Was brought in as founding tech member to take an idea and build it. Founders were convinced the idea was a hit because of 2 existing brick and mortar businesses in the space and the idea being what was missing in the space. Decision was to not include 2 existing businesses in the new venture because would affect tech multiple of venture. Offer: $100k, 8% As CTO, I setup the entire tech org (domains, emails, slack, zoom etc). Architected and built the backend tech stack. Drew wire frames and brought on an ex-coworker to help design the wires. Recruited 3 full-time and 4 part-time remote frontend engineers to take designs and build the frontend app. Currently manage all 7 of them. Deployed and configured everything at AWS (rds, ebs, ec2, amplify, s3). Established agile and am scrum master. Am tech prod support for all issues and ops requests. Only engineer in the office. Idea did not take off as fast as founders anticipated it would. Marketing team still trying to figure out how to get users to the platform. VCs more interested in existing businesses so decided to merge the 2 businesses (~70 employees and growing) under the new venture. Current valuation of both existing businesses is about 35mm in total. I was told as CTO, I did not perform duties outlined in my job description which was a generic CTO job description that involves finding cost reduction measures, integrating existing technologies, strategy etc so need to bring in a seasoned CTO to help with that and move me down to VP of Engineering and reduce my equity to 2% since I currently do not contribute (from a tech perspective) to the existing businesses. 1. What would you do? 2. What am I worth? #startup #stock #equity #cto #vpengineering
$100K base and 8% bonus? Or 8% equity in the company? What was your equity reduced to?
8% equity in the company reduced to 2%
Oh wow. That sucks man, I am sorry. No real advice.
What you described is pretty basic business startup work. You might get a lateral move to senior EM or director at a larger company. Given the low base and cut in equity. I would leave and more than double my compensation. But, I would have structured the deal differently to not get screwed when equity gets cut with such a low base.
What do you need the founders for? Raise seed and own 100% instead of 2%
Can you please explain how can equity be “reduced”? It just sounds ludicrous. Did you mean diluted by some means? You can’t really “reduce “ it in common sense
Restructure everything as part of merging the existing 2 businesses
they gave 25% of combined equity to the business line you’re in? In this case everyone is affected in this bus it just you
So did you vest 2% or it’s now 2% over 4? Sounds like you aren’t getting any equity and they are pushing you out
Well, think of this like a merger. If it was 8% of the original business, and now is 2% of the combined business, that sounds like it may reflect reality that the VCs were more interested in the two existing businesses with cash flow. However, when I hear somebody picking at a job description to renegotiate equity, that is an Earn Trust failure, as we say at Amazon, and those are absolute no-gos to me in an early stage startup. So I would instead pose to the co-founders that since they are essentially merging in two businesses to make a new one, dilution should be based on value of the relative equity. If you have been at this for 16 months, I assume you have a contract that gives you some leverage, right? And you had legal review of it, given that the equity number was the vast majority of your comp, I assume. So you should have some leverage here.
Maybe move.on.. you basically built the business and now you're getting screwed. How much equity have you vested?
This sucks big time. You are obviously being push out by reducing your stake to 2%. I would negotiate for an exit with a lawyer. Can’t imagine you will be there long.
Leave!
How long have you been with them? Why do you think you're not performing? Is engineering team slow to implement new iterations of the idea?
Moonlighted for 6 months and officially for 16 months. I think my team and I are performing and delivering on new iterations of the idea in a timely manner. They are using the fine print in my job description as cto about the other stuff that I haven't been doing.
Yeah, they'll try to dilute you further. Frankly I'd talk to a lawyer. I can give recommendation if you're in Bay Area.