Sorry dude, looks like that is precisely what you are going to have to do. Don't worry about the board stressing; they can handle it. That's their job.

Focus on YOUR job: the success of the company. The board will stop believing you when you prolong this longer than you should have, actually making the situation much worse.

When you go to the board, GO PREPARED. Assume the board does not know anything. And treat it almost like a trial where you will get to present your side, and at some point, your co-founder will get to present his. In these cases, I like to open up a document and put down the facts in bullet points. When presenting, remain calm and stick to the facts, which when evaluated by a sensible party(your board), should have them arrive at the same conclusion as you.

It sucked, and I felt like I had wasted 3 years of my life, and while my co-founder definitely did his own damage by not holding up his end, my biggest personal mistake was to not immediately, and aggressively, deal with the problem when I saw it arise (and after initial cooperative attempts at resolution went nowhere).

If you are putting everything you have into your startup, then you have everything to lose if you let someone else fuck it up for you.

It's going to get real messy, especially since he holds all money, bank, passwords info (now I understand why he wanted to take control of those stuff in the beginning). Firing him will be so messy, and the 3 employees we have today respect him a lot especially since he's an expert following those rules in the article I stated in the original post (he's even deceived me lot's of times!)

shit.. Sometimes I think I need a new startup problem to solve to leave the company because this is not letting me sleep at night (and it's no longer the first thought when waking up in the morning).

You should also roleplay with this person as if he is your cofounder. Have him be a dick and make any argument you can see you cofounder make at any point. I've learned that winning arguments and being right are two different things. This way, if your cofounder is good with the former, you need to be prepared and roleplaying will give you a great edge!

Also, write down all possible scenarios. So if the board asks you "what will happen if the employees quit?" you need to have already thought through that use-case. They will probably be very impressed if you have a document that has these use-cases and possible plans.

This is a big red flag. Who hired those people? Why did you agree to hire them if you don't respect their judgement? Or is your co-founder also doing all the hiring as well as taking care of everything else?

Starting to sound like you should be asking yourself what you contribute.

What does OP really want his cofounder to do, maybe its time he explains why is he an 'overrated' person.

It's hard to read between the lines to know if he's really not keeping up his end. Employees like him, he sounds like he's the field expert, he's got the money, he assembled the board, etc...

This will give you first line of objective feedback even about your own positions.

You're not kidding. I hope you just mean logistical access (as in, currently holds the details to), as opposed to actually having them in his name. If the latter, you're pretty much screwed. In any case, when you discuss this with the board, once you get them on board with this decision in the first place, you're going to need to make a clear plan for getting access to all of those resources transferred. Hopefully you can do so quickly and without legal action required. Fortunately, if they're in the company name, there are steps you can take to get that access.

You need to present your case to the board, there is no other good way to go. If they side with you, your co-founder will have no choice but to turn over control of the money, and in fact you should encourage the board to force the point on the money / passwords / etc controls anyway.

During this period of time you can hire a team (or someone) to secure your companies credentials. Hiring a team to review your assets both physical and virtual; code base and otherwise would be wise.

Would you file for divorce based on an HN article about overrated spouses?

As others have pointed out, it sounds like he does do a fair bit for this company but you're blind to it. The one trick he's clearly missed is getting to this level of distrust with his cofounder. For that, though, it is not clear that you should fire him. Maybe he should fire you...

No matter what its going to be messy, and you need to be absolutely sure its worth going down that road before you do it.

• Discuss it very frankly with at least one board member you trust. Depending on their involvement with the business they may already suspect that something is wrong. Outline to this board member your concerns that Co-Founder is going to take this the wrong way and derail the business.

• Discuss with Co-Founder the specific areas you feel Co-Founder isn't pulling his weight (it isn't okay, even if it's the truth, to say "he isn't doing anything"). Make an irreducible list: start with what are obviously his strengths, and then list the ways in which he is not playing to them. Make it inarguable and prevent it from turning into a personal matter.

• Keep the focus on company not him. For the company to succeed, you need to accomplish XYZ.

• Explain very clearly what his options are. You are not trying to screw him, but you are displeased with his input. You would like to amicably resolve this so that the board doesn't have to be involved, but failing that you will take it to the board and ask them to do their job by sorting it out. He can accept reduced equity and no day-to-day involvement, or he can kick up a fuss and you will move him on. Either way he should accept the reality that his involvement is coming to an end and that his decision now is how it ends.

Your board, if they have any kind of experience in running a business whatsoever, will know that this is one of a billion things which will go "wrong" over the four or five years it will take to make or break your biz. You can influence a lot in the way you communicate this event to them. It sounds to me like it's not truly a crisis but a significant opportunity for you to offload someone who is not contributing and reallocate capital to someone who will put in the hours.

My overriding advice is that you should not worry about this. Next time you start a company be sure to finalise your divorce before you finalise your marriage (i.e. very clearly delineate duties for founders and establish what success for your roles looks like), but other than running out of capital or not growing, very few things are disastrous for a startup.

Elad Gil[1] has written about this in depth about 12 months ago: http://blog.eladgil.com/2013/01/how-to-fire-co-founder.html

[1] https://angel.co/eladgil

What, he won't even hold the whip? ;)

I'm pretty sure that "S&M" above actually refers to "Sales & Marketing", for anybody else who was... confused on a first read.

How about this OP - who are you to fire your coworker after he got a cosy relationship with a board?

This is literally no better than firing an 'idea man' after they did nothing, except just bring an idea, set up a company around it, and code the first version.

Who are you to do that? If you were good enough to found and run a company by yourself, including raising money, you would be doing that. Where are all the companies you founded and ran by yourself in the years and decades you didn't have your current cofounder? Even if he showed up to work three days: one day when he talked with you and then brought a huge investment from a board that you couldn't bring, then 18 months later to sign some Series A papers with you after discussing them by email, and the third day he to sign the IPO documents before quitting, you should still STFU and thank your lucky stars you're allowed to get 40% of an actual company that he actually orchestrated for/with you, in exchange for nothing more than working there, much as you might for whatever salary "S&M" or "product design" is worth.

It's not your co-founder's job to work for you. Who do you think you are anyway? Go design a product or do sales at a big conglomerate if you want pay grades, or go found a company by yourself if you don't need the things you've already listed your cofounder as bringing, including a cozy relationship with a board.

If you can found a company and raise money for it by yourself, go ahead and give yourself a 2.5x equity raise up to 100% by getting the fuck out and doing so. enjoy 100% of what you feel is 100%, since you feel your cofounder didn't add shit to the mix, in your extremely personally centered opinion.

Everyone else here has it 100% wrong, IMO.

So someone with 40% of the company thinks the other guy with equivalent ownership isn't worth his share? What if that guy thinks the same thing about you?

The other guy apparently has employee loyalty, funding, and administrative controls on his side...

I am not at all convinced that the OP deserves sympathy for wanting to screw his business partner, and publicly soliciting strangers' advice on how to go about doing it.

If I were the other guy, I'd put this HN comment thread in the hands of my attorney and take my own case to the board. Sounds like the jig is up for this partnership, take it out back and put it down.

Is an employee agreement and vesting schedule in place?

Who reports to whom? You haven't mentioned formal titles/roles, but unless you're already final-say CEO, you'll probably need the board's support to oust him. You'll definitely want their support and advice, especially if adversarial steps to adjust equity or reorganize are necessary.

Talk to older mentors/lawyers who've seen similar situations.

Look up 'shotgun clause'; even if one doesn't already exist, a 'him-or-me' game of chicken might be resolvable with minimal damage/legal-risk using some sort of similar bidding/step-up-or-leave arrangement.

Maybe he's not pulling the weight, but like a movie the other day, a Washing Machine works hard, so what.

Think through if he's benefitting the company in his total contribution. If you want more from him, ask. If he won't do it, explain it's unacceptable and go to the board.

Like badclient states, it's going to come down to perception based on asserted facts. Those facts will be interpreted through the lens of relationships.

I have been through this before, I can help if you want someone to bounce things off of real time.

This is the key point for everyone advising him to go to the board or quit and start anew with the employees. It's unlikely the board meeting will go well unless the other cofounder has done something seriously wrong. Trying to work out goals with him, as suggested, has a better chance of being productive compared to asking him to reduce his equity.

Before you go to the board (you ethically should) let ascertain a few things.

Are you sure he's an overrate person or is it just that you don't see the value in his input?

Some where in the thread you mentioned:

> It's going to get real messy, especially since he holds all money, bank, passwords info

Some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful. If he has mismanaged finances, that's another story.

If he has not mismanaged the finances and has taken ownership/charge of these affairs you need to reflect on why you did not opt to share the burden.

Some people don't like managing finances, nothing wrong with that, but they do need people who'd do it for them, even better if there is a mutual need to succeed. Anyone can be the best money manager in hindsight.

> the 3 employees we have today respect him a lot especially since he's an expert

Respect is very important. Sure, the article says that the Overrated person can establish themselves as an expert, but believing this without a doubt also means that you don't trust the judgement of your first three employees.

Not saying you're wrong, but there is a possibility that you need to delve a little deeper on why they think your co-founder is an "expert".

> following those rules in the article

Not all rules apply all the time. Also these are not really rules but situational observations.

> The only problem I see here is that he has more rapport with them (the board).

Was he instrumental in helping you raise funds? Could you have raised the funds with a 100% surety without him if you were a single founder? Would this rapport help keep the faith of the stakeholders in the prospect of your success?

Maintaining and managing peoples belief in an idea or the people executing an idea is no easy task. Are you sure he has a zero percent contribution in any of these? And again are you sure you could have achieved a 100% of past results without him?

> He actually threatens the company's success if I ever try to "sneak a move" on him

Why would you try to sneak a move past anyone who has as much to loose as you, or even if it was a fraction thereof?

How does he threaten the company?

Does he threaten to leave? If you want him to leave, this solves your problem. But, if his leaving threatens the company, you should probably reconsider firing him.

I see this problem clear in many situations these days. A lot of angel investors/fund raisers tend to think themselves as founders.

The problem with such a though is that, your job ends once you give the money. Though arranging for money is important once sales get going you tend to be looked up as some one who did an initial favor but is by and large not contributing anything to the company for months/years.

Mean while other people, even non founders who throw in insane efforts to keep the company going look at such people as dead baggage to carry whose only role was raising that initial investment and riding that accomplishment wave since then.

After some time it makes more sense to honorably give back the investment + profits to that initial investor than have them control you, while not contributing anything meaningful to the company.

If you want to (you should and must) get to the board and present your concerns, they are going to need those questions answered

It will only help your case

If your cofounder is as bad as I'm imagining, you should do your homework: get emails, recordings, etc which is strongly hinted by his threat (make sure you get him on that, record with your cell phone - hidden - or something)

But there's also a possibility things are merely like this: "some credit needs to go to an individual who has taken ownership for responsibility of finances, considering the amount of onus that falls on the need to maintain finances optimally for a start-up, this can also be really stressful."

You need to work a very clear and ironed out case for the Board. And remember, to them everything is still ok, and they hold him (and you) in consideration, so you'll have to work the case real slowly, be tolerant of their questions, as dumb as they are (it's a dumb question to you, not to them)

And talk to your lawyer, of course. And make sure he doesn't know about this.

Be incredibly careful: this could be a violation of state privacy/wiretapping laws.

Not sure what's the laws on that, but yes, it's better to check

2. Talk to him. Offer him something in return for his shares (such as a large amount of debt which is only triggered if/when the company sees a liquidation event of suitable magnitude).

There hopefully will not be a step 3.

If you want to talk, drop me a line here and we can hop on the phone. I have a strong opinion on this topic: http://mattmireles.com/contact/

Additionally, there is a reason successful solo founders are rare. It is hard to found a company, especially without somebody who is 100% aligned with you (at least economically) the whole journey. I'd imagine that a situation where you start with 2 founders and go down to 1* makes it even harder, because you are like a single founder but with all of this stress you are accumulating right now on things that aren't related to making a great product.

Now this isn't to say that founder strife is something that doesn't happen in successful companies. It does. It is just the magnitude and early-ness of your strife seems pretty large. Making a successful company is really really hard, and you really want to put yourself in the best position to succeed. If you aren't in a good situation, and getting to a good situation doesn't seem likely, then just leaving and starting something else might be your best available option.

Note: I have no idea how large your company is, so this post is assuming your company is 2 or 3 people and is very early stage. If your company is doing really well or is much larger, this advice basically doesn't apply at all, because then "sticking with it" starts to look like a good option.

*: I'm extrapolating that you had 2 founders based on your post. If for instance you had 4 founders and were going down to 3 I don't think it would be as big a deal.

Your first and only duty is to the welfare of your company.

I recommend reading "The Founder's Dilemma's" to cover the other things you'll need to consider later as well prevent other, BIGGER, issues.

1. Your co-founder has the same level of ownership as you.

2. He controls the company bank account, passwords, etc.

3. His relationship with the board is stronger than yours.

4. Your employees like him.

5. He is aware of your desires and has made it clear he is willing to fight your efforts, apparently even if it means sabotaging the company.

Given these facts, I think it would be wise for you to consider what you can realistically achieve even if you are successful in removing your co-founder. You may find that the question, "How do I fire my co-founder?" is not the first one you should be asking yourself.

1) S&M? Sales and Marketing? At some point in the comments you mentioned that he's the financial guy in your team. I assume because you're writing this on hacker news you're the product guy. So I assume you're comparing his tasks with what you do day in day out.

I started a company with three other founders 6 years ago in Berlin. We had depressing times, but also great times. I left the company a year ago to join one of our VC and after 5 years I was the first to leave.

During those 5 years, I had moments were my co-founders didn't live up to my expectations. And the other way around with me. In retrospect I even think that two of us had a burn-out during the time (which results in exactly the behavior, described in the article you've mentioned) and because we had constantly re-invent our jobs.

And during the time were we re-invent our jobs, we're not that productive - or appear not productive - for some time. Give him that time, you'll need it at some point too.

2) You've started that company with him and you've raised funds. Congratulations, because at least your investors are thinking that you are a strong team - otherwise they wouldn't have invested in the first place.

From your ask and comments it sounds like your relation with your co-founder seams to be already hostile. For the sake of your company, you have to put aside feelings and put the interest of the company in front of everything. Which means your _ego_.

get some consultancy and figure out how to communicate on a professional level.

Someone mentioned to put up goals. I assume you have some, so try to reach them. If you don't need them then there is always the option to get another co-founder - maybe a more senior person - into your company.

Good luck.

Could you quit and re-start? If you have employees, maybe they quit and follow you? Perhaps your investors would go with you too.

Then what resources would the remaining co-founder have to go through the US court system?

Lastly, leaving and re-starting doesn't have to mean the exact same product.

I know what you are saying, but Im pretty sure it could be side stepped with some creative thinking.

To bet on this would be to bet on the new company being a failure.

Because if it ever does become successful, plenty of lawyers would be willing to work on behalf of the ousted cofounder on contingency.

Communication is key in any relationship. If you can't manup and talk to them, you are part of the problem.

If after you two talk and there is no movement, then seek out other alternatives. But always try to keep an open line of communication. Sometimes the alternative is way too costly.

Don't talk to board about firing the co-founder, talk to the board about making the company successful. If that requires replacing the co-founder they are perfectly capable of figuring that out.

All that said, here's my advice:

1) You have to be mentally prepared to walk, and go do something else, because there is a good chance you won't be able to work with this person again. You also should be prepared to rebuild the company from scratch.

2) If you have a good enough relationship with your co-founder (and one that's worth preserving) you have to go to them and say, "I think this isn't working. Can we figure an equitable way out of this?" You may have to be the one that leaves. You have to be prepared to let him have a large chunk of equity. If you skip this step, you will have an enemy for life. (You should only skip it if you already have an enemy for life)

3) After step 2, you should contact the board member that's closest to you and tell them, "I'm considering moving on. Can we talk?" They will be savvy to know that something is up, and they can help make the call for which of you two will stay.

4) No matter what the outcome, conduct yourself professionally at all times.

In the end, the code/passwords/money won't disappear. If your co-founder does something crazy when there are outside investors, his career is doomed. He may get angry, and you may get fired, but he won't so overtly steal.

Good luck and let us know how it goes.

So first off all, get someone to talk this through. Ideally someone who can give you an honest opinion, but any second opinion is better than none.

And second, after you decided to use the nuclear option, shelf it as a plan B. The nice thing is, almost everything is better than that. So you can plan with a lot more freedom, and you can play with a lot of risk. If it does not work out, then you just push the button and go nuclear. In your case, when you decided that there is only one of you left when the dust has settled, then you don't need to worry how you can work together in the future. One way to exploit this, you can be brutally honest. Perhaps you find a common basis again, or you go to your board.

If you wait to long, and your cofounder feels a threat, they may beat you to the punch.

After doing more than a million in revenue in our first 3 quarters and hiring a team of 15+, I was fired. A clause in our operating agreement allowed for this to happen, even with equal equity.

I encourage you to act quickly and very accurately in order to alleviate any risk of your partner taking action against you.

Good luck. I sincerely wish you the best. As messy as it gets, stay honest, stick to the points, and don't overreact in your defense. It will all work out as long as you diligently work to resolve the issue.

again, I don't know the full details of your situation but there is two sides to a story. Whatever you end up doing won't be pretty but talking is and discussing things hombre a hombre is the best approach.

it blows and there is never an easy way to dissolve such relationships. i had to threaten 'going nuclear', i.e. closing the business, to get him to leave.

With a vesting schedule in place, parting with a co-founder (voluntarily and involuntarily) is much cleaner.

If you convince them of your case, seek their guidance in approaching your board and other influencers. You should also seek advice from the company's legal counsel, he is obligated to protect your confidentiality. Also quitting or firing are not the only two options here, but I'm sure your legal counsel should know about this type of stuff.

More than happy to talk it through with you and let you know what worked well/didn't for us. Twitter: @MackMackTweet

At this point, he should just go directly to the Board and include his proposed improvement plan in his presentation. The co-founder has already indicated an unwillingness to change or leave; the Board should be able to force it.

if you're a co-founder and all you have is options and not a significant chunk of real equity, i'd say the problem is not that he isn't pulling his weight, but you (that's you, not him) got short-changed for the amount of work you are doing. and you are probably upset about that.

if he's a CFO/money type that's been charged with fund raising, money management, records, dealing with vendors and HR, etc, his compensation (no actual equity?) is probably correct, or even under-valued.

in which case, if you go to the board, you are going to be forced into a position of justifying why you want an increase in compensation for your work, instead of lowering his compensation for the work he's doing.

these are the kinds of things you learn so that your 2nd and 3rd time around are easier.

"When we started on this endeavour I was expecting you to behave/provide/take care of X and you are not doing those things that we agreed on (or the results you are delivering are WAY OFF the expectations that the company had on you). You cannot be part of this if you are not helping it getting better. I'm sorry but I don't want to continue with our business relationship."

Be honest (with him and with yourself), you DON'T WANT HIM and there's nothing wrong with it. The more transparent you are here, the better you'll come out of 'the negotiation'.

The negotiation: Wether you want it or not, he owns some part of the company, even if he had just been doing jack shit the fact that you invited him to your endeavour and you are still referring him as a co-founder means that he's ethically entitled to 'something'. Now, it's up to you to decide what is that 'something' that he deserves'; again, just be honest and talk about what would be fair for him to take.

Be honest! That's the only rule here and if he co-founded this thing with you (even though you knew he wasn't worth it, or didn't knew at all) chances are that you may be real-life pals; if that's the case, just solve it like pals, after all it's always better to have a friend than a dollar.