4 ms·

> If you raise more than a full-time salary's worth of money, and that money is used to make a payroll that pays a prospective "co-founder", they aren't a co-fo

by exelius 11y ago

> If you raise more than a full-time salary's worth of money, and that money is used to make a payroll that pays a prospective "co-founder", they aren't a co-founder. Treat them like an early employee. I disagree; not everyone who's qualified to be a founder is able to forego salary. It's a big problem right now; otherwise awesome prospective founders have to be lured away from $150-200k/yr jobs - and that's really hard if your salary offer is $0. It's a lot easier if you're offering $100k - it's not their market value, but it also allows them to more or less maintain their lifestyle.

tptacek 11y ago
"Founder" isn't a qualification. It's a super-common trap to think that it is; thinking that implies that you can see into the future and map someone's resume to their impact on the company. You can do that only in the vaguest possible terms. Joel Spolsky covered all of this in his guide to equity, which is like a more detailed version of Siebel's post. If you have to give one co-founder living expenses, give the other co-founders IOUs for the same money when you get funded or start taking in revenue.
- cperciva 11y ago
  If you have to give one co-founder living expenses, give the other co-founders IOUs for the same money when you get funded or start taking in revenue. Would you allow co-founders to invest in their own company on the same terms as angel investors? If no, why not? If yes, how is this not equivalent to giving the salary-taking co-founder less equity?
  - tptacek 11y ago
    So I'm writing a lot here because I'm procrastinating finishing a fake Phrack article I'm publishing later today to announce the Starfighter CTF, and we should get opinions from other people besides me. But having said that: it's probably situational. If all the cofounders have roughly equivalent finances, maybe that's OK. But if some of them have, for instance, just sold a company, and the others are doing their first no-salary startup, it doesn't seem fair to allow the better-off ones to buy additional influence. I'm using "fair" here as a shorthand for "things that will damage the incredibly valuable cofounder relationship more than it's worth".
    - cperciva 11y ago
      it doesn't seem fair to allow the better-off ones to buy additional influence This sounds like an argument for multiple share classes. Founders not taking a salary get extra shares, but they're non-voting shares, perhaps?
- exelius 11y ago
  I dislike that approach (maybe because I'm one of those guys without a trust fund who could never work for a startup without a salary). "Living expenses" are often far more than that for someone in their 30s: mortgage, student loans, car payment, etc. Right now, founding a startup is overwhelmingly for people from privileged backgrounds who can afford to be bold and work for no money because they have a safety net (parents, trust fund, etc) they can rely on if they fail. It sucks. There's a reason there are hundreds of food delivery startups every year: the only people with the ability to start companies don't have enough experience with the world to know what would even make a good company. Sometimes they stumble onto something wonderful, but most of the time they just fail, go live with their parents for a few months, then go start up something else. Repeat until they get tired and just get a 9-5 job at Google or Facebook. Every individual has a market value. If I make $200k/yr right now, and I get an offer to work for a startup where I would make $100k/yr, how is it fair that someone who previously made $75k/yr gets the same amount of equity as me? After all, I'm giving up $100k/yr just to work here! It's better to ask someone "what would it take to get you to work here?" and pay them that. Then give them equity as an incentive to be successful. I know the Silicon Valley hegemony is against talking about money like this, but people definitely think it.

by exelius 11y ago

tptacek 11y ago

"Founder" isn't a qualification. It's a super-common trap to think that it is; thinking that implies that you can see into the future and map someone's resume to their impact on the company. You can do that only in the vaguest possible terms. Joel Spolsky covered all of this in his guide to equity, which is like a more detailed version of Siebel's post. If you have to give one co-founder living expenses, give the other co-founders IOUs for the same money when you get funded or start taking in revenue.

cperciva 11y ago
If you have to give one co-founder living expenses, give the other co-founders IOUs for the same money when you get funded or start taking in revenue. Would you allow co-founders to invest in their own company on the same terms as angel investors? If no, why not? If yes, how is this not equivalent to giving the salary-taking co-founder less equity?
- tptacek 11y ago
  So I'm writing a lot here because I'm procrastinating finishing a fake Phrack article I'm publishing later today to announce the Starfighter CTF, and we should get opinions from other people besides me. But having said that: it's probably situational. If all the cofounders have roughly equivalent finances, maybe that's OK. But if some of them have, for instance, just sold a company, and the others are doing their first no-salary startup, it doesn't seem fair to allow the better-off ones to buy additional influence. I'm using "fair" here as a shorthand for "things that will damage the incredibly valuable cofounder relationship more than it's worth".
  - cperciva 11y ago
    it doesn't seem fair to allow the better-off ones to buy additional influence This sounds like an argument for multiple share classes. Founders not taking a salary get extra shares, but they're non-voting shares, perhaps?
exelius 11y ago
I dislike that approach (maybe because I'm one of those guys without a trust fund who could never work for a startup without a salary). "Living expenses" are often far more than that for someone in their 30s: mortgage, student loans, car payment, etc. Right now, founding a startup is overwhelmingly for people from privileged backgrounds who can afford to be bold and work for no money because they have a safety net (parents, trust fund, etc) they can rely on if they fail. It sucks. There's a reason there are hundreds of food delivery startups every year: the only people with the ability to start companies don't have enough experience with the world to know what would even make a good company. Sometimes they stumble onto something wonderful, but most of the time they just fail, go live with their parents for a few months, then go start up something else. Repeat until they get tired and just get a 9-5 job at Google or Facebook. Every individual has a market value. If I make $200k/yr right now, and I get an offer to work for a startup where I would make $100k/yr, how is it fair that someone who previously made $75k/yr gets the same amount of equity as me? After all, I'm giving up $100k/yr just to work here! It's better to ask someone "what would it take to get you to work here?" and pay them that. Then give them equity as an incentive to be successful. I know the Silicon Valley hegemony is against talking about money like this, but people definitely think it.