Are these founders trying to screw me?

https://news.ycombinator.com/item?id=323787

by readyrnot • 18 years ago

31 64 18 years ago

news.ycombinator.com

I've been working for a startup for about a year now. I've written many thousands of lines of code for them. The founder has lied to me several times, gone ballistic on me and is one of those ultra paranoid crazies. If I knew this about him when I started I would never have worked for him. I've been promised a large amount of stock months ago and haven't received my stock agreement yet. We now have a well known investor that has just agreed to invest. Over the past few months I've been told "hey your stock agreement is coming". Then the other day I get handed some paperwork to sign: NDA and contract. They say "sign these and you'll get your stock agreement". The problem is that the contract is outrageous and takes away every right I have. Clearly I'm not going to sign it. I just want to know what's in my stock agreement and they're telling me "hey that's up to the investor and his law firm". My lawyer is saying "don't sign anything until we see what's going to be in that stock agreement". So we're kind of at a deadlock. Advice?

noodle2• 18 years ago

first and foremost, is this really still worth it to pursue for you? sounds like its a stressful, difficult situation.

ask to see if you can sign a NDA specifically with respect to the stock agreement, maybe?

i'd also find out from your lawyer, if you can, exactly what your rights are. have you been officially working for them? is that code technically still yours? what other things have you signed? etc..

readyrnot12• 18 years ago

You're right it is very stressful and difficult. I've thought of walking away many times since in my opinion dealing with dishonest people is not worth it. I haven't signed anything ever with them. It's all been on good faith. I've been doing work on their servers and checking it into their repository I'm not sure what that means. Up here in the north east where there isn't a large pool of investors / firms like silicon valley I feel pressure to comply so this investor doesn't vanish.

noodle2• 18 years ago

if you didn't sign anything at all, you might want to talk to your lawyer about IP laws and also talk to this investor in a one-on-one meeting, talking about whats happening.

just because they have and are using your code might not necessarily mean that they can continue to do so without your permission, if you didn't sign anything.

/not a lawyer

functionoid• 18 years ago

Are you worried about investors? This is the time to take your slice of the pie(I mean in honest sense). If investors find out you own the code and can walk away with it they will be hesitant in investing since once you walk away what are the founders left with? they'll lose investor.

Also if you think they are not honest trust me it is not worth trying more, down the road they'll try something else to get back the stocks even if they give it to you now.

If they are not honest with you take your code without telling them and start you own company or if you need a job find other one. It is very difficult to get the dishonest people straight, best thing is to find your way out.

alecco3• 18 years ago

Think of making your own startup with your code and contacting the investor? Ask your lawyer :)

menloparkbum2• 18 years ago

From past experience, if it is a good idea for a company, and the sole problem is that the founder is a psychopath, I'd just steal all the code you've written and form your own company and poach the investors. Worked for Zuckerberg. Of course, YMMV.

readyrnot12• 18 years ago

it is a good idea ... in a perfect world this sounds ideal :)

bigthboy• 18 years ago

As it works here in the US, you can take anything you've personally wrote and go your own way with it unless the following exists... You've signed or >>cleary<< declared that you are relinquishing ownership of it to them, they own a patent to the work you're doing for them and thus they have priority over it, or you've been paid and on the terms of payment was that you were providing them with code. The last one about being paid is still arguable but worth noting as you can argue that they were paying you for a license to the code you were writing and you just happen to be more open to share information and listen to their opinion on the matter.

In a situation like this, if the idea is stellar enough (and you understand it enough) that you could do the idea without them and it would likely be successful, I would take it and form your own company, potentially file for patents on anything new, and look immediately for investors.

In the world of business there are two key things which separate one from another, and both must be present. The first is material, code, visual/displayable proof of concept, prototype, or product. The second is money to execute and grow the material and code. With those two things, you'll have the upper hand against them at any time. Some will argue in the long run, if they manage to survive being beaten out in the beginning by product and money, that they may have a greater vision or business sense to execute it more efficiently, but the success would be unlikely. From your description of them I would think they would quickly crumble under the matter and the fact that you did what he's so scared of and he drove you to do would render him utterly useless/dysfunctional.

THAT IS JUST MY POSITION AND TAKE ON IT. I AM NOT A LAWYER AND DO NOT CLAIM TO BE CURRENT OR ABSOLUTE IN MY LAW KNOWLEDGE. THE ABOVE IS JUST MY OPINION AND VIEWPOINT ON THE TOPIC IN QUESTION.

lux2• 18 years ago

It's not really stealing of source if you wrote it and there's no contract saying it belongs to them.

I know in Canada at least, unless otherwise stated copyright stays with the creator (in a contractor relationship, other way around for employees) and you've simply licensed them use of the code. So you're only bound to anything you've verbalized (that can be proven) and written down (think emails). I know our copyright laws are a bit different from the US though, so it's worth being prudent first (always is :).

rksprst• 18 years ago

It doesn't matter if there's a written contract... if you are working on a venture together with some sort of verbal understanding, in California (I'm assuming in the rest of the USA too) that is just as legally binding as a written contract (At least according to the two lawyers I've talked to... you should obviously talk to your lawyer about your options as circumstances may be different).

pmorici2• 18 years ago

Are you getting paid a salary for this work?

furiouslol• 18 years ago

Would it weaken his position if he is well paid for his work?

pmorici2• 18 years ago

I think it would weaken his position significantly if he were paid... http://www.ieeeusa.org/members/IPandtheengineer.pdf Check out page 5. If you are an employee of the company the company clearly owns your work. If you aren't getting paid though and there are no other agreements covering your relationship... ...You could argue you were never employed and your work still belongs to you.

The other big question would be whether or not you used employer resources in a significant way.

gscott• 18 years ago

I have been in this same position, I relied on promises for 2 years and what it got me was 6 day workweeks and 14 hour days for a small salary with no upside. All I had to do was ask for a raise, but I never did because I thought I would make the money later. Given the chance again I would have worked 5 day workweeks and regular days. I have nothing to show for that period of my life.

Personally I feel you still own this situation. You can either rip up there paperwork for dramatic effect or ask for (and get) a raise.

gamble• 18 years ago

It's been my experience that for every entrepreneur who realizes that it's better to have a smaller share of a bigger pie, there are three who would rather give up a kidney than stock. And, frankly, your chances of getting anything don't improve as the company becomes more secure and established.

volida• 18 years ago

I am surprised you've been waiting for a year. You should already agree and demand they give you the percentage they promissed.

It's OBVIOUS they are trying to screw you.

"I've been working for a startup"

Did you get paid for the work you did? If no, then probably you still own the code. Check that with your lawyer.

In case you decide to leave now will you still own the code? If yes, then you know what to do.

noonespecial• 18 years ago

Did you get paid for the work you did? If no, then probably you still own the code.

This is really good advice here. So many people miss this one. I wish it had more upmods.

When people try to screw you like this they usually rely on keeping everything as vague as possible, hoping to get as much out of you as they can and then stiff you in the end. This vagueness cuts both ways. If there was no written agreement and no pay, what you've got is a few guys working in a room on their own stuff with a verbal agreement to trade that stuff later for more undisclosed stuff (like stock, or shares, or whatever).

YOU OWN YOUR PART and you can walk with it. Of course, check with a lawyer to determine your legal exposure before doing so and have a plan of action for dealing with some very angry guys who have just realized the upper hand they thought they had has been reversed.

All I can add to this is to be sure to tell your lawyer everything you can think of. Sometimes things that seem irrelevant to you have magical legal significance.

readyrnot12• 18 years ago

No I've not been paid for anything. My lawyer at one point mentioned that if I was they could use that to say "oh we've paid him, that's what we agreed to as compensation". So I believe you're correct in this aspect. I"ll ask my lawyer again.

_ecga4• 18 years ago

You should really talk to a lawyer about this. Oral agreements can be binding and enforceable. If this project is big enough that the founders would actually fight you, then you definitely should not assume that no written agreement equals no deal. Unfortunately, the short answer is that it's complicated.

helveticaman• 18 years ago

They're screwing you already. I would take this as sunken losses and quit; they're not ethical, and can't be trusted even if they do give you a stock agreement; and you're technical, meaning you can get a job somewhere else.

The "hey that's up to the investor and his law firm" part is a negotiating tactic where you appeal to lack of authority (I forgot its real name). It's bullshit. They're the founders. They can make things happen. Do you think if they would say this to Richard Stallman? No. They're just pretending something's impossible so they don't have to give in in negotiations.

On a final note: Everyone here is going to give you advice that, on the whole, is aggressive. "Tell them to fuck themselves." "Sabotage them." They're saying stuff that amounts to "You go, girlfriend! Tell that man he ain't good enough for you!" and they're not necessarily the best course of action. Especially when a recession looms.

I've been doing work on their servers and checking it into their repository I'm not sure what that means. Up here in the north east where there isn't a large pool of investors / firms like silicon valley I feel pressure to comply so this investor doesn't vanish.

You obviously have them by the balls. The fact you've touched a server and even operated it tells me you're probably a nerd, like myself and everyone on this site. You don't really have a lot of experience with this sort of thing because you probably had no social currency growing up. Now you have a lot of currency. Enough to kill their startup. If you can't work up the courage (not a trivial process) have someone negotiate on your behalf. Alternatively, move to another startup, or to California. You're technical. You can find something better.

As always, I am not a lawyer.

trapper• 18 years ago

Did you get paid for the work?

jhancock2• 18 years ago

1 - talk to a lawyer. 2 - talk to a lawyer. 3 - talk to a lawyer.

My non-legal opinion is that if you were promised shares and you have any form of documentation the conversation took place, you should leverage your position before the VC round closes and don't sign anything prior to getting what you feel is fair. Even if you do not stay with the company, you may get a nice payoff or some severance shares to walk and let the VC deal go through. Most first round investors will walk if the founders have liabilities like the one you are describing.

oh yeah, and stop working for assholes ;) There are lots of decent company founders out there. I think you will find that turning your back on the bad ones will somehow eventually make the world just slightly a better place.

alecco3• 18 years ago

They all look decent when you start. In fact, if they look very decent and there's no clear paperwork from scratch watch out. Scammers are charming.

jhancock2• 18 years ago

I see many well intentioned founders that do not have well defined stock ownership plans in place in the first 6 months. In order to tell the difference between a scammer and a well intentioned person that is simply shy of defining the options you have to judge the person's character and past history.

The way I've dealt with this problem is simple. ShellShadow is not my first start-up (both as founder and as one receiving equity from founders). I have solid equity contract in place from day one. I know the value of a good key employee and can quantify that value in the equity contract from day one. Additionally, my contracts are short and easy to understand with no legal double talk.

This approach works for me and I would like to see others that supposedly have "done it all before" to follow this approach. If your a leader, act like it!!!

Stabback• 18 years ago

Do not trust the internet for legal advice. Talk to your lawyer and see what they think is right/in your best interests.

readyrnot12• 18 years ago

I am actively engaged with a lawyer who knows about equity deals. He and I agree and our position is to find out what's in the stock agreement without signing anything first. I just keep getting the runaround which is "oh you have to sign this nda / contract first and then you get your stock agreement". As my lawyer says "I'm gonna call bullshit on that".

davidu2• 18 years ago

The NDA might be legit; but he should be prepared to hand you the stock agreement within about 2 seconds of you handing him the NDA. And of course, you don't have to sign the contract first.

SwellJoe• 18 years ago

You're being screwed. Lawyer up.

I presume you haven't assigned copyright to these fine gentlemen, yet? If not, you're in a deadly strong position, and you can shut the whole thing down.

huhtenberg• 18 years ago

> Advice ?

Run.

known2• 18 years ago

I think the founders are trying to manipulate and use you.

pg• 18 years ago

Sounds dubious. But if the founder is the sort of person you'd never have worked for if you'd known what he was like, why do you care? It sounds like you ought to work somewhere else anyway.

readyrnot12• 18 years ago

The problem is if the idea is good and they take my code and sell it and make money then I've lost out. At this point I want what was promised to me.

ConradHex• 18 years ago

How about just getting them to buy you out for cash?

I can't help but think if they are this flaky, the chance of success is minimal.

dkokelley4• 18 years ago

You have a great deal of leverage that you don't seem to be using here. If you haven't signed anything, and haven't been paid for anything, then the code is yours, and you can walk with it. Understand that contracts don't require papers, but it helps when things go wrong.

The key here is consideration. It's what you've given up and what the other person has given up in return. You've given up the code (IP, time, development), and what have you gotten in return? If you've been paid, that may be all that matters in court. If you haven't been paid, and if you've been promised equity and haven't received it yet, the contract is unenforceable and you can walk with your code.

I would use that last bit if applicable to leverage your position and make your case to the founder. You want the equity up front, before an NDA. The NDA keeps you from taking your code elsewhere, which is probably what the founder, his lawyer, and the investors want to keep you from doing.

Also, don't settle for a wimpy stock agreement. If you're in a position to take your year's worth of work and bring it somewhere else, and that year's worth of work is substantial, use that to get a substantial bit of equity. I would be ready to take my work too. In fact, it might be better to go ahead and do that since things are pretty shaky with this founder.

Disclaimer: Like most other people here I'm not a lawyer, so don't sue me after taking my advice.

maxklein3• 18 years ago

Tell them that you are going to stop working till this issue is cleared up, and that if they decide to stop working with you, you will revoke all rights to the code you wrote for them through a court order, and that the business will fall through because of legal considerations.

Things will happen fast then. Otherwise, you just go get another job. You have nothing to lose that you have not already lost, they have everything to lose. You have them by the balls, don't let them intimidate you.

readyrnot12• 18 years ago

I have threatened this several times to which the founder freaked out and begged me not to stop. It's at a critical point. I believe mostly they are just trying to intimidate me. It's now come to a point where I absolutely can't trust them and I'm going to stop providing code until I get what I want. I believe you're right, when I threaten to stop things will happen rather quickly in my favor.

almost• 18 years ago

Don't just threaten, do. How long can it really take them to just give you the stock options? Especially when they realize they're screwed if they don't.

maxklein3• 18 years ago

Tell them that you want a handwritten promise of what you agreed upon verbally. No specific details, just a simple hand written promise at this moment, with a specific 3 or 4 week deadline to make this formal. If they say no, you tell them that they are acting in bad faith, and that you are going to stop work immediately.

An agreement is an agreement - if you have emails or chat messages or so on, that's already a contract.

They have a choice - give you something handwritten now or they lose their developer at the point where they are about to close a deal, which is a really bad time. They will tell you that this is the wrong time to apply pressure, but for you, this is exactly the right time. This is when they are most vulnerable because the deal could fall through, so this is your best chance to get this through.

When they have investment, how useful do you think you will be? They will just get rid of you and hire someone new.

DabAsteroid2• 18 years ago

I have threatened this several times

Maybe this points to the root of the communication problem between you and them. By threatening, instead of doing what an assertive person might do (which might be to simply walk away with the code that you own and wait for them to contact you with a sweet offer in writing), you might be sending them a message that is poisoning the negotiations. It is possible to be passively abusive to people. It might be your own greed and anxiety that is preventing you from being a stand-up person, doing the stand-up thing, and making money off of this situation.

trevelyan• 18 years ago

Understand that others are treating this as a business relationship. Being lied to or not treated in a way commensurate with what you have been promised is excellent grounds for leaving.

Stand up for yourself. Tell them you'll sign it together with the stock agreement or walk.

prime0196• 18 years ago

I would find out who is really pulling the strings. Could the founder's lawyers or maybe the investor be asking that all parties involved sign an NDA? Are the founders merely advising themselves? You may want to think about having a meeting with everyone(founders, lawyers, investors) and find out where the contingencies are. The people in control may not even know your situation.

readyrnot12• 18 years ago

This is exactly what I would like, a meeting with everyone involved so that we can see what is true and what's not.

mattchew• 18 years ago

I'm reminded of the scene in Cryptonomicon where Doug Shaftoe lectures the guys about bullshit landing on their heads. Translated into your current situation:

"My goodness, this guy is attempting to screw you!"

You seem to think that getting a stock agreement means that you have "won". I don't think so. It just means that the guy has to start looking for a different way to screw you.

You are dealing with a bad person. If you try to interact with him on good faith, you are likely to lose one way or another. All the time you're writing code, he'll be thinking about ways to screw you over. Maybe that will be a clever loophole in the contract, or maybe it will be easiest to frame you for embezzlement and send you to prison.

My opinion, your first priority should be getting out. If you can do this and get paid also, great. You have leverage because of the investor, maybe you can sell out all your interest for cash today (with the help of your lawyer). If you can't get paid, get out anyway.

Good luck.

davidu2• 18 years ago

This doesn't sound too good, but it's easy to get past.

You need a YES or NO answer on this question to the founder: Do you have your equity package already?

If YES: Then you state that he needs to immediately prepare your stock agreement, and if he is unable to do that he must prepare a very brief document stating what % of equity you are being granted and on what vesting terms and at what valuation subject to the common shareholder agreement all other employees are or will be bound to. In other words, you can't be singled out at a later date.

If NO: Then you ask him to draft a letter where he commits to providing your equity package concurrently with his own, and to immediately spell out what % of equity you will be granted and at what vesting rate. Demand that your terms me similar to all other hires brought on board at the same time or before you.

Overall, this stuff is just process and if he or she can't get it done, that's a bad sign.

Harkins• 18 years ago

When someone is screwing you, they never say "ha, ha" until the very end when they think they've gotten all they can. Before that, this is some temporary instability, this is an important time, don't you trust me, it's coming, we're waiting on the lawyers, that language is boilerplate, this is how the business works, you don't understand the nuances, etc.

Stop listening to what they say, look at what they do. Either they do or do not produce a stock options contract and make good on their other promises -- and I'm sure there have been a few that have been delayed "for now", right? And I bet that either this company has the founder, one or two of his very old buddies, you, and maybe another worker or two - or there's the founder, his buds, and a 1-3 dozen people with 95% turnover every few months.

Your founder sounds like a sociopath, someone who lacks a conscience and will say anything they think they can get away with manipulate people into doing what they want. Read the book The Sociopath Next Door, it's a decent intro (skip the bunk "origins of conscience" chapter) - until you realize they literally can't be like a normal person, you'll keep thinking they'll make good on their promises and the golden future they've described will arrive.

I worked at a startup owned by a sociopath for most of a year. There were some huge promises and I was excited to be part of it. Except that sometimes the founder was a huge jerk sometimes, except the business didn't feel quite right, except agreements never worked out like I understood they would. I finally realized something was badly wrong when, instead of the long-promised stock options, they offered employees the opportunity to invest their own money in the company. That was fishy enough, and when I went to do it and found out the CEO would hold stock 'in care of' employees. Just a legal formality, the lawyers said it had to be this way for anyone investing under $X. When a few folks asked about investing more than $X, they were privately told a different reason they personally had to accept this assignment scheme to buy in. The company was all friendly and nice (unless you wanted promises fulfilled, then you'd get pulled into the stairwell or out into the parking lot and yelled at until you were back in line) but nothing ever quite seemed to happen as promised for reasons that were plausible on their face.

So take stock: what's happened as promised? I see in other comments you haven't been paid, that puts you in a great negotiating position as you own the copyright to everything you've built. But this isn't some bump in the road you'll fix and get on with: as soon as they have copyright you won't be a team player, you'll be canned, your options will be revoked by subclause 2.4.c(iii), they'll hire some . Have your lawyer draft an agreement that you give them copyright when a check for $X clears, and find a good startup or start your own business. They've been screwing you for a year to great effect, why would they change strategy?

readyrnot12• 18 years ago

Yes it is the founder and his buddy of many years. For many months now I've had that feeling that things are "not right". I've recently found out that he's one of those guys that will say anything to get the outcome he desires.

known2• 18 years ago

You should talk to the Investor.

Are these founders trying to screw me?

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