stock-options, ctoI am thinking of leaving a startup after 2 years. I have options that may be worth something someday. I have most of the product knowledge (but I have built a pretty good dev team as well) I want to leave, but not harm the company and not get screwed out of my options. I am thinking of: Offering a consulting arrangement to make sure the business can continue, but perhaps based on what my stock options are looking like. Anyone have any words of wisdom?
thanks.
Think you are missing the point, those options were set aside under the assumption that you would remain with the company - and should be given to your replacement, not you in my opinion; clearly, what you and the startup agree to is between the two of you, just stating what I see as the facts.
Next, think you need to set aside your interest for a second, and focus on what’s best for the startup, for a number of reasons including that you I assume already have a vested interest in the startup’s future success both financially, professionally and for that matter, assume that you’re friends with a number of people at the startup too. As such, you need to draft a transition plan that does not require you at all, even as a consultant. Reason being that no new CTO is going to want to come onboard and have to depend on you to respond to requests, or be one upped by you in front of the staff, board, etc. Further, you clearly don’t want to be at the startup, so why pretend that being a consultant would make things better, since it likely would not.
All that said, with the above in hand, and already being willing to walk away with nothing - you will be in a much better position to negotiate for the terms you want. Next you should review all the legal agreements that are currently enforceable, and briefly chat with two or three attorneys that would be able to represent you if needed; in part to see that it’s likely not worth going to court over the matter. Especially important for any vested stock options you have are the post-termination terms, which will likely set a window on how long you have to exercise you options; which might also be something that you could negotiate depending on state of the startup, your personal finances, etc.
Good luck!
Such a key person, a founder maybe, leaving a startup is something very very bad for the company. Even worse if you leave with lots of options or equity with you.
The most important and the most valuable bargaining chip of a startup is its equity (also in the form of options to acquire equity). It is very common for the stage of a startup to be measured by the equity distribution between the founders, the investors and the key employees.
Imagine yourself in the shoes of whoever will replace you: the person will compare himself with you and will question your stake of the company compared to his stake of the company, giving that you will no longer contribute and he will be in the key position. Seems very unfair to have a non-contributing former employee hold much more options or equity than you.
This equity sharing issue is so relevant that in our ecosystem it is getting much more common to see investment agreements forcing founders to give all their shares to the investors, and receive call options on them with a 4 year vesting. So if, for whatever reason, the founders leave the company too soon, not even them will get out with disproportional amounts of equity compared to whoever will be forced to replace them.
I have seen that happen in one of my invested companies. We (the investors) were forced to replace the founder that held the CEO position, and more than 30% of equity. Given that another founder with almost 15% of equity was already out (he opted to pursue a career even before investment), we found ourselves with 45% of equity in the hands of non-contributing stakeholders. We could find no replacement for the CEO that lasted more than 3 months, even with a huge paycheck. We had no equity to attract and hold talent. Huge mistake. Very painful write-off. Everyone loses.
Assuming you have a reasonably good relationship with your co-founders I would suggest discussing the matter with them at the earliest possible opportunity. If you reassure them that your intention is to ensure you do not leave them in a difficult position they should be motivated to help determine a solution that is in everybody’s interests. It may be a difficult conversation to broach, but a flexible position and a mature attitude from both sides should ensure a smooth transition. Once you move on to negotiation of the details, look for the “must have” items for each party and see if they can all be accommodated. Be clear both with yourself and with them about your own “must haves” and be prepared to give way on other stuff. Good luck.
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