Replacing one founding member before company starts?

Our startup is comprised of 4 members. Each of the members is outstanding in some particular area; all are able to bring immense value to the team in their own niche, except one. The three co-founders all agree that the 4th member, our web developer, doesn’t have the attitude, work ethic or mentality to put into our concept. More than that, he doesn’t have the respect of his co-founders.

Our initial group wasn’t founded as a business, but as it a work-organized course where we paired up. The web developer just happened to sit at the table with us that day and ended up being in the group. It was a month or two later that the initial concept was brought up in our group discussion and the 4 of us ran with it.

He has contributed to developing a shell of a web page (wordpress), some mock integration with our employer’s platform and provided a template for a powerpoint deck. We’re not contesting the fact that he’s trying to contribute, we just don’t believe that the skills, background and ability to contribute are at the level where the rest of us even want to have him remain on the team. Since we work with him, we’re aware of his ability to code, and frankly, that’s my main concern.

Our startup has so far, built out a business plan, done the financial modeling and forecasting, presented the concept to our employer (directly to the CEO), and have secured an agreement with our employer to allow us to utilize company resources (servers, licenses, legal, accounting, etc) and act as our incubator during pilot. We, as founders, have all agreed that we need to discuss equity and the more than everyone (aside from the web developer) agrees that he’s not a fit for the company.

We have agreed that we must confront the issue and plan on speaking to the web developer this week, prior to our next meeting with the CEO and some potential partner discussions. We know that now is the time to act, but we don’t know how to value his contribution, or what is ‘right’ in this situation. We have mixed opinions ranging from 1-2% equity to a few hundred dollars to compensate him for his time. Other ideas were to ask him to step away with plans on future integration once we reach a certain size or some other deferred payment plan. I personally tend to lean toward an as little as possible mentality, but I do want to act ethically and want to figure out what the general consensus would be for what would be ‘fair’ to everyone involved.

  • I would not compensate with equity in case you drop him. If you feel ethically bounded it might be a solution to offer a financial compensation: paid later and the amount depending on milestones reached with your business in the next year(s).

    Be prepared that he might not be interested in this as much as you think. Maybe he just wanted to be part of it and is sad that he is not good/skilled enough.

    Be honest and fair, but don’t feel guilty. You can’t afford it, there are tougher decisions ahead.

  • I’m not quite understanding the arrangement. You said it started as a work organized course – as in the company OWNS everything since it was done as part of work.

    I’m assuming you got some agreement from the co to spin out your startup. That way your friend doesn’t “deserve” anything technically since he was paid all this time to work on the project by the company. Just tell the CEO that you don’t want him on the project.

    To not hurt his feelings maybe the company could give him a bonus or something.

  • There is a good chance that your employee owns the rights to everything you have done or will do in this endeavour.. I would start there.

  • Agreed on the employer probably owning everything you conceptualize and materialize.

    On the developer note, be sure not to discount things that he confirmed for you. You may have relied on his ability to quickly validate and guide the mundane technical side that the other founders may have no real idea about.

    My recommendation would be that you tell them you need a CTO-level person to take it forward, and if the developer has the chops, let him compete… otherwise he will openly back away. Graciously offer him $1000 for being upfront about not having that level of skills to move it forward, but was potentially supportive in helping keep the passion on-task at the table when the initial concepts were being chatted about that eventually became the catalyst for a business venture.

    Keep him in the loop. This is not just for his own well being, but for yours.

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