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Ask HN: Technical founder startup share

6 points by lucifer ↗ HN
I've been presented with an opportunity to help an aspiring entrepreneur take his idea from the idea stage to (a) demo and then (b) foundation code-base and initial launch system. For (a) the cash strapped founder is offering an effectively insignificant sum that I may as well wave, and a somewhat more realistic sum (pending his successful demo-based vc funding search) for the initial code base + a 3% share.

Given my NDA obligations I'm not at liberty to delve deeply into the idea, but its possible to say that it is a non-trivial (but not rocket science) cross between a social system and a ubiquitous domain X, and that technology will necessarily play a key role in the operation and success of the enterprise. The system will require a sophisticated backend and it is clear that market price for contract development of the system is substantially higher than what is on offer. In sum, while there are other aspects to the business such as 3rd party affiliations and data acquisition costs, technology costs will be a significant chunk of this venture's operational costs. (Marketing, should a non-viral path be chosen, is the only other immediate potential cost. Company can be virtually operated.)

The original founder is entirely non-tech. He seems intelligent but I'm not 100% sure if he is really up to the game of an internet startup (he apparently has been shopping a cost structure where 10% of his costs were for software ...), and that most likely his potential competitors (n.b. nobody seems to be doing what he is proposing!) will be techies. In any event, in the course of the our ongoing conversations I have been giving him critical feedback outside of the mere technical aspects of his proposal, so I certainly think I would be making contributions beyond providing software.

Currently I am in a situation where I can minimize my expenses and go in Ramen mode for a few months and I think the idea is compelling enough. So I am considering a counter proposal to join forces as the tech co-founder and bootstrap this venture, and seek outside investment at a subsequent stage where we have a functioning system and a founder team that covers the bases for the required expertise in running this business.

So. There is a founder with a compelling and fairly unique idea. He does not have funding as of yet. He has worked out the process to some degree but I've been also giving him feedback on that front as well, but lets just say he has the idea snd processed worked out for the sake of the argument. If a tech founder were to join, what should he reasonably look for in terms of percentages?

(Thanks in advance for your feedback and advice.)

11 comments

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brk
This has been asked and answered frequently on HN.

Some summaries:

1) There is no standard answer. 1% might be perfectly appropriate in this scenario, and 80% might be perfectly appropriate. You should probably be looking more at ratios of His Stock:Your Stock vs. finite percentage numbers (which are basically data in a vacuum).

2) You will generally find that the "approacher" will maintain a higher stock percentage than the "approachee". Not always, but frequently. In this scenario (and the limited information provided) it appears that the "idea" guy has (at least in theory) many "tech guys" to choose from. You, based on the post here, have a single "idea guy" in front of you to partner with. Hopefully the rest of the supply and demand concept is obvious enough here that I don't have to type it all out.

3) These scenarios somewhat follow the "if you have to ask, you can't afford it" principle. If you don't know what you're worth, or how to handle this, you are probably relatively inexperienced in this particular realm of business. The experience in this case is most likely worth 10x long-term what any delta in equity between what he offers and what you think you deserve would be equal to. Track-record and experience is a very valuable thing long-term. Opportunities to get involved in a founder-type role are somewhat rare and also valuable. This is also assuming that he has at least some experience or talent pool to draw from that leads you to believe that partnering with him offers you some probably of success above and beyond any random guy with a cocktail napkin.

4) EVERYTHING is ALWAYS renegotiable. Sometimes the best way to get to where you want to be is to get on-board, prove your value, and then renegotiate at the next funding round.

lucifer
Thanks for the summary.
newy
3% pre-funding or fully-diluted? 3% before a seed or angel round is minuscule.
lucifer
Pretty sure that's pre-funding. But even after funding, I thought that was unrealistic on his part, but needed sanity check and thus my Q to HN.
newy
Yes, crazy either way. Happy that HN was able to provide a sanity check.
dannyr
That is a warning sign too. It just shows how much he values your work.
rcmorin
lucifer - I'd turn the tables on this deal. What is the value proposition of the non-technical co-founder? What is he bringing to the table? Money, ideas, customers, investors, partnerships, IP, co-founders? He generated the idea: yipee. Biz guys and idea generators are over-rated. There is no marketplace for ideas, and business plans are worth less than the price of the paper they're printed on. He cannot execute, and needs someone to do his bidding. There is no business at this point - just a compelling, unique idea and chicken scratches on napkins. All this talk about signing NDAs, pricing shares, and seeking VC $ is a waste of time. Focus on (1) building a team, (2) coding a basic v.1.0, and (3) finding users. If you can get past the prototype stage, then some more serious conversations can begin.
lucifer
That pretty much sums up my thoughts. Not quite sure what you mean by "get past the prototype stage, then some more serious conversations can begin." Do you mean build it on my own and retain code ownership?
rcmorin
I'd ask myself a blunt question: why do I need this guy? Why am I so attracted to this compelling idea? If you're a smart engineer, you can be the idea generator and the coder. That way you can retain full ownership, and then recruit the business guy. I'd reasses your approach to this potential partnership. Ideas and code are property of the business. Your compensation comes with equity and % ownership. I'd state clearly what each of you plans to contribute to the future of this venture, and how the two of you will work together to make this succeed. Ex. I will focus on engineering; he will be the biz guy who focuses on fundraising, handling investors, doing sales, crafting product vision, etc.
dannyr
I was working with a non-technical guy before for an app. He was insisting 50-50 even though most of the task we have is coding and I was doing all the work.

I asked him to shell out some money just to make it fair. His quote for a couple of week's worth of work for me was $300.

I felt insulted and walked away from the project.

choward93
Coming from the non-technical perspective, I see little value that a non-techie can offer to a company for <=97% of the shares. Someone making you this kind of proposal surely does not understand how a web startup works because the value is in the development team and their resulting product.

In every endeavor I (try) to embark on, I always offer 50-60% of equity to the technical person, to show that im not a control freak and value their expertise.