Let’s not sugarcoat it. If you’re reading this, you’re probably in a mess.
And if you’re not in one yet, but things are getting weird with your co-founder, read very carefully.
Because here’s what no one tells you, but we, as Delaware business litigation lawyers will: founder betrayals follow a script.
And we’ve seen it enough times to break it down almost beat for beat.
Sometimes it’s about money.
Sometimes it’s about ego.
Sometimes it’s because someone brought in a slick advisor who whispered:
“You don’t need them anymore.”
Whatever the reason, here’s how it goes down.
Now—why should you listen to me?
I’m not a general counsel. I don’t write hedging memos or panic over every hiccup. I’m a Delaware commercial litigation lawyer—the person companies and founders call when things stop being theoretical and start getting real. When it’s time to go to court.
I’ve been in the trenches of business litigation across multiple states, from founder disputes to equity dilution to contested board control. I’ve seen how these stories unfold, and how they can be stopped—or, at least, reshaped.
Think of your GC as your primary care physician. I’m the surgeon you call when the bleeding won’t stop.
That doesn’t mean we rush into court. But it does mean we know where the pressure points are—and how to get clarity before the damage is irreversible.
So, with that context, here’s the pattern I see as a Delaware commercial litigation lawyer:
Stage 1: Strategic Tension
It starts off normal.
You disagree about something—product direction, team structure, investor outreach, financing.
You think:
“Okay, we’ll talk it out. Just a difference of opinion.”
They think:
“Time to move.”
That’s when the shift happens.
They stop seeing you as a partner—and start viewing you as a liability.
Nothing changes immediately, but the seeds of the squeeze-out are planted.
Look back and ask yourself:
Was there a moment when—in hindsight—everything changed?
If one pops into your mind without much effort, you’ve already lived through the apex of Stage One.
Stage 2: The Slow Freeze
Communication gets cagey.
You’re no longer invited to certain meetings. Calls that used to be instant now “slip through the cracks.” Board materials arrive late—or not at all. Your Slack threads are suspiciously quiet.
You sense it, but you don’t want to believe it.
They’re not ghosting you. They’re plotting and cornering you.
Stage 3: The New Best Friend
This is the inflection point.
Your co-founder brings someone new into the orbit. Not a full-on replacement. Just… someone “strategic.” Someone who “gets it.”
We’ve seen many permutations of the “new best friend,” but the patterns repeat:
- A new board member with maturity, a résumé, and a big Rolodex.
- A senior advisor or “adult in the room” who’s supposed to bring credibility to the company.
- An investor—often an angel. But if it’s a VC? That should set off alarms. They play for keeps.
- A management consultant, business coach, or “startup whisperer” type.
- A lawyer—sometimes from a very respectable firm (cough cough, Wilson Sonsini, cough cough), supposedly working for “the company,” but somehow seems to be doing a little too much cheerleading for your co-founder.
Your partner starts dropping their name in meetings. There’s a bit too much admiration in their tone. It feels… intimate. Like you’ve been replaced.
You feel it—like a jealous spouse.
The new best friend is cordial to you. Friendly, even.
But they’re always just a little formal.
And you get the sense they know something you don’t.
You brush it off.
But slowly, the new best friend becomes a fixture. They weigh in more. They shape discussions. And you start hearing things secondhand.
And if you raise objections? You might hear you’re being ‘paranoid,’ ‘uncooperative,’ or ‘emotional.’ Your partner/co-founder might even placate and tell you about how ‘you’ll always be a team.’
Don’t take the bait. These are the early cracks forming beneath the surface
Stage 4: The Restructure (a.k.a., the Mouse and the Cheese)
The “new best friend” doesn’t stay in the shadows for long.
At first, they’re just helping—giving advice, joining calls, offering insights. But soon, they get a formal seat at the table, directly or indirectly.
If they’re an investor, it might be a small convertible note or SAFE agreement—just enough equity to give your co-founder a new voting majority with them.
Or they might “only” get 5%—but buried in the fine print is a dilution clause that, when exercised, makes your shares irrelevant.
If it’s a lawyer or “advisor” type, they’re more subtle. They often don’t hold the power themselves—but they’ll recruit what we (lovingly) call a “loyal stooge” to carry their water. This person—maybe a new operations lead, interim CFO, or outside consultant—suddenly starts making decisions like they’ve been there since day one.
Then comes the pitch.
They sit you down and say:
“To raise the next round…”
“To attract top-tier talent…”
“To get this into YC or a major fund…”
“To hit the next inflection point…”
They’ll say it’s all standard. That “everyone does this.”
That you’re thinking small. That you’re holding the company back.
But what’s really happening?
They’re walking you into a trap.
Like a mouse with cheese.
You’ll hear phrases like:
- “This is standard.”
- “Our lawyers said…”
- “To raise the next round, we have to…”
- “It’s just a formality.”
Except it’s not.
It’s not standard.
It’s not required.
It’s not in your interest.
What’s happening is:
- They’re restructuring.
- They’re reallocating power.
- They’re laying legal groundwork.
And you?
You’re being boxed out.
They’ll use process as cover.
And if you object—politely, or otherwise?
You’ll be labeled:
- “Difficult.”
- “Uncooperative.”
- “An obstacle to growth.”
But that’s how it works.
The trap isn’t sprung all at once.
It tightens slowly—until you’re locked out.
Stage 5: Weaponized Corporate Formalities
So you signed the document.
Maybe you were worn down.
Maybe they framed it as a small step to unlock capital.
Maybe you just didn’t want to fight anymore.
And for a moment, everything seems fine.
They either get what they want and ghost—or worse, they celebrate, suddenly friendlier than ever, like a pig being fattened before the slaughter.
But here’s what just happened:
You stepped into the trap.
And now? They tighten it—with weaponized corporate formalities.
Suddenly, everything requires board approval.
You ask for financials—something you used to see regularly.
They reply:
“You’ll need to submit a formal books and records request under the bylaws.”
You want to vote on an upcoming hire or expense?
“That decision was already voted on. You weren’t available.”
You raise a concern about how a decision was made?
“The meeting was noticed properly under Section 3.1(b) of the bylaws. We’re in full compliance.”
They know the corporate code now.
They quote it fluently.
They’re precise, procedural, and polite.
But only when it serves them.
You start getting:
- Meeting invites on two hours’ notice.
- Motions passed before you can respond.
- Legal memos copied to “company counsel” (who now seems to work only for them).
It’s not about fairness.
It’s not about governance.
It’s about control.
They didn’t care about formalities before.
Now it’s their shield—and their sword.
And you?
You’re still on the board. Still technically a shareholder.
But you’re being treated like a nuisance, not a partner.
They are preparing for the final move.
Which we’ll cover shortly.
Stage 5.1: (Optional) Consolidation
Sometimes, they don’t go straight for the lockout.
Instead, they soften the ground first—with a move we call Consolidation.
Here’s how it works:
Suddenly, the board votes (at a quick meeting you may or may not have attended) to consolidate operational control under the CEO.
Who’s the CEO?
Your co-founder. Your partner. The one holding the knife.
They pass a resolution that says:
- Only the CEO can access the full books and records.
- Only the CEO can enter into contracts.
- Only the CEO can view financials outside of quarterly summaries.
- All other officers now “report in” to the CEO—even you.
They say:
“This is just how it’s done now.”
“We’re growing. We need hierarchy.”
“Investors expect a formal structure.”
You’re still on the board.
You’re still doing your day job—sales, ops, product, whatever.
But in practice, you’ve been demoted from co-founder to employee.
If you try to object, you’ll hear the same refrains from Stage 4:
“This is standard.”
“You’re being emotional.”
“Why are you so paranoid?”
Sometimes they do this fast and quiet at a preordained board meeting.
Sometimes they gaslight you into thinking it’s your idea.
But here’s the truth:
At this point, you can’t stop it without legal intervention.
But you still have a seat at the table to watch the rest of it unfold.
And unless you act, that seat may not last much longer.
Stage 6: The Lockout
It’s almost always triggered by something.
Sometimes it’s real. Often it’s pretextual.
We’ve seen it all:
- A sudden liquidity crunch, real or imagined.
- A “big client” demanding “clear governance” (in reality, most clients don’t care).
- A prospective investor with a “hard deadline” to fund next week (translation: artificial urgency).
- An interpersonal dispute manufactured out of thin air: “You’ve been difficult lately. We need to streamline.”
- Or sometimes? They don’t even bother with a reason.
Whatever the excuse, here’s what happens next:
- You get locked out of your email.
- Your access to internal systems disappears.
- Board meetings get scheduled without you—or you’re removed entirely.
- New shares get issued, yours get diluted, and you’re handed a letter from a lawyer that says:
“Best of luck. You’ll cash out in 13 years—if we IPO.”
You went from co-founder to outsider. Overnight.
And to make matters worse, your remaining stock gets diluted again and again with each new raise. So by the time the company hits a buyout, you’re staring at $5,000 on an eight or nine -figure cap table.
We’re exaggerating—but not by much.
This is the moment most people call us.
And by then, you’re not negotiating.
You’re litigating. Except at that point—you’re a little fish, going against multi millions, who will gaslight you into thinking you went along with this whole scheme.
Is This Legal?
Sometimes. Sometimes not. Often, it falls into a gray area.
It depends on several factors:
- The bylaws
- Entity type ((Corporation vs. LLC — and candidly, if it’s an LLC, your risk of being pushed out goes up. We’ll explain why in a future post.).
- The cap table
- The stockholder agreements
- The governing state law (Delaware? California? New York?)
- And—most critically—what’s in writing versus what was left unsaid
But here’s the hard truth:
If you’ve been locked out, you probably already know something’s wrong. You may not know whether it’s illegal yet—but it doesn’t feel right. And that feeling is usually correct.
This is where many founders get stuck.
First, they call a lawyer they know—someone they trust.
Often it’s a seasoned general counsel type, known for thoughtful memos and cautious language. He tells you, “It depends,” hedges on every answer, and references cases from 1998. He means well, but he hasn’t seen the inside of a courtroom in a decade or more.
Then maybe you turn to a local litigator. Smart, capable, gets results in small business fights or real estate disputes. But something about this feels different—and you can tell he’s never handled a governance case out of Delaware or briefed a books and records action.
Or maybe you do call a high-end firm that knows what they’re doing.
And they tell you the retainer starts at $250,000. Just to look.
So you’re left feeling boxed in:
Disoriented. Disappointed. And not sure what to do next.
You’re not alone in that feeling.
And no, you didn’t imagine it.
This stuff happens more than most founders realize.
Can You Fight Back?
Yes.
Absolutely, yes.
There are tools—statutory and strategic.
Books and records demands.
Preliminary injunctions.
Claims for fiduciary breach, minority oppression, wrongful dilution, and more.
But the earlier you act, the better.
If you’re still in the “Stage 2 freeze” or “Stage 3 new best friend” phase, you have options. You’re still inside the building. You can shape the facts. You can document your objections. You can be strategic.
Once you’re locked out, it becomes litigation. That’s still winnable—but the road gets longer, more expensive, and less certain.
Next Blog Post: How to Fight Back If Your Business Partner Screws You
Advice from a Delaware Commercial Litigation Lawyer
We’ll break down the actual playbook—
• What documents to collect
• What emails matter
• What objections are worth making
• And how we structure a response that protects your position
We won’t give away everything—this isn’t LegalZoom. But you’ll understand what real action looks like.
And if things are urgent?
[Contact us directly.] We’ll talk.