One of the uglier sides of angel investing and venture capital is dealing with unethical founders who don't want to acknowledge, or wish to downgrade, your ownership rights when things are going well, or want to avoid negative consequences when things are not living up to everyone's original expectations.

As an investor, the first thing you always look for is people who are extremely driven, knowledgeable, and passionate - in an ethical way. Investing in a startup is like a marriage, so you want to be married to a founder you believe will do rightly by you. But, despite that being a key factor, sometimes you guess wrong.

In my experiences dealing with such founders, I have found the following to be a helpful checklist for how to address the issue:

  1. Keep a level head: Often, the founder will stake out a position degrading your contribution - fiscal or otherwise - to the company. This will make you upset, especially because they will usually intentionally stake out an untruthful position because they are strategizing that they will have to move off it to something more in the middle. But reacting to it highly negatively, including saying or writing things yourself that don't reflect your best, won't help.

  2. Revert back to your legal documentation: As a good investor and-or adviser, you hopefully spelled out your legal rights clearly in documentation at the outset of the relationship, when everyone was happy. So, stick with that. I like to think that, in these sorts of disputes, there are three sides to the story: their truth, your truth, and what the signed documents say. The closer you are to your signed and documented legal rights, the better off you are.

  3. Don't email or call without counsel's assistance: If it get ugly, call in the cavalry. Revert back to your legal rights and let your lawyer handle it. If it - financially - is not worth a few hours of your attorney's time, then recognize that as well. Definitely not always - but certainly more often than not - unethical founders are unsuccessful founders - so if its not worth the trouble, recognize that. Keep your anger and passion out of your objective assessment of the value of the holding and the situation.

  4. Remember that reputation is everything: In our business, reputation is everything. Do what you said you would do, no more and no less, and you will be fine.