equity, co-founder, buy-outAfter some years I left a company that I co-founded. I own a bit more than 10% of equity and now the company wants to get me off the cap table as they say that it looks bad for future investors.
The buy-out offer they are making for the equity is really really low and they are very desperate to get me out of the company. They claim that if I don’t accept, the company won’t be able to raise money, and it would fail. I would like to sell at the next fund raise at a fair price, not earlier.
I’m a good leaver and founder: I helped building the company from the ground up for years and I officially left because of other reasons, not company related.
Is a leaving founder on the cap table so bad for investors? I’m really skeptic about this assumption in this specific case; I talked with other experienced business people that told me that leaving founders happen and it’s normal practice to buy their equity at the following raise.
Since you have left the company you have become an investor in it rather than a founder. The difference is you invested your time and knowledge and your contract states you are a good leaver.
I think they are worried over nothing, it is easy to spin the situation to state that they have someone vested in the company with intmiate knowledge of the business. The only reason they would have a concern would be if you left because of something nefarious going on at the company. But since you still have shares you must still believe in it.
This really depends on the individual investor (and deal size), but it’s generally not a deal breaker especially at 10%. You’ve obviously vested and therefore earned your 10%. The company should treat the situation as you would for any other investor. But in the end this comes down to you - and if you think it is fair to take anything less than the most recent raise/valuation.
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