Proposition HN: I will pay $8000 for you to build your side-project/MVP
Investors/Incubators over-estimate their ability to pick good ideas/startups.
Premise 2:
An MVP built by a lone, but talented techie is almost as likely to turn into something 'successful' as a startup on angellist that has: 4 founders, 9 advisors, 13 press releases, 600 followers, etc
Premise 3:
Most freelancers will not build and/or follow-through with their ideas, because they perceive their opportunity cost to be too high.
Premise 4:
HackerNews has a decent number of talented freelancers with good ideas.
Based on these premises, I present The Proposition [Version 1.0]:
I'll pay you $5000 to build the MVP of that idea you've been kicking around in your head for the last year. Once you're done (ideally within 2 months), you can go back to earning your full potential. At this point, I'll take over and spend an additional $3000 to acquire enough users/customers for us to evaluate the project's likelihood of success. We split the resulting company 50-50, as equal co-founders.
394 comments
[ 4.5 ms ] story [ 283 ms ] threadIsn't this a horrible deal? Incubators typically inject more money for far less equity! I earn $10K a month, I could easily save up $8K in a few months, and do this myself for 100% equity.
True. If you can get into YCombinator, for example , you should obviously go for it. I can't compete with that. If you're earning $150K+, or you've already been working on your side-project for a year, this may not be for you. On the other hand, if you're just getting started and you need a little push, both financially and emotionally, this could be right up your alley.
Who the hell are you? Why would I work with you?
I'm also a techie. Have had one moderately successful venture so far, which has given me a comfortable life (but not quite retirement amount). I want to reduce my coding time and instead help people get their ideas to market using my resources. Hopefully we can build a few success stories along the way. You can find out more during our first Skype chat!
Will you fund everyone and every thing?
No. I'll still need to like your idea, and feel that a positive long-term return is possible. But my belief in Premise 1, combined with the favorable structure of the proposition, means I don't need to be that picky. I'll also need you to commit to working on the MVP full-time until it's done. Evenings + Weekend work is something this structure is actively aiming to avoid. Sign up, ship it, then go back to earning a steady income.
If you have questions or HN-style critic on the structure/proposition, write below and help me build proposition version 1.1!
World.
Upfront will be small (possibly nil) to prevent time-wasters. We can agree milestones based on nature of project. Once code is flowing onto a shared repository for a couple days, I'll feel comfortable starting the money drip.
C/S corp in Delaware sounds reasonable. A yet to be drafted, founder's agreement to be signed at project start also to protect both parties.
Can you specify ways that you will be involved to justify the 50-50 split?
I guess what I'm trying to say is it REALLY depends on the person. This isn't for everyone.
Getting married isn't for everyone.
Working freelance isn't for everyone.
Having a kid isn't for everyone.
Nothing is for everyone, dude.
Nonsense. He's doing an angel investment and taking 50%. That still might be attractive since he does more than just an angel investment but don't pretend he's doing anyone a favor, this is for his own benefit as well as the potential partner.
He's not giving you a job, he's playing the role of seed investor and co-founder.
1 - That 50 - 50 split is a killer when I'm doing most of the work. 2 - You talk about taking a month or two and full time working on this project until completion. Trust me when I say I'd love to do that, the issue is I can't just go jump back into the same job as if I didn't ditch everyone here for two months.
Like I said this is probably just not for me, but those are two things you may want to consider for version 1.1.
For a product that can be built in 2 months (per the guidance here), it is going to take much more time to develop the sales and marketing and acquire enough customers to make it profitable.
I think this underscores why this may be a great deal for a (young?) developer with limited business experience. I learned a lot of hard lessons like this once I stepped away from an editor.
As for me personally (which I said off the bat was the kind of answers I was bringing. Personal opinions on why I myself wouldn't do it.) I feel comfortable with my ability to sale to people and gain good traction and growth.
But this is a killer opportunity, especially for someone younger who can live on the 5k and is not worried about family and mortgages yet.
This could be better than an MBA for many people who want to bring a real product to market.
Note: I have no context at all on the OP, so I'm making the jump that they have a strong business background and would not be flailing around once it was time to execute.
Honestly, I'd probably pay $5000 just for some good ideas if disclosure didn't ruin the concept.
Think of it this way: would you have made $8000 in a month or two without his investment? Would you have potential for continuing income on that project afterwards? If the answer is yes, then this isn't the deal for you. If the answer is no, then what's the harm? If you're in position to negotiate this as a deal breaker, you're likely in position to find something more flexible. If you're unemployed and want some money while you work on a project you've been dying to work on, you've just come out ahead. There are plenty of job offers for freelance/contract programming that don't offer 50% royalties, or royalties at all.
- Product
- A Market for said product (solving a problem for a customer who has money)
- Getting your Product to that Market and convincing customers you solved their problem
In reality, you are probably doing about 33% of the hard stuff (and the other 66% is hard too, making sure you have the correct MVP and promoting it)
Until you've put a product out there, you don't really know how hard the other two are and how critical they are to the success of your venture. hmexx is offering to do that part for what I consider a reasonable cost to test the waters.
YMMV, of course, and you're free to take on 100% of it all, but reducing risk is how you get a product launched. I personally like hmexx's approach here.
That said, reducing risk isn't what hmexx is doing. Since the risk of quitting your job and starting on your own product is failure to create a good enough product and NOT have a job to go back to. He's not made any warranties about you being able to resume your previous job (nor could he, or should he.)
Again, look at my other comments, where I plainly state this is not for everyone, like people who already can market and recognize an MVP. And it's best for younger people who have crummy jobs and little marketing and/or business experience, and little to lose (like a nice good current job.)
Software developers who don't intend to go into management should not be permanent employees. You should be working as a contractor so you don't have to worry about things like this. As a contractor, you don't get paid for days you don't work so no one cares as much when you're gone (so long as it's not negatively impacting a project). I usually take 8-10 weeks off per year, so taking advantage of this offer would be easy for me and have no impact on my "day" job.
Premise 3 was:
> Most freelancers will not build and/or follow-through with their ideas, because they perceive their opportunity cost to be too high.
I wouldn't quit my job for this (if I had a job), but as a freelancer I'd consider taking a month of no client work and building it at what amounts to a reduced hourly rate.
A couple thoughts:
* If you have a month to work on a project, consider taking this offer. Nothing helps motivate people (myself included) like a deadline and a partner. Don't get hung up on the equity split or other boring details -- just go do it. And be thankful you have the free month to work as you will; not all of us are so fortunate!
* I am skeptical using 50-50 as a basis for a partnership in general, much less with someone on the internet I've never met. You are probably a chill dude, but I had similar optimism for too many girls I met online... :) Everyone claims to be funny and open to new things. If I had goals to work on this project fulltime, I'd be very concerned that the two of us might not work well together (I have no reason to believe this, but this is a risk based on past experience). I'd prefer some way to break ties. Either 49/51 split or something. If I had goals to work on this as an anonymous internet side project like my github work that happens to generate income, then rock on with 50/50 because it's simpler and anything else gets in the way of the product.
* Would you mind documenting the outcome of this experiment? PG often cites YC's internal data as influencing their decisions. Not having access to that data and believing I see a large number of survival biases on HN, I'd be curious to see someone as honest as you document what actually happens. If anything, I imagine the outcome from the experiment will better inform you of improvements than any comment from HN.
* Best of luck! I love creative experiments. No one here knows how this will turn out, but I know we all are interested to follow along.
$5k to build, with payment upon MVP completion... spend an additional $3k, including costs to establish a legal entity with joint ownership with no worse than a 50/50 split and friendly buy-out terms...
Good luck!
As a partner in a consulting shop just starting out, this isn't a bad proposition. It nets you rent money to work on scratching a pet peeve; if you're between clients and you've got something really simple you can wrap up in a month at a discounted rate this is a great idea. HN is filled with "passive income strategies" blog posts that revolve around short projects like this.
Back in October I might've taken you up on it.
A NDA, a No-Compete Clause in a contract, and even nothing written down and signed and witnessed by a notary public just rings alarm bells in my head.
What stops him from taking your MVP project and doing it with someone else? What stops him from telling others about your project so they can copy it or do it better?
Nothing whatsoever. But then again, since we're talking about ideas that would be on the shelf anyway not a whole lot would be lost.
And the OP would be outed and burned beyond recovery. Anybody stupid enough to risk that on a forum as widely recognized as this one would be seriously out of their mind.
> What stops him from telling others about your project so they can copy it or do it better?
Again, absolutely nothing. What stops YC from doing something like that when you apply to YC?
This all boils down to basic trust, and at some point in the business game you're going to have to extend yourself far enough that you can get burned a little if you want to up your game.
This guy is extending himself far enough that he'll get burned a lot if he abuses the trust he's getting here. That alone should count as some insurance.
Imagine how many upvotes a post along the lines of "That hmexx dude is XXX YYY in real life and screwed me over" will get. Probably even more than "That hmexx dude is XXX YYY in real life, we did this thing and have just picked up follow on investment".
Startups are all about execution. It's with this in mind that I find the OP's proposition interesting. In my opinion, the more important part of the proposition is not the money or the marketing work, but the kick-in-the-ass that he's providing to someone who would normally fear taking the leap to execute.
Having someone to whom you are accountable (i.e. a cofounder) is huge for executing. Being accountable only to yourself makes things incredibly hard to continue to execute through all the difficulties of starting a company.
A valid point of course but in reality anyone needing this type of arrangement wouldn't be in a position to sue to enforce the contract. Unless the idea turned out to be so super successful and if that were the case I'm sure money would be forthcoming to avoid any problems.
How many investments are you making?
One or two, maybe 50% equity is fair for your efforts at building traction and growing the company.
Ten, probably not.
A hundred, no way.
On the other hand, a 100 investments is probably what is needed for the chance at a real payday. On Graham's premises, it doesn't really matter how much equity one takes because the return on the home runs is so large. Thus the 50-50 indicates that the goal is not home runs but more modest exits.
Rationale: Let's assume a home-run rate of about 3% which is my rough estimate of what it is for YC startups. That means that funding 75 startups yields a 90% chance of at least one home run.
Now one might ask how long this will take. If we assume that 50% of the companies can be marked as failures quickly, he will only need to invest substantial time in ~37 companies. If he can focus principally on 3 at a time for a period of 6 months, it will take approximately 6 years to achieve a 90% home run probability. Of course, he'll almost certainly have had some modest successes before then.
Again this is all predicated on hmexx being good at selecting and advising startups. For most people, the odds are much worse.
(a) one person being able to do the job of the entire YC team.
(b) that person having equivalent relationships with additional capital.
(c) one might make the case that the relationships to capital must be better because ventures are likely to be located further from conventional sources of capital.
50% equity is a lot to give up for two months of effort unless the other co-founder is only expected to put in the initial two months. And if that's the case, why bother?
The truth of b & c are completely dependent on who hmexx is.
Furthermore, those companies taking the note have a much longer runway than hmexx will provide and will be plugged in to a network of later stage investors.
Finally, each YC company has access to the other companies in its class and the YC alumni...and lots of other things in the valley.
It's logically possible hmexx could approach a similar level of success but it looks unlikely.
If the OP is investing in only one or two companies at a time, then it is practical for him to participate in YC in his role as cofounder. If it's 25 companies, then it is more difficult.
You imply that they'll tend to be fire-and-forget type projects (iPhone apps would work well I guess) but even most of them need some significant attention further down the line. Who puts in the extra dev work or marketing efforts (or even further investment) if it's worthwhile/needed further down the line and how are they compensated if that split of work is very uneven?
"As in all categories, Kickstarter is for projects that can be completed, not things that require maintenance to exist. This means no e-commerce sites, web businesses, or social networking sites. (Yes, this means Kickstarter wouldn’t be allowed on Kickstarter. Funny, but true.)"
Are you planning on doing this anonymously?
To me, this is a red flag.
The offer is set before the entire HN community. It has substantial financial and legal implications.
You are competing with YC.
Your track record is relevant to the ranking of this thread on HN.
I'm no one special... just a techie with some moderate success who wants to help launch some cool new products.
Since your comments point to a trail which leads to a plausible individual, it is difficult to see a serious legitimate benefit which arises from not claiming to be that person. On the other hand, falsely claiming to be that person would have legal implications.
[Edit] on a meta-level, I believe that a precedent for this type of offer to be made anonymously is a hazard to the HN community.
So? If you're not going to take the OP up on his offer then what business is that of yours? Or are we little children that need your protection?
> You are competing with YC.
And YC can't deal with that competition? It has to be shouted down so nobody knows about it?
> Your track record is relevant to the ranking of this thread on HN.
Not one bit. The ranking is only dependent on the number of upvotes, not based on his/her track record.
Really, you have 0 business flagging a thread like this. It's one of the more interesting experiments that I've seen here and if stuff like this gets flagged then HN has truly lost its charm.
That's reasonable to me. Anybody could out him once they connect, if he was a shady character the ruse wouldn't last long.
If someone is willing to take $5,000 to do the heavy lifting up front (therein taking most of the risk) for only 50% equity, their idea is either terrible or they aren't committed to seeing it through.
I wouldn't take this deal, because stopping / starting employment isn't that easy for me, but I can see other people rationally taking it.
And if other people think he's underbidding, I would encourage them to bid him up.
But for those people who freelance, and are in between jobs this may well be an ideal opportunity to (continue) being paid for doing something they have been thinking about for a long time.
It's okay if you don't hit a home run. It's even better if you don't starve or get evicted for your troubles.
If it turns out to be a crap idea you lose 50% of a crap idea. If it turns out to be a great idea you gain 50% of a business.
I have made and launched dozens of sites. The only ones I was paid to build belonged entirely to someone else. The ones I made for me .... I could barely afford hosting at some stages in my life.
Employment - Low Risk, Low Returns
Startup - High Risk, High Returns
I love how this preposition is somewhere in the middle.
Is this closer to what you're talking about than an angel/investment model?
As the offer is written, the $3000 could be spent on AdWords and similar services.
An open question is: how active of a partner would you be once the business (hopefully) becomes a real/profitable business? Are you offering to be a full active partner in running the successful businesses that you seed with this offer? If so, then your offer sounds like a good deal for developers.
Anyway, great idea!
Protip: find real investors who are interested in giving you a fair price. This offer is basically equivalent to a payday advance or a loan shark in terms of cost.
- 50% is too expensive.
- "Co-Founder" role is too much commitment.
- Reduce equity ask, package with a 1 year cliff + vesting schedule, market it to college students as a way to spend your summer.
- Maybe there's a model where an incubator can scale to thousands of companies, instead of dozens.
I'll match this offer as well for anyone who is interested.
Yes, it sounds like a bad deal for some people. But for a lot of people its a great way to:
1. not have to find work for a month,
2. work on something they're passionate about anyways,
3. have an idea of theirs that may not have otherwise seen light of day become a reality.
Perhaps a little codification might be good:
* A Maker puts their idea onto HS with "MatchMake HN: " * Any interested Investor then replies * Maker chooses Investor (possibly publically) * A month later a "Show HN" is published.
I would be interested seeing everyone's results
Just put this together. No escrow or anything and haven't fully implemented bidding but let's see if there's any interest.
Dev: Is rock star techie whose disadvantage is lack of motivation Dev: Builds MVP that Proposer thinks is going to be valuable Proposer: "Validates" it by showing it around Proposer: Sells flips MVP for considerably more than $8k
It's not necessarily bad, it's probably symbiotic.
So..
* Do all stars care about 5k? * If they do, why is short-term motivation of $5k show powerful? * 50/50 with equal voting rights? Disputes, ahoy. Two people that never worked with each other before.
Emotionally its probably what many devs need.
Accelerators, meetups, co-founders, all serve the same need. Believing that the idea has at least one person who believes in it, and prods you to move on.
That said, this is probably a bad split - hmexx might be better to decide if he is an investor (early stage) or a co-founder -> if the latter then really its just one company - you cannot be a founder of two companies at the same time...
That being said, I think this idea does have the potential to be very interesting, and if circumstances were different I might even consider it.
My guess (above) is that HN is the ideal place for investor / 'prenuer matchmaking. Whether pg will let it be I cannot tell you. But it should beat AngelList just because.
For those of us who are complete neophytes at things like this, would you be willing to elaborate on what this means, and why it's important?
Vesting schedules typically last 4 years with shares vesting quarterly or monthly.
So, you can think of it like this: After year one, you'll own a 1/4 of your 50%, or 12.5%. Year two, 1/2, or 25% ...and so on. You don't actually own the full 50% (i.e. doesn't "fully vest") until year 4.
Many vesting agreements carry a one year cliff, which means that none of your shares vest if you leave the company before performing for one full year. This is to prevent the "lazy founder" problem, where one founder is doing most of the work and the other one is goofing off, or decides to leave and take another job.
This is important because the first year is the most risky for a startup and requires all hands on deck. If someone flakes out, you can't have a big chunk of shares tied up in them. One, because it isn't fair. Two, because you likely need to go find yourself another founder or will need that equity for first employees. It scares off experienced founders and investors to see a chunk of your cap table trapped in a "bad decision" founder that flaked out. This same logic carries over to why there are vesting arrangements... you shouldn't be compensated if you abandon the company and don't put in the same work as the other founder.
Hope that helped explain what it is and the reasoning for it!
for example a common scenario is a Four year vesting with a one year cliff, acceleration up any sale or liquidation event.
What this means in every day terms is that you own more shares each month you work, but if you leave before a year is up you own nothing. So if your half is 5 million shares then after the first year of working you will have earned 1.25 million shares after your first year which are now yours and cannot be taken away.
For each working month after that you will earn an additional 104,167 shares (its actually 166 2/3) until you have completed your 48th month at the company at which point you now own all five million shares, or are "Fully vested" as the term would imply.
It basically just ensures dedication to a project and that an early person who was involved with the company in some way does not come back 10 years later suing for "their half" of a company they may have helped start but had no involvement in product direction, success etc.
Say two founders begin a vested company and one drops out, does total ownership transfer to the other founder?
If BOTH drop out, how are assets divided?
Lastly, it seems that the disagreements over ownership will merely shift to disagreements over 'time worked', and weather the effort was legit.
In the case of one person leaving, all their invested shares fall back into the management pool and are distributed proportionally amongst the remaining co-founders (but not investors, they always only have the number of shares they paid for).
Also make sure you do an 83b election (in the US) for vesting shares. Otherwise you pay income taxes on the value of them as they vest. Google it for lots more info, it's pretty straightforward
Basically, you don't want to end up in a situation where your co-founder can take off after 6 months and still have 50% of the company. Co-founder==co-worker, in the strictest sense.
Conversely, if the $8k is to be treated as just investment (which would not fall under vesting) he should be taking much less than 50%.
However if putting in 8000 is the only thing you do, then it's a horrible idea. Putting in more money, maybe.
This is the perspective of someone in the Bay Area though. 5000 is easily saved/spent here.
You can find someone else cheaper, but likely would have to communicate remotely. That increases your risk too.
Startup: Hey, come work here for below market salary for 5% that vests over 4 years Dev: Sounds rad!
This guy: Hey, work on your own project for 50%, and you only have to work on is the MVP for a month, and I'll pay you sort of crappy but probably better than other people in other fields. HN Devs: You. fucking. bastard.
This guy: Work on your own idea! Have your own dream! I'll just put in the money and experience to make the business a success. HN Devs: You're not offering enough to have a 50% share in the company that wouldn't exist without you!
What experience?, I don't know who this guy is!.