How does the rest of the team feel? Ready to walk or eager to charge forward and continue trusting the VC?
If there's some team solidarity on the matter, you could try renegotiating the terms or buying him out.
i.e. you could say: "We feel like that deal broke down because of you, which was contrary to the interests of the founders and other shareholders of the company. It's hard to be motivated to grow this company when we know that you could submarine any exit or additional financing at a whim. We talked it over and 6 of the 10 people on the team are going to walk, though of course we'll give you a month to find new management if you'd like to. As an alternative, we'd stick around if you'd be willing to legally adjust your rights so that you can only block a sale of less than $1M dollars. As an additional alternative, the company will buy back your shares for $X over Y months."
If there's no solidarity and everyone but you wants to soldier on (either for the lifestyle job or trusting that the VC will act sensibly next time), then you should probably announce your intention to step away and see what your co-founders want to do.
Thank you for great advice. The takeaway for me is that I should get a more thourough feel for what the rest of the team thinks. There is a lot of leverage to be applied this way.
If there's some team solidarity on the matter, you could try renegotiating the terms or buying him out.
i.e. you could say: "We feel like that deal broke down because of you, which was contrary to the interests of the founders and other shareholders of the company. It's hard to be motivated to grow this company when we know that you could submarine any exit or additional financing at a whim. We talked it over and 6 of the 10 people on the team are going to walk, though of course we'll give you a month to find new management if you'd like to. As an alternative, we'd stick around if you'd be willing to legally adjust your rights so that you can only block a sale of less than $1M dollars. As an additional alternative, the company will buy back your shares for $X over Y months."
If there's no solidarity and everyone but you wants to soldier on (either for the lifestyle job or trusting that the VC will act sensibly next time), then you should probably announce your intention to step away and see what your co-founders want to do.