Co-founder wants to leave

Keeping it short – I’m a “co-founder/friend” who wants to leave a 50/50 relationship (really a handshake). I tried to get the other co-founder to sign a simple collaboration agreement before he put in any amount of work (but he put the work in anyway without signing), and now we’ve both put in a significant amount of “sweat equity” into the project. No funding, no personal capital invested, just time, and the project was my idea. I’ve built-out the proof of concept cloud-software even though it’s based on an existing excel app, and he was working on the business plan.

Question is: would I be entitled to any equity when there’s literally nothing but an idea, proof of concept and invested time? I was considering asking for the right of first refusal, a small percentage of future sale price, and I want the rights to work on the project if there’s more than 18 months of dormancy (he has a tendency to not follow through).

That all being said can I just work on the project on my own as a competitor and walk away from the collaboration entirely?

Any advice seriously appreciated!

  • Barring any formal agreement you technically own half the company. That’s why starting a company without written contracts is often a bad idea and one which new entrepreneurs do and often regret.

    Since you are mentally prepared to get less than half I’d suggest letting your partner know the reality and negotiate downwards from that position.

  • I think here that the real answer is: Do you value the friendship?

    If you don’t then, no documents signed equals no agreements on both side. Since you are the one who developed the software, it’s still your intellectual property and the business plan is his. So you could leave and become a competitor but lose a friend.

    If the friendship is important, sit down with your friend and sort it out. There’s a nice and simple framework to split equity based on the work performed by each member. This book is called “Slicing Pie”. It’s a short read well worth the time.

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