Sounds like an expensive legal fight with nothing to gain.

Sweat equity for cash seems strange if it’s not tied to company success. That’s just bad for everyone.

Can you just negotiate that value owed into more equity?

Approaching this as a 1-2 step exercise: offer to buy them out (through earn out) and then seek to bring new partners or sell the asset outright. It sounds like them being in the capable is a liability… been there.

I don’t think I follow.

You talk about sweat equity but make it sound like they owe you cash. What is it equity or cash?

Also you talk about “there not being a contingency on the success of the company” but say you’re a co-founder.

Are you an employee or a co-founder? If a co-founder then of course it was dependent on the success of the company. A co-founder is responsible not just for eg writing some code but for the overall success of the company, and if it isn’t you’ll end up with some experience and not much else. If more like an employee or contractor then sure sue for the money owed, come to a settlement or bankrupt the company, and get another job.

If they don’t have the money, you can’t get blood from a stone.

If the company is going nowhere, the best bet might be to push to sell the IP to a company that can actually use it to make a profit.

In short, you might be looking to get acquired in some M&A. In that case, it’s like selling a house, you want it to look nice, not torn up.

No. Move on. Lesson learnt. Make better contracts going forward.

Your going to sue your co-founders as individuals? If so, what are the claims? — sounds more like a suit you would bring against the company, but if the company doesn’t have any money, you won’t get anything (except for maybe the ip assets as part of a settlement)

Speaking from experience, avoid litigation at all costs. It’s just not worth it. Your owed $250k? Well you’ll never get that in a settlement — cut it in half, then lawyers fees you be left with a fraction of what you thought you would get. Plus the mental toll of being involved in litigation

Are they trying to keep running the company? Raise money in the future? If they are trying to keep going, a lawsuit would drag them down especially if they are trying to raise. But it sounds like they are just giving up on the company. I can’t see how fucking with a 30% owner would be a good idea if they want to continue. I’m not a lawyer, but I don’t think you even need to sue now. You could wait and see if they continue and have something to lose and then sue the company at which point they might be more willing to settle. But honestly it sounds like it’s a wrap - in which case if there are still assets of value remaining that they want to liquidate or pull out, you could have some leverage to settle. Again not a lawyer but just thinking through where leverage is.

Walk away, you’re upset because you lost. Losing is part of the game

Okay after reading all your comments, I am going to be brutally honest with you.

1. The company made 500k last year. Meaning you do have traction
2. You are a co-founder with 30% equity, not an employee with 5% sweat equity

Are the other co-founders also taking 250k cash salary as you claim you are owed?

I think you are just being inflexible and probably like an a***le. Startups are hard and unpredictable, yes they probably did plan to take a salary of 250k once they are profitable but it didn’t happen… YET. But I think it has the potential become profitable and has some traction since you said the company made 500k last year, which is actually a pretty good.

You need to start acting like a co-founder and help the company succeed. Now if you were offered 5% sweat equity and were promised a salary in cash, then it would be different, but I don’t think this is the case here.

Don’t do anything stupid and definitely don’t sue, otherwise words gets around and you will never be a technical co-founder ever again. Yes your cofounders maybe multi millionaires but you don’t have any claim on their personal assets.

Wealthy people often value their time more than money. You can tell them you’d like to end this without wasting anyone’s time in court so if they could give you a % of what they owe you (let’s say 50%) you will all be able to move on quickly.

Well, if they have the cash, you should get paid for your work. Get a lawyer that knows how to do it.

Depends on what your reputation is worth to you. Word gets around; it may be challenging to find another co-founder once they find out you sued your previous.

Then there’s the whole squeezing blood from a turnip thing. You can sue to dissolve the company and grab the IP, but if the company was not successful what are you going to pay in legal fees to acquire the IP? Only you can do that math. You are unlikely to see a dime in cash or be reimbursed legal fees.

Lawsuits suck even if you are 100% correct. You will have to float the fees which can easily last over a year. Remember that the company shields personal liability from the cofounders so you max recovery is the assets of the company.

I totally understand what you’re going through and it sucks to be wronged like this. But if it were me, I may spend $500 on a lawyer letter demanding an IP assignment and then leave it there. It’s not worth 10s of thousands in legal fees as well as the stress and impact to your mental health. Take it as a lesson to write these types of contingencies into your next contract but don’t cut off your nose just to spite your face.

Happy to chat in DM. I’ve been through a suing the company lawsuit before.

Equity is the contingency here.

Seems your agreement states that you’re owed based on the value of the company.

You would be owed whatever agreed upon percentage of “not as much revenue as expected” is.