Nine months in, the message lands on a Tuesday afternoon. "I've been thinking about this for weeks. I can't keep going. I'm taking the job at Stripe."
You start three replies and delete all of them, because the only thing actually in your head is a number. Forty-five. Forty-five percent of the company, held by someone who will be badging into a different office on Monday, and nothing signed anywhere that lets you get a single share of it back.
Three weeks later you're sitting across from each other at a coffee shop neither of you picked well, and they ask the question first. "So what happens with my shares?" And you realize, with a small drop in your stomach, that they're asking because they don't know either.
That moment is the whole thing. Whoever brings a number to that table first sets the frame.
What can you actually do when a cofounder left with equity and no vesting agreement?
You cannot take the shares back. Without a vesting schedule or a repurchase right in the stock purchase agreement, those shares are their property, and no board vote, cap table edit, or angry email changes that. Everything from here is a negotiation. But your position is much stronger than it feels at 11pm.
Four things sit on your side of the table.
They want something from you. A clean story for their next employer. Sometimes unreimbursed expenses or deferred salary. Sometimes a reference. Almost always, they want to stop feeling like the person who bailed.
The paperwork is probably incomplete. More on that below, and it matters more than anything else here.
A dead-weight founder holding 40%+ makes the company unfundable. Ask any seed investor what makes them pass on an otherwise decent team and this is near the top of the list. That means their 45% is 45% of a company that never raises, never grows, and is worth nothing. This is not a threat you make. It is a fact you both need to be looking at.
And time works on you, not on them. Every month they're at the new job, the story that they built this company gets thinner, to investors and to themselves.
Were the shares even properly issued?
Before any negotiation, have a lawyer check whether the stock legally exists. In a large share of early-stage companies the answer is messier than the cap table suggests, and that changes the entire conversation.
The checklist is short. Was there a board consent authorizing the issuance? Was a stock purchase agreement actually signed, not just discussed? Was consideration paid? Delaware law (DGCL §153) requires that par value stock be issued for at least par value, which means somebody had to write a check. On 4,000,000 shares at $0.00001 par, that check is forty dollars, and it is astonishing how often it was never written. Is there a signed stock ledger entry, or is the "cap table" a Google Sheet? Did they file an 83(b) election within 30 days of purchase, as the IRS requires?
If the shares were never validly issued, your cofounder is not defending property. They are asking for a grant. That is a completely different negotiation, and it is worth two weeks of a lawyer's time to find out which one you're in.
How do you open the buyback conversation without blowing it up?
Open it inside the first 30 days, and open it with a specific number rather than a principle. Principles get argued. Numbers get countered, which is what you want.
Three openings that reliably fail: "We need to talk about the cap table," which fills a week with dread and gives them time to call a friend who says never give up equity. "Our lawyer thinks the shares weren't properly issued," which turns a conversation into a case and doubles the cost. And any version of "you didn't really earn that," which guarantees they dig in, because now their self-image is the thing being negotiated.
What works sounds closer to this:
"You put nine months into this and that was real, and I'm not pretending it wasn't. I also can't raise money with the cap table the way it is. My proposal is you keep 8%, we sign a release, and neither of us has to think about this again. Here's how I got to 8. Tell me where you think it's wrong."
Credit first, number second, reasoning third, invitation to counter fourth. You are not asking them to admit they failed. You are asking them to agree the paperwork should match what happened.
What number is actually fair?
Apply the vesting schedule you should have had, retroactively, then add a premium for founding and rounding. That's the honest math, and it's defensible out loud.
Say they held 45% and left at nine months. A standard four-year schedule with a one-year cliff gives them zero. Do not open at zero. Nobody signs zero, and zero is not true either. Instead run it without the cliff: 45% × (9/48) = 8.4%. Offer 8%. Expect to settle between 8% and 15% depending on how much they built and how bad your document situation is.
Three adjustments that are real:
- Cash they put in is not equity. If they wired $20,000 for the first year of infrastructure, pay it back, on a schedule if you have to. Keep it separate from the share conversation so it can't be used as a bargaining chip.
- Cash out beats a long tail. If you have money, offering the original purchase price plus a modest amount to cancel the shares outright is worth a lot. Note that under DGCL §160 a Delaware corporation can only repurchase its shares out of surplus, so if your balance sheet is underwater, the buyer is you personally or the structure is a surrender for no consideration plus a separate payment from you. Your lawyer will know which.
- Unassigned IP cuts both ways. If they never signed an invention assignment, they hold code you're shipping. Fold that into the same document rather than fighting about it later.
Write the deal points in plain English before either of you calls a lawyer, while you still agree on what happened. Working through the terms in a structured space like Servanda keeps the conversation on shares, dollars and dates instead of on who was more committed in month four, and it gives your attorney a term sheet instead of a feeling.
What does the signed separation and equity settlement need to say?
A settlement that only covers the share count will fail you inside eighteen months, usually during diligence on your Series A. Every item below exists because somebody got hurt by its absence.
- Shares surrendered and retained. "Of the __ shares held, _ are surrendered to the Company for cancellation effective , for consideration of $. Departing Founder retains ___ shares."
- Payment terms. Amount, dates, and what happens if you miss one.
- How the retained shares behave. Subject to the ROFR, drag-along, and either a voting proxy to the remaining founders or conversion to non-voting stock. Skip this and you will be chasing signatures from a stranger for the next decade.
- A signed, undated stock power delivered with the agreement, so cancellation doesn't depend on them answering email in 2027.
- Retroactive IP assignment, covering everything from the first day of work, named as a date.
- Written resignation from all board and officer positions, effective on a stated date.
- Mutual general release, explicitly including unpaid salary, expenses, and any future claim to additional equity.
- Mutual non-disparagement, plus one agreed sentence you both use when asked why they left. Write the sentence into the document.
- Confidentiality of terms, carved out for counsel, investors, accountants and spouse.
- Further assurances. They will sign financing documents, stock powers and tax corrections when asked.
- Tax treatment and who reports what, so a 1099 doesn't arrive as a surprise in January.
- Governing law and how a dispute gets resolved.
Pull the stock ledger, the board consents folder, and every signed document you have into one place this week, and find out whether the 45% is real before you decide what to offer for it. Then send the message. The number you can settle at today is better than the one available in six months.
