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Ask HN: What deal makes sense for a late co-founder?

2 points by mcv ↗ HN
I'm about to join a startup that has existed for a couple of months on paper, but hasn't actually done anything yet. It's the infamous example of an "ideas guy" looking for a programmer (me) to build it, but he's already been working hard on collecting information we need, networking, talking to potential stakeholders and trying (unsuccessfully, so far) to get money for this idea.

I think the idea is great and would be fun and educational to work on. The only downside is that he doesn't have money to hire me.

We're not sure how to arrange ownership of the startup, particularly in light of the work he has put into it. The first heal he proposed was: I get a normal salary, and in 3 years I can buy 20% of the company for €2000. As long as he can afford to pay that salary, that's a totally fine, no-risk-for-me deal. But there's no money, and I think maybe it'd help a lot if I built a prototype first. I can afford to go without income for a while, but since I'm unpaid, that requires a different deal. Some of his proposals:

* If I work 1 month unpaid, I get 20% of the company.

* If I work 3 months unpaid, I get 40% of the company.

Both seem fairly reasonable to me considering he's already put several months into this.

Something I'm considering is: the prototype is mine until we get funding, and then he buys it from me. This would have the advantage that if it fails, I keep my own code. (But is that worth anything? Once it's finished, I can probably build a better one in less time.) And I'd get money for my work instead of shares that may or may not be worth anything.

Downside is that we don't know when we will have funding. But that's really the fundamental problem here: will we have some funding in 3 months? And how will we eat if we don't? What risks are reasonable to take here?

3 comments

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andrewstuart
Stay employed - both of you.

Build it and prove it whilst employed.

50/50 equity. Make sure you have a vesting schedule.

mcv
I don't have the time to build this while employed. And doesn't 50/50 ignore the time he already put into it?

In any case, I've made up my mind about putting at least a month into this. Even if it fails, I'll probably be doing a lot more fun stuff in that month than I've done in my past couple of paid projects.

Note that the company already exists and he currently owns 100% of it. How would that work with vesting schedules? He's probably thinking along completely different lines (he has experience in traditional business, but not tech startups).

brudgers
50/50 also ignores the time you put into learning technical skills...and the time the ideas guy put into becoming an ideas guy. To put it another way, if your joining the company more than doubles the value of the company, then 50% of the equity is a bargain for the ideas guy...and you're 'leaving money on the table'.

To put it another way, if the structure of your mutual relationship is hard negotiating, then it's fair for either of you to renegotiate based on each piece of work.

Or to put it another another way, if the ideas guy resents being generous and their concept of equitablility is that 3 years + a few months is worth 80% of the company and 3 years + 2k is only worth 20% then that's a tell. And it may not be a view of the world that is likely to get significantly better.

Good luck.