My friend and I are co-CEOs. This was great at the beginning when everything was 50/50. Now that we raised $700k in seed capital, my friend’s megalomania is getting to be a problem. He’s micromanaging and bullying everyone. How do I fix this?

Tell him you own 50% so he needs your cooperation to do anything and you'd be passive aggressive as hell if he doesn't stop being a bully.

Original poster here. I really didn't see it coming. Something in his personality just unlocked all of a sudden after we got the money. We've definitely talked about it but I only recently found out that he kept doing it behind my back. It's like dealing with a child. Is there any legal way of reducing his share? Didn't facebook screw one of their co-founders by setting up another corporate entity and reducing his share in the new company?

Divide out the workload and create clear decision-making lines. Otherwise you're confusing your employees as well.

This is the only solution. https://www.youtube.com/watch?v=ubwUfyhm4Vs

This is probably why the VCs don't like 50/50 companies. Even if it is 51/49 someone should have final say.

Other than talking it out as another poster noted, if you have a board you can start chatting offline with the investors but be warned you will look like probably more of a pain than you want at this stage.