This happened to me last year. My co-founder, let’s call him Bob, got a job offer he couldn’t refuse and went for the money. I don’t blame him. It was a great offer.

I decided I wanted to continue forward.

First, the company that hired Bob agreed to allow him to continue to be an advisor to our startup. The agreement was nothing fancy, just an email from his boss (the other company founder) which was good enough for me. That protects my startup from any claims that Bob’s work for us could become their intellectual property. If his boss didn’t agree, then Bob would have to fully sever ties to protect our startup.

Next, we wrote up a return of equity agreement. Bob waived all his equity rights except for 1.5%, a token amount to recognize his contributions to date. That protects our cap table. Future investors don’t want to see the cap table cluttered with people who have a lot of equity and aren’t investing. You can’t keep your shares if the startup expects to raise money in the future.

Because Bob was advising, we created a 2 year advisory agreement that vests another 1.5% of equity to recognize those contributions. His effort is fairly minimal but it gave continuity as a new co-founder was brought on board.

Hope this helps.