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So I've developed a product and someone wants to be my business cofounder.

10 points by lowglow ↗ HN
I've already developed some web app MVP, and someone wants to come along and be the business co-founder.

What should I know about equity, terms, etc? How should I structure the business? What should we get straight right at the beginning of this all? So many questions!

Any articles/advice you care to give would be greatly appreciated.

Thanks :)

12 comments

[ 2.8 ms ] story [ 48.4 ms ] thread
magee
Wow, dude... I'd need to write you a textbook to answer your questions... if you have specific questions you can ping me at magee70@yahoo.com... FYI I'm on my 3rd startup... sold the first two..
lowglow
I will definitely drop you a line.
arthurdent
This sort of response is exactly the type i expect from "all talk" types.

When I read your reply, I see, I'm awesome. I know so much about what you want to know that I can't even figure out to start. Oh btw, how cool am I?

ra
More importantly, is this person the right co-founder for you?

What skills do you lack?

Do you trust them?

Whatever the deal, assume you own all the equity to start with, and they have to buy shares to become cofounder. It doesn't really matter what the cost per share is, but it should be enough for you to reach the next milestones.

You also need to reg the company, and have a lawyer produce a shareholders agreement.

The analogy of co-founder to marriage isn't far off the mark.

lowglow
1. I just moved to SF a couple of months ago and haven't found it easy to find "business" people that I didn't feel were completely BS off the bat. That being said, I haven't met much of anything else other than other devs here. 2. It's not so much that I lack the appropriate skills, I lack the contacts. I also feel the opportunity costs are too great for me to be picking up the business side of things without experience yet. So I was hoping to learn a bit from him before my next venture. 3. I trust him more than I trust most people 3 days after meeting them for the first time. But he has shown great interest and found me from hacker news. So he gets points for zeal and ambition. 4. I don't understand this concept you're putting forward. 5. I work at a start-up now and the founder of this company I work at has lawyers that can help me. 6. I know, but we're really racing to push this product out and I feel that by giving up some responsibilities in areas I may be weak in will give me the ability to really pump out competitive code. So I'm struggling to find volunteers to help.
bdclimber14
Have him or her prove his worth over the next month as a trial. No compensation or promises, equity or otherwise. Business co-founders are generally great at talk, but less so at action. It's stereotyping I know, but its a generalization based in fact. They aren't as in demand as the technical side, and are generally more willing to work for free. Of course, saying "I'd like you to work for free without any compensation this month" won't sound good. Try "I'm skeptical of the need for a business cofounder, so I'm giving you the next month to show me that you're critical to success."

At the end of the month, you'll likely either think "well, it doesn't look like he(she) did anything I couldn't do" or "wow, there's no way I can do this without him(her)".

If it's the latter, give up 30% of your company vested over a few years.

lowglow
So you'd say 30% vested over how many years? He's got a pretty good track record and claims he can introduce me to all the right people. He's thrown out some names, and seems like a pretty legit and nice guy. I'd essentially like to keep developing the idea while someone else is out building business relationships and structuring the business.
bdclimber14
I think 15-40% is a good range. Less than that and they feel like they are just an employee with stock options, but more is dangerously close to equal. You want them to always know who's boss :)

I'd also get references without asking. If he claims to play golf with someone big, track them down and see if they say the same. Ask around and see what his friends say. Track record is huge. Make sure the measurable successes match the hype.

I'd say 2-3 years is good to vest. You'll know by then if the business is failing or not. Things could also change if you get investment.

Definitely delay bringing him on board so you can cultivate a friendship and vette his work ethics. Its a lot easier to not hire someone than it is to fire them.I'd say try and spend lots of time together for the next couple months if you just met him. Make him make sacrifices.

lachyg
Switch the thing round. I've got a business idea, all written out and documented. Someone wants to be my technical co-founder. Are you suggesting the same thing?
bdclimber14
Late reply, but I ironically was thinking the other night if this should work conversely. For most points, I think yes. One notable difference is that developers will create something tangible, and usable, within a month or two. It could be enough to raise money off of. In this case, I'd say there should be equity structure in place at the beginning. Business co-founders would provide value in a month, but its probably through intangible relationship assets. The value by a business co-founder is also something that is ever-expanding. If he or she made 100 sales in a month, you'd never say "Well, that's all we need, have a nice life" but with applications, some people may see them as "done" and therefore you don't need the developer any more. Anyone who understands that software is never done in a startup would disagree, but its less obvious, especially to business founders, that this is true.
lowglow
Is there any literature that might shed some light on this whole process?
chipocabra
Ha, I'm on the other end. I'm more excited about the product and marketing side of this business. But alas I know no coders so I had to learn all this coding shit myself.

I'm also on the look out for a technical partner and will actively start looking once I have my prototype working.

What I plan to do though is meet them in person or via webcam first. Shoot the shit, observe how they handle different situations, get a feel for their morals, talk about normal stuff friends talk about.

You want to know the real person you're going to share your business with, not what their CV says or what their marketing talk convey.

How would they handle conflict? How likely are they to use slight of hand tricks to better themselves at others expense? What do they want to accomplish and how would that tie in with your shared business? Do they simply want to make a quick buck? Do you?