hire a lawyer.
OP doesn't really understand their situation or their rights; that's why the submission was created.
Also considering the OP's writing, they probably don't fully grok the legalese of their contracts.
Depends on the terms of the agreement. In my case the unvested shares had to be returned if I terminated the employment or the company fired me for cause, but not if the company terminated the employment without cause.
I've had clauses like that too, as part of M&A, but haven't seen them in company formation docs. This seems like a thing you can discover quickly and relatively inexpensively.
Yea, this is called a "double trigger" and is often written into founder reverse vesting agreements signed during formation. The idea is that at first, you can be fired as per usual like any employee. But, if there's a significant change in control of the company (e.x. M&A of >50% of outstanding shares), then _one_ of the triggers has been met. At that point, if you're fired without cause, that's the second trigger and remaining unvested shares immediately become fully vested.
Of course, I've since learned that pretty much _anything_ can be re-worked in an M&A agreement -- "we're not buying you without striking this clause" -- so it's no silver bullet.
The OP however didn't say who has the power to fire and on what kind of terms. If the other founder can fire him, the 3% was offer for him to leave on good terms. Because they could just fire and OP would get actually 0% and no discussions or negotiations needed.
It's a little more complicated than that. As they described it, they own 40%, but if they leave early the company has the right to buy back certain numbers of the shares at the original price. The one year cliff suggests that at this point, the company can buy back everything, but in another month, they will have 10% that's not touchable.
Yeah, but each share is valued at a fraction of a cent. The company will have to cut a check for a few dollars. (Happy to explain more if you’re interested!)
It's complicated! I'll do my best to explain it simply, but there's a lot of nuance.
There's a few different valuations. There's how investors value it, which can be different between investors. There's also a 409a valuation, which is what the government deems it to be "actually worth".
But since the OP hasn't vested, the number that matters here is the strike price at the time the OP got their shares, which is likely ~$100. At some point the OP wrote the company a check for $49 (or so) to "legally buy" their shares (49%). But they haven't vested, so these shares are in a sort of "limbo".
So, the company can't just take them back, since it would be stealing $49. The OP also hasn't earned the shares, per the vesting contract.
This means the company has to pay back the $49 if they're going to take the shares back. It might seem silly to be talking about so little money, but that's all the OP means (even if they don't realize it) when they say the company has the right to buy back the shares.
Can the company in this situation generally force the return sale of the shares for the strike price at the time the shares were issued? And assuming 1/4 of the shares are vested after 1 year, can the company still buy those vested shares? How does valuing those work?
Basically, since the OP didn’t vest. It’s only worth anything if it vests, so in this case it’s less about forcing and more about just tidying up the paperwork from a legal place.
No, that means that this one investor THINKS they are worth 10x dollars. Other investors might value the company differently, based on number of customers, cash in bank, their own subjective opinion on the product, etc.
I understood "walk away" meant walking away without any kind of papers signed. That would mean, that if the other stakeholders want something from OP they have to approach him and make a clear offer.
And I think that is also the best option. Just mentally evaluate the ROI of this project to zero, and try to focus on something else now. With startups you got to get used to the fact that failures and misinvestments happen.
Maybe it's just because I'm an outsider, but startup finance is complete nonsense to me.
>Same goes for giving you the 40%... there's no way they can build a company when someone not involved owns a huge stake.
This actually happened to one of my professors, which represents the opposite end of the absurdity. He started the company with a friend. The company pivoted to a completely different direction and the friend left because it was outside his expertise. My professor wanted to "do the right thing" and preserve their friendship, so he let the friend keep all the equity. In the end, the friend ended up getting millions of dollars despite producing 0 value to the company.
There has to be some middle ground here, like offering options to the company to buy back OP's shares at the current valuation plus interest. If company still can't afford a buyback a few years later, then they didn't grow the company enough to deserve to own those shares anyways.
I don't think it's really a solvable problem. There's a very wide range of hard-to-predict outcomes, from total failure to massive wealth, with a lot of just-bumping-along-for-years scenarios. The value of money varies drastically over time. The people involved are generally novices. Labor and skill contributions are impossible to predict in advance. Social conventions and ties add more layers of difficulty. What everybody is doing is essentially buying lottery tickets. And any serious dispute resolution can be more expensive than makes sense early on.
So what the industry has mostly converged on is a pretty basic, simple-to-understand solution that has a small enough number of dials that people can work it. It covers the main outcomes reasonably well if people are not too terrible. And if people are terrible, well, no mechanism is really enough.
They only have to buy his vested equity. His unvested equity, for all practical purposes, reverts back to the company. In standard 4/1 vesting, you get 1/4 of your equity on your first anniversary, and then equal-sized chunks every month thereafter for 4 years. Prior to that first anniversary, the idea of 4/1 is that you get nothing; the whole idea is to avoid allocating equity to people who don't last a whole year.
The professor probably had other options, but decided that this is the route to go. And once the decision is done, there is no turning back.
In the early phase of a startup it quite often happens that equity is given on very relaxed way on good terms. For example someone can work only short time in the company and still get nice piece of equity, just because other founders are lazy or careless.
A lot related to startups is "play stupid games, win stupid prizes". Sometimes you can get lot of equity & money if you just happen to be in the right place at the right time. Other times you end up working a lot and get nothing.
Shares are not connected to the work done. Why would they? It's an investment. That friend got rewarded for making right choices and meeting right people
To me as an outsider too, it seems one middle path is to pay people doing the work in equity thus gradually diluting away people who left. In the beginning, the guy who left owns a large piece of a small pie, as time goes they will own smaller and smaller piece of a larger and larger pie.
I know you mean well, but this could not possibly be good advice because there isn’t enough information in that post for even a lawyer to give good advice. You don’t know what’s In his contract. Maybe his cofounder can’t fire him. Maybe He could but that would trigger the vesting. Maybe he could put it to the board and fire his cofounder.
Maybe his cofounders threat that it’s 3% or nothing is bluffing. It doesn’t really make sense for his cofounder, because that guy maybe is in the same situation if OPs contract is favorable. Maybe It’s 40% or nothing for him.
The only acceptable advice here is to go talk to a lawyer. That’s it. Internet advice about things like this is always bad even when it is meant well
I agree we don't know the whole story. But this is the version of the story that puts the OP in the best light, and still, my overall impression is it just seems like it's not worth it.
What's the best case scenario they could get out of it? Maybe 6% equity, or maybe a $10k severance. But going after a company with no revenue and only $40k in the bank doesn't really seem like the best use of anyone's time, energy or money.
There's minimal available short-term value, and litigation/fighting will sharply blunt any potential long-term value.
Well, one possible case scenario is that OP’s contract does not allow his cofounder to fire him, or fully vests if he does. He can this tell his cofounder to pound sand and his cofounder will have to realize that his options are 40% or 0%. If he believes the company has a bright future, he’ll take the deal. There’s a very real chance OP gets much more than 3% or 6%.
Or there’s something better that I can’t think of because I’m not a lawyer who deals in this and don’t know the specifics.
It’s just bad to give really any advice here, which is part OP’s fault really because he should not be asking a lawyer rather than Internet randos.
It's difficult to account for every possible case while still remaining brief.
Seeking expert knowledge is good advice in most situations. If you have the time, and the issue is potentially costly or valuable to you, then you should almost always gather the best information before deciding.
Agree with this, 3% of something is better than 40% of nothing. I was a technical co-founder was that left a startup early on, and because we didn't have a vesting agreement from the very beginning, I was entitled to my 40%, even when I left the company. While it was to my advantage, I didn't want my co-founder to give up when I left, so I gave most of it up. For my next startup, I'll make sure to have a goals-based vesting agreement from the very beginning i.e. co-founder gets x% on first sale, x% on first raise
I agree. They can fight this and drain energy but they will only get what they deserve up to this point. Which might be worth fighting for but if you believe that that you can do better, I would walk away - no agreement/liability to the company and if they are passionate about the idea rebuild it with a stronger team quicker.
The difference this time is they is more knowledge, clearer path and knowledge of what a competitor is doing. Consider it draft 2..if that's a direction you want to go.
> Them raising money to pay you just kills their chance at ever being successful
> there's no way they can build a company when someone not involved owns a huge stake.
So what? That sounds like their problem, not his.
> But I'm 99% confident you won't get anything out of this, so it's best to just walk away.
Possibly. But is that is the case, why not just keep the 40%? He's got nothing to loose. So in that case, there is no need to give in to someone else being unreasonable.
From a purely legal perspective, this is incorrect.
He's on a vesting schedule, and currently has 0% (his cofounder also has 0% currently, assuming they started at the sam time). They both entered this agreement to only get ~40% if they work there for 4 years (and at that point, they'll likely have to revest).
Vesting schedules were created for this exact situation.
I mean, maybe. But that is not a reason to follow your advice and just "give up".
If the choice is between "giving up" or getting as much equity as possible, for example by stalling for a month until he vests, but also causing those other problems that you mentioned, then the choice should be clear.
Stall, and get the larger amount of equity. He's got nothing to lose, right? If you have nothing to lose, then there is no reason to not take as much as you can.
I don't think it is some costly effort to simply stall for a month, and refuse any deal. He doesn't need a lawyer or anything. He can simply refuse a deal, and continue "negotiating" until he vests and gets his guaranteed 10%.
This is a partner we all agree is ruthless enough to terminate a productive partner prior to a cliff, but somehow either lacks enough clue or holds on to just enough ruth not to be able to simply fire the partner before the cliff elapses. They probably don't have to accept a deal in order to be terminated.
Ok, but he already has nothing to lose, right? I had the choice between accepting a pittance, or forcing the other person to take actions that would make them possibly legally liable, then I'd choose to force the other guy to take on the legal liability.
Because if they were to fire him, then they'd basically have to fire them like a week or 2 before his vesting cliff, with an establish history of an attempted negotiation.
Firing someone a week before they vest, in order to claw back the shares, because the other person refused your offer, is likely illegal, and not "good faith".
If he is already in a situation where he has nothing to lose, you may as well force the other person to engage in the possibly illegal action against you.
Or, at the very least, get them to make the illegal threat in a way that you can document it.
Even the bluff, or threat of legal action, against a questionable practice, is a huge problem for a company, that most founders do not want to have to deal with. And he doesn't have anything to lose anyway...
That doesn't mean you have to sue them right now. Even the threat of mentioning that this might be illegal, and that you are at least considering legal action, could force the other person to give in, and not do the possibly illegal thing.
Or even beyond that, if there is a documented evidence of these illegal actions, what you can do is simply not sue now, and only sue later on, if the company is actually worth something in the future, and it makes sense to do so. All upside, and no downside. Don't pay the court costs, unless there is something to gain.
* The 3% he's been offered, which while paltry compared to the 40% he had if things had gone better is still not a small amount of equity to hold in a successful company.
* Many thousands of dollars in legal fees.
* Many months of effort and stress.
People on message boards have weird ideas of what does and doesn't constitute lawful termination. Hiring in the US (I'm assuming this is the US, because there was a $100k investor) is at-will, most especially so in companies documented carefully enough to have 4/1 vesting. There is likely no such thing as a "bad faith" termination; there is only termination authorized by contracts establishing who manages the company, and termination that isn't.
Again, by all means, pay a small amount of money to get a competent lawyer to verify that's the case. Everybody on this thread will likely say "go ahead and fight" if it turns out this person can't be fired, so you can just stick a pin in that thought and we can continue to discuss the more realistic scenario.
Threatening to sue: also often a bad idea! If it's not credible, and everyone knows you don't have the resources to litigate, and that even if you did it would be economically irrational to do so, then the threat does the opposite of gain you leverage; meanwhile, threats can trigger other legal problems for you. Advice I'm pretty confident in giving: don't trust a message board post that tells you to threaten legal action.
Yeah. Probably neither the 3% nor the 10% is worth anything--especially if this turns into some nasty litigation. And, as you say, in the eventuality that this company actually has a successful exit, 3% is less than 10% but it could still be a decent sum of money.
> There is likely no such thing as a "bad faith" termination
Sorry but this is simply not true regarding vesting specifically. There are laws that prevent someone from being fired 1 day before vesting for the purpose of clawback.
EX:
This source is about retirement vesting. Not exactly the same, but close.
This source says the following "assuming this termination is made for good-faith reasons, such as business downsizing or poor work performance.", implying that if it is not for good faith reasons, and just for getting back the shares, that this is illegal.
Also from this source: " In general, to avoid costly lawsuits, companies consider future vesting dates when terminating employees. They may delay the termination date, extend it by using "paid time off" days, or accelerate the upcoming vesting to avoid appearing to terminate an employee merely to forfeit soon-to-be vested shares."
So companies specifically try to avoid this situation, because they know it is illegal.
"These cases provide very powerful ammunition to employees who are either negotiating for additional severance or engaged in litigation with their employer.
First, Kelly and Newberger provide an employee who was wrongfully terminated with a legal basis to become fully vested in any options that were previously granted."
And here are a bunch of lawyers agreeing with me that this is illegal:
"AT will is one thing, this is quite another. This is an obvious scam by the employer to avoid having your stock vest, which is not only not fair, its illegal in my view"
"In Mass., if an employer terminates an employee for the purpose of preventing a right to compensation to vest, the employee has a claim for the compensation. "
"There are certain kinds of showings that you need to make in order to be able to collect in this circumstance. The short answer is that you may very well be entitled to the stock."
Thats why I am saying that this threat needs to be documented. It is quite clear, that there are many cases where terminating someone, for the purpose of getting back shares or retirement or bonuses, is very illegal.
Some of these cases are based on unlawful terminations --- for instance, Kelly was pregnant when she was fired. If this person is a member of a protected class or has other reasons to believe that they've been fired for a statutorily invalid reason, by all means, pursue that.
Here's a Santa Clara Law Review article (take that for whatever it's worth) on almost exactly this scenario, in the context of Zynga, citing Newberger, and suggesting that "company determines employee is not worth the equity they were originally allocated" is a valid reason to terminate an at-will employee (even if it is, as I'm sure we all agree, bad business):
But look, I'm not saying that this person shouldn't talk to a lawyer; in fact, I'm saying the opposite. Find out if the termination is valid. But be clear-eyed: when you get a straightforward answer to whether you can be terminated, and it confirms that the termination is valid, stop there, and don't spend a fortune in money and time fighting a foregone conclusion.
Disagree. Normally I would agree, but this is such an outrageous situation that the OP should just dig in and tell the other side to GFT. Let's not set precedent that a-hole co-founders get to cut out their technical co-founders after almost a year for zero compensation without a fight.
But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?
I get the impression this is all happening because things are going badly, not because things are really about to take off.
My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
> Well, we don't know the other side of the story.
This is such a tired line. No, we don't know the other side. But the OP is here and asking for advice, so rather than sliding into some kind of false balance you could simply assume that they are telling the truth and basing your advice on that. The obligation to inform is on them, and speculation on your part what the other side may or may not be is pointless.
> But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?But knowing what we know, what's the best case scenario for the OP? Even if he's 100% right and the cofounder is the worst human being on the planet, what's ultimately the best outcome they'll get out of a startup with $0 revenue, maybe a potential $60k ARR with ads (but maybe not), and has $40k in the bank?
That's all speculative.
> I get the impression this is all happening because things are going badly, not because things are really about to take off.
Alternative point of view: if it was worth nothing the co-founder wouldn't be making such a play to own it all.
> My point is that it may really really suck, but I just don't see a path, even if everything goes perfectly, where the net gain is worth it.
But that's exactly why the OP is here: to ask people if they do see such a path. If you can't see such a path then maybe just stay out of it rather than trying to talk the OP into something that they may regret gravely?
i agree. you are not left with a lot of options. walk away. having been in somewhat similar position, i can tell you that it's not worth it. good luck.
having said that, you can walk away. and still piss on their cake.
but this a toxic partner. you cannot work with them. that's for certain. you will have to walk away.
I think the idea that they will not be able to work with the co-founder again really depends on the type of person that co-founder is. If the co-founder is just doing this as a strategic move, expecting things are going to become quite valuable soon and considering the 10% cliff it may be that if their strategy does not work they will not have any problem continuing the partnership - although if that is the case I would (when things became profitable/ much improved) negotiate for some kind of exit because obviously the co-founder is not trustworthy.
if you can emotionally check out but legally remain, thats ideal. you are mostly likely getting pushed out, so recognize that you are in a 100% adversarial relationship and separate yourself from any kind of personal emotional investment. a completely detached self interested approach is totally warranted given the circumstances, and would significantly increase the probability that you will be compensated more fairly.
IMO. No serious investor will give money to a company where someone who owns 40% of the equity is no longer involved and/or left on bad terms. Having him around but not active is going to limit how the business raises money in the future.
You know, I like your position here dude. Keeping out of discussion the money (everyone of us work to pay bills) I think sometimes to give up maintaining a high profile is better. Anyway, the personal situation of the founders is unknown to me and dont want to talk too fast. But i get your point here.
I agree to the point that the company is probably done at this point, but of the off chance that it succeeds I'd get the 10% and then walk. if he raises another round etc. then that's a bargaining chip to get something (probably would amount to 0 but better to have it)
Rolling over because it's the easiest path is not a good option. That type of attitude will be apparent to people around you and you will likely get taken advantage of.
Wish I had downvote powers to downvote this because it's horrible advice.
You literally have nothing to lose by just waiting for the equity to vest and keeping your 40%. Fuck the co-founder. Fuck 3%.
Worst case you end up with 40% of nothing. Walking away you end up with 0% of nothing. If you don't stand up for your equity no one will. And if you let him get away with this, down the line he'll do the same shit to someone else. Stop this guy now in his tracks, don't let him swindle you and everyone else.
Your theory of the case here being that this company has managed to find a set of contracts that establishes 4/1 vesting and enabled a seed funder to invest $100k, but somehow didn't designate any officers of the company or any authority to terminate members of the company.
It could happen! They might reasonably spend $400-$500 figuring that out.
The funny thing about this is that it isn't even good advice in the chest-puffing status-seeking model in which its proposed, because a big controversy with a former founder might mostly just makes you someone reasonable people might not want to work with.
If there's a pattern it's one thing. But for a single event when it's hard for an outsider to figure out who was in the right and who was in the wrong, it's probably easier just to avoid both of them.
I'm 100% avoiding on principle ever working with a founder who ruthlessly terminated a partner in month 11 of a cliff without simply accelerating the cliff, so there's not much need to litigate that point.
Advising to give up while there's still room to negotiate sounds like bad advice. At the worst, OP could turn this into a learning excercise on how to negotiate in a tough situation, with zero downside compared to the advice given here.
This doesn't have to be a protracted legal battle, but reading up on documents they signed, figuring out their proiories (continue in biz? get at least some value out? etc) and negotiating in good faith is something that might come very handy later, in another startup, with much more to lose.
I think negotiation is good, if you're realistic about it, and if you actually value what you're likely to get from it. And I agree, they should quickly find an answer to whether they can be fired by their partner (they probably can, for reasons stated elsewhere on the thread, but it's very much worth getting a solid answer).
It's not me, but if it were, I'd approach the getting fired problem with "look, I build this. You can fire me, but you don't have money for adequate dev and average Joe will run it into the ground in two months. Your greed will make you lose everything", and also approach the investor (if they're hands on) with the same rationale.
Also agree with the point you made elsewhere - this can get gut wrenching (even without any lawyers getting involved) and if you're prone to dwell on negative thoughts, pretty damaging to your morale through the duration. Money spent fighting is not the only downside.
The downside here is what happens after trust is broken... You end up working for another 12 months at the company pro-bono, then get canned 1 month before your next cliff vesting.
I would take 10% for the first year of service and walk with it, not expecting anything. The angel put in 100K for 10%, and you worked for a year for 10%. very simple.
I would burn the entire thing to the ground and piss on its smoldering ashes before I would allow someone to take advantage of 11 months of my work just because he thinks he can make more money for himself if he positions himself as a solo founder.
"I would spend $15,000 of my own money and 8 more months of my life during which I deed control of my adrenal system to this stupid controversy and get little else done, and ultimately reach at best the same outcome as I'd have achieved walking away amicably, less expenses, before I would allow someone to take advantage of 11 months of my work".
Greater good/game theory argument. If we're all spineless, we just make it easier to be taken advantage of. Burning it to the ground is akin to MAD, but it only works if it's a likely outcome.
I'm not sure what I'd do but I'd view a 51/49% split as suspect from the start.
Their main claims to success based on OP's description are that they show up in search engine results and are only $60K in the red. If that's success in 2020 then I can launch a dozen successful startups by January 1.
They said they have 60k users. If you can acquire 12 * 60,000 = 720,000 users for 720k in less than a week I think you'll have a lot of people beating down your door.
the sad part is that they are right. I was in a similar situation and there really is nothing you can do. They don't own the majority share of the company to make the decision.
Walk away. It's not fair, but starting a company isn't like getting a job. It's a relationship and a risk that doesn't always work out. Sometimes you find more money and success than you could ever dream of, and other times you waste 11 months.
Here's my thought process. You and your cofounder aren't going to be able to work together after this. The company has no money and no value, so you're trying to get your portion of something that doesn't exist. Them raising money to pay you just kills their chance at ever being successful... plus, who would give a company money just to pay someone out? Same goes for accelerating vesting on the 40%... there's no way they can build a company when someone not involved owns a huge stake.
You could spend time and money trying to right this injustice. And yeah, it is an injustice. But the worst thing you can do is tie your identity to this. There's not much upside to fighting it; all you'll do is spend more time, money and energy you could be using to start something new.
I've had this happen to me before, so I completely understand what it's like. You feel helpless and shitty and like you wasted a ton of time. Rather, do your best to put it behind you, and focus on what benefits you got out of it.
Did you learn about a new space that will make you extra valuable to another company? Even just having a founder mentality will raise your value to a startup. Did you learn things you would do differently? You can start another company, and do it better this time.
I know it sucks. But I'm 99% confident you won't get anything out of this, so it's best to just walk away. It's cheesy, but "success is the best revenge." Your relationship with this company failed, but you haven't. Don't tie your personal journey to this one company.
Good luck, and my emails in my profile if you want to talk!
(Also, a few years ago I wrote about going through it: https://medium.com/@gkoberger/five-years-time-6a6ae1157a66)