Ask HN: Next steps after being dropped from a startup?

https://news.ycombinator.com/item?id=3728653

by mrmagooey • 14 years ago

3 7 14 years ago

news.ycombinator.com

The story is: two months ago myself and two other friends were approached to help develop, deploy and own what we thought was a pretty cool product, and we were told we would have equal shares in the company.

Today however, the story changed significantly. Suddenly we had no shares in the (yet to be created) company, and the development work was going to be completed by a third party IT company and paid for using a grant that we had helped obtain. One of us was offered a consulting role to manage the IT company, but the need for an in-house coding capability wasn't seen as necessary (…for the entirely IT driven product!). This is in the context of two founders whom we now realise are fairly clueless about IT in general (one hadn't heard of Dropbox), and who seem to believe that hackers and code are a generic commodity.

We feel a bit let down and foolish for believing the hype, but my question is: What do people normally do when deals like this fall through? We're taking this loss as a sunk-cost, but are still keen to produce something great.

kosso• 14 years ago

Check any contracts and paperwork you might have signed. Read them thoroughly and then read them again. Get someone else to read them if you can.

What you are 'told' is rarely what actually happens at a startup, unless you have fully understood, signed contracts.

What is it you want do? Create the same or competing product? Get some compensation / shares / revenge? Or simply move on?

If you only worked on this thing for two months, then it's no great loss is it?

brk• 14 years ago

You have just received what is commonly known as "experience".

What do you do with it? Learn from your mistakes (get things in writing and signed beforehand next time, interview/evaluate the people you consider going into busines with, etc.), chalk it up and move on. There is little you can do in this case beyond picking up and starting over at something new.

dkersten• 14 years ago

I'd say just move on, its not worth getting into a legal dispute unless you're absolutely certain you can win. You're lucky you only lost two months. Live and learn. Besides, it may be revenge enough just knowing that the company is going to flop as outsourcing IT to another firm rarely works for early stage IT companies - especially if the founders haven't a clue.

PS: not knowing what Dropbox is isn't really a good indicator that they're clueless - though outsourcing the tech in a tech company is.

mrmagooey• 14 years ago

Your PS just made posting this worthwhile, cheers.

newman314• 14 years ago

Ask your local lawyer but if no compensation ever exchanged hands and paperwork signed, you may well own your IP depending if it's work for hire etc.

If so, you may have an option of licensing said work. However, it may not be worth the time, money and effort. That is something that you will have to decide and possibly chalk it up to a learning experience. But regardless, do not do any more work. Good luck...

kls• 14 years ago

When I enter an arrangement where there is nothing developed I generally have a contract put together in which I get equal ownership of the resulting software, and that that ownership is vested on the same timetable as all other owners. As I look at a pure equity arrangement as me being the technical guy, I am doing all the other guys a huge favor. As a technical person you need to look at these arrangements in that manner. I am not necessarily saying be a jerk about it, but all things tallied you will be taking the most amount of risk on as the developer, as you put the lions share of the work in up front.

Once you start to look at this arrangements as you doing the other guys a favor then arguing your fair position becomes a whole lot easier. The thing to remember is that you can go out and build any idea, you could be working on your own and taking 100% of the equity, model that in your mind in these situations, if you view it as they are not letting you in on their idea (which are worth little), but rather you are, letting them in on your equity by taking their idea over your own, it sets the stage for negotiating, up-front to not get in the situation you experienced.

Unfortunately clueless founders are on the rise again, I have had a recent rash of dealing with them, where these hipsters are going to change the world with a dumb idea and all they need is some of those tech guys to whip it up for them. The good news is that they become easier and easier to spot once you have had one or two dealings with the type. In doing so you start to only loose a week or so instead of spending months of your life on what amounts to nothing.

Finally what I personally do when a deal or start-up I have been working on falls through is I go back to freelancing to built up my reserve to take another swing. It helps me recharge, learn some new things and see what the rest of the industry is doing.

brudgers• 14 years ago

>"What do people normally do when deals like this fall through?"

Look for another deal. Write a proposal.

When one hits. Cash the retainer and start work.

I'm a consultant.

When it comes to forming a business, it's different.

In that case, it's like getting married. Except that you're both in it for the money not just domestic bliss.

If you don't absolutely trust the other person to protect your welfare, don't own a business with them. And if you do trust them, get a contract.

The upside of your experience is that you were not alone, three of you were conned - it's a pattern. My recommendation to the one staying on as a consultant is to require a retainer to be applied to final payment and wait for the check to clear before doing any work.

Ask HN: Next steps after being dropped from a startup?

Related Stories