I agree. They can fight this and drain energy but they will only get what they deserve up to this point. Which might be worth fighting for but if you believe that that you can do better, I would walk away - no agreement/liability to the company and if they are passionate about the idea rebuild it with a stronger team quicker.

The difference this time is they is more knowledge, clearer path and knowledge of what a competitor is doing. Consider it draft 2..if that's a direction you want to go.