6 ms·
Ask HN: How do I reach a fair agreement with my co-founder?
Hey HN, I need your advice. I'm re-negotiating equity stakes in my start up and want to be fair to my co-founder but don't see his long term role in the company. What should I do?
At the beginning of this year I participated in a hackathon with two co-workers. One of the guys is a web developer and techie like myself, and the other is a database admin and project manager with no programming background. We built a pretty cool web app and won the top cash prize at the event. We decided to use the cash to continue improving the app and were accepted into an incubator program over the summer. At that time the other techie guy had to stop working on the project because of a new job.
So my co-founder (the db admin/project manager) and I went through the incubator program. I was working part time 2 days per week at our old job and 3-5 days on the start-up. My co-founder was working 4 days a week at our old job (where he is a minority shareholder) and 1-2 days a week on the start-up. After graduating from the incubator program I decided to quit my job and work on the start-up full time. My co-founder is continuing to put in 1-2 days per week.
Now we're at a crossroads. We've got the product to a point where we can start selling it, and we've both been talking with potential customers and investors. Sales is neither of our strong suits and we agree that we will need an experienced CEO shortly after landing our first customer and raising additional money.
I envision my role as CTO and doing primarily product development, but am having a difficult time imagining what my co-founders long term role will be. He is not interested in sales or the CEO position, but can't do any technical work other than database design and maintenance.
We've been renegotiating equity stakes because we are rasing a small amount of angel money to keep the doors open as well as bringing on a subject matter expert to help with improving the product. I know this is all pretty vague, but I wanted to get your advice on the situation. I'm asking him to drop down to a <10% equity stake if he's unwilling to start full time. He can't be full time now because of other financial responsibilities, but I'm willing to wait until we can raise some money to pay him. Maybe this is a mistake... I don't know that his full time involvement is what the company needs right now.
I've talked to him about my concerns, but I get the feeling that he doesn't agree with me. The conversation didn't really end in any sort of agreement or mutual understanding.
Am I being unreasonable? On the one hand I want to be fair and I doubt the company would exist without his involvement. I've done the solo founder thing once before and wouldn't do it again. On the other hand I don't want the company to have a bunch of equity held by anyone who isn't working full time or 100% dedicated and even if he were, I'm not sure what his role would be. Has anyone gone through a similar experience before? Any suggestions for how to evaluate the situation in a fair way? I am stressing out about this and would really appreciate advice.
- keeptrying 15y agoOne option is to make equity based on achievements. So both of you can create a list things that need to be done by a specific time and then split it between you two. This should make it very clear to the non full time partner that he isnt getting much done. If he is able to achieve the milestones then its probably a good thing to have him on board even if he's part time. A startup is all about getting shit done. Dont worry about hte time he;s spending at the job.
- deleted 15y ago[deleted]
- throwaway55022 15y agoThanks for the advice. I tried suggesting the idea of attaching equity to milestones but he didn't see the need. I probably didn't explain why I thought it was important well enough. I think this is a good idea and I'll suggest it again.
- mControl 15y agoCheck out the 'founder's pie' calculator (google it) not a perfect tool, but a great place to start in weighing the stuff that needs to be/has been done plus a way to view, categorically, what each person brings to the table - and if you haven't already locked in ownership equity you may want to consider a performance based profit equity that leads to the promise of ownership once he's willing to commit full time to the project. Good luck!
- billswift 15y agoIf both parties don't agree to a re-negotiated agreement, then it is not "fair". If you can't come to an agreement, dissolve the partnership and start over.
- chris_dcosta 15y agoThis doesn't always work if one of the parties has something invested and the other doesn't - there's an imbalance. One party stands to lose and the other party has nothing to lose. Big difference!