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Ask HN: How should you split equity with a part-time, non-technical co-founder?

6 points by curiousjorge ↗ HN
I've built the product from start to finish over the past 10 months.

I am working full time on this and always have.

I'm paying the bills.

Co-founder is a sales/business guy background.

Co-founder has a full time job and will join full time once it launches.

I feel like much of the details discussed, although productive, have little impact on the product launch. I am focused on the immediate development and launch of the product.

I am also concerned about the part-time of the co-founder and that he is not full time.

I really love his experience and business skills but feel like this is a leap of faith, although we've worked together in the past at the same company.

I know that I need to have a co-founder but not quite sure how I can split the equity fairly for a part-time, non-technical co founder. Is it wrong to take account for the premium of a business orientated co-founder?

6 comments

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dpeck
from what you're saying 100/0. It sounds like at current he's basically been an advisor and not much else.
curiousjorge
I think you are right. Lot of advising and a lot of explaining from me but I guess when someone is new, you have to explain it as well.

Right now, I'm just thinking what do I value more? Future sales or someone who can develop the product with me? Or someone that does both?

Nothings in ink, everything is just in the air. But my worry is exactly that, I am lifting all the heavy parts and what I actually need is someone to do it with me.

dpeck
I say this as someone who has never played the equilty/founding game, but seems like this would be something to get locked down now. I'm guessing it could come back on you in a lot of not-fun ways.

That isn't to say he shouldn't have anything going forward. But some %, year cliff, and then vest over the next 3 would let you see the value he brings to the realities of the business.

bjones53
Based your the description you've provided you shouldn't split anything, but I'd need more information to answer your question.

Has your co-founder brought in any sales? Does he have any industry expertise? A strong network of customers/advisors/investors? Is he leaving a high paying job? If the answer to all of the above is no, then it's hard to justify giving him much...

It sounds like you've done all the heavy lifting, but understand there's a lot more to come; ask yourself whether you want to do this on your own; ask yourself whether you want to do this with anyone else.

No one wants to leave their job for anything less than 10% (with no salary). Also, if he's 'your guy,' make sure he feels like a co-founder; someone who can share the pain.

Finally, make sure you sign an agreement wherein the shareholders earn equity after a specific date (this is called a cliff, it typically occurs after 12 months), and that equity vests over a specific period (typically 48 months). You can find a lot of information on shareholder agreements online, but at some point you'll want to see a lawyer.

curiousjorge 

    Has your co-founder brought in any sales?
No, but we plan on going to sales meet together.

    Does he have any industry expertise?
No, I had to explain the industry in it's entirety.

    A strong network of customers/advisors/investors?
No but knows other sales people.

    Is he leaving a high paying job?
I think it's high paying, but not 100% sure what he's salary is.

The thing is he does feel like a co-founder, he got everything I explained very quickly, we think similarly and dig the vibe. Now he wants to code and help out on the dev side (as he's done it on the side on and off), which I welcome.

Do you mean after a year, both of us start earning equities? What does it mean to vests? I will consider a lawyer.

bjones53
Chris Dixon does a great job at explaining vesting schedules for founders and employees http://cdixon.org/2009/04/21/founder-vesting/.

If he feels like a co-founder then you should be able to have a conversation with him about equity; if things go poorly then the partnership was never meant to be. Use this as an opportunity to discuss commitments and expectations; will he quit his job? how about cover costs?

Some people suggest that equity should be awarded based on set milestones, but I think this strategy makes people feel more like employees than co-founders.