We usually think of ownership as an option. You choose to own something, and when you don’t want to own it anymore you sell it, give it away, or toss it. But sometimes the thing you own isn’t really a “thing” and the terms of your involvement mean you are trapped with it.
In 2021 I spent $350 on “the right to certain shares of Gumroad.” This awkward wording comes from the Crowd SAFE (Crowdfunding Simple Agreement for Future Equity) agreement I signed from the fundraise Gumroad did on Republic.co. (A SAFE is a common instrument in early-stage venture capital, allowing investors to provide capital to a startup without immediately receiving equity.) As a longtime user and customer of Gumroad I was excited to be able to claim to be a part-owner.
I didn’t think much about the details of the document until hearing that the Gumroad founder, Sahil Lavingia, was in the news recently for being fired from his volunteer efforts with the Trump administration’s Department of Government Efficiency in reducing the size of the Department of Veteran’s Affairs.
As a Veteran this made me angry. For all the many flaws of the VA I find the arrogance and hubris of thinking you could “engineer” a better solution without considering the impact on actual Veterans to be reprehensible. In addition, taking on a role like this under an administration that demeans and exploits veterans isn’t just naïve… it’s complicit.
In my anger I wanted to distance myself from the grandstanding efforts of Sahil Lavingia. I reached out to Republic and Mr. Lavingia about selling or even forfeiting my “right to certain shares” as a way to rid myself of being professionally associated as an investor in his enterprise. Turns out, there isn’t much recourse.
Section Five of the agreement is titled Transfer Restrictions and states:
… the Investor further agrees not to make any disposition of all or any portion of this instrument or the underlying securities …
I find the idea of being trapped in an association with a person I find detrimental to my reputation as unjust. But what can I do? I signed the Crowd SAFE agreement back in 2021 and I’m bound by the laws of the United States of America.
Shareholder Question: Surrender My Investment
Understanding that I am legally trapped in a formal association with Sahil Lavingia, should I sent a Notice of Waiver and Voluntary Relinquishment of my SAFE Investment to Mr. Lavingia? In this notice I would offer to waive my rights, claims, or interests in Gumroad in exchange for being expunged from the records of SAFE holders. This would represent a complete loss of my initial investment, and I would go so far as to even offer to cover the administrative costs of removal.
Having funded a founder who has turned out to have a wildly different set of ethics than me, whose actions I find grotesque, I would rather take a financial loss than be associated with his success.
But perhaps this is too emotional a reaction? Rationally should I stay the course and wait to reap the future financial rewards? I am thankful to have the counsel of my shareholders to help me in this ethical dilemma.
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