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I am a 'technical co-founder' and I can't say how many times I'm approached by people who want me to build some application for them in exchange for 10-20% of e

by isalmon 14y ago

I am a 'technical co-founder' and I can't say how many times I'm approached by people who want me to build some application for them in exchange for 10-20% of equity. What do they bring to the table? In most cases it's just their 'idea'. So usually my question to them is - why can't I just take this idea and execute it on my own? If you want to find a good technical co-founder - be good at sales. Business is successful when you can 1) build a product 2) sell it. Well, part 2 is the hardest one in 99% of cases. If some biz co-founder can nail it - he/she will have no problem finding a tech co-founder.

EternalFury 14y ago
LOL, I get that a lot too. "The first version is 90% done.", they say. "I just need to delegate it to a tech co-founder so I can focus on business.", they add. "You'll get double-digit equity, up-to 13%, even.", they conclude. For me, "co-founder" starts at (100 / n)%, where "n" is the number of co-founders.
- dkersten 14y ago
  Exactly, equal share[1] and then dilute (again, equally) as other non-founder shareholders come on board. [1] and equal equity share means everyone needs to bring an equal amount of value to the company. If they want me to build the entire thing and they sit back and watch the money roll in, then they are not adding equal value, so why would this be worth equal (or, god forbid, less than equal) equity to me?
- SparksZilla 14y ago
  How often do you know these people prior to these offers?
mgkimsal 14y ago
"In most cases it's just their 'idea'. So usually my question to them is - why can't I just take this idea and execute it on my own?" Which is why so many of them want you to sign an NDA. :)
- SparksZilla 14y ago
  Awesome question to ask. What are some of the best & worst responses you've gotten?
  - isalmon 14y ago
    To be honest in most cases people just laugh. I guess that means they don't really have a good answer ;)
  - mgkimsal 14y ago
    I typically don't sign an NDA when it's just someone's idea. If they've already invested a significant amount of their own money and look to have traction, I may. If it's a situation where I'm more like just a contractor coming in to an established company, I'll sign an NDA (and have signed short-term non-competes as well too if need be). When I don't sign an NDA, often (this doesn't happen every day, but on the order of 6-8 times per year) I'll get some line about how this is a great idea and I'm a fool to let it pass. Or that the other person has to do this to protect themselves because I could just steal the idea and make all the money. Or some variation of one of those. I simply state that if they're looking for a true partner, starting off on by distrusting me that much, and making the relationship extremely one-sided (based on the language in the NDA as it may be), is a recipe for failure. Recently someone approached me with an NDA, and had a business for something that millions of people need (not a want, mind you, a need), and they'd each be willing to pay $100/year for it. I wasn't told what it was until I signed the NDA, which I didn't. But I asked "how will you deal with the competition?" and was told "there won't be any". "Really? You're creating a market that doesn't exist right now, and generating hundreds of millions of dollars in revenue within a few years, and you think there will be no competition at all?" "Correct". I politely declined at that point, and pointed out that even if I'd signed the NDA, I wouldn't be able to 'partner' with someone that naive about business.
reefoctopus 14y ago
I was in this exact situation recently with my employer. They offered me equity and capital in order to bring one of my nascent private projects under their roof. After 6 months of "getting the paperwork ready," they offered 13% of the new company. All of the capital went to the old company to pay for my work. I immediately quit when the terms were revealed but reconsidered after negotiating a bit. Although it isn't quite what I had hoped for, they are paying me a salary, the work conditions are great, the other partners are entrenched in the industry, and I'm not the one taking a risk. They also removed all strings attached to my stake.

by isalmon 14y ago

EternalFury 14y ago

LOL, I get that a lot too. "The first version is 90% done.", they say. "I just need to delegate it to a tech co-founder so I can focus on business.", they add. "You'll get double-digit equity, up-to 13%, even.", they conclude. For me, "co-founder" starts at (100 / n)%, where "n" is the number of co-founders.

dkersten 14y ago
Exactly, equal share[1] and then dilute (again, equally) as other non-founder shareholders come on board. [1] and equal equity share means everyone needs to bring an equal amount of value to the company. If they want me to build the entire thing and they sit back and watch the money roll in, then they are not adding equal value, so why would this be worth equal (or, god forbid, less than equal) equity to me?
SparksZilla 14y ago
How often do you know these people prior to these offers?

mgkimsal 14y ago

"In most cases it's just their 'idea'. So usually my question to them is - why can't I just take this idea and execute it on my own?" Which is why so many of them want you to sign an NDA. :)

SparksZilla 14y ago
Awesome question to ask. What are some of the best & worst responses you've gotten?
- isalmon 14y ago
  To be honest in most cases people just laugh. I guess that means they don't really have a good answer ;)
- mgkimsal 14y ago
  I typically don't sign an NDA when it's just someone's idea. If they've already invested a significant amount of their own money and look to have traction, I may. If it's a situation where I'm more like just a contractor coming in to an established company, I'll sign an NDA (and have signed short-term non-competes as well too if need be). When I don't sign an NDA, often (this doesn't happen every day, but on the order of 6-8 times per year) I'll get some line about how this is a great idea and I'm a fool to let it pass. Or that the other person has to do this to protect themselves because I could just steal the idea and make all the money. Or some variation of one of those. I simply state that if they're looking for a true partner, starting off on by distrusting me that much, and making the relationship extremely one-sided (based on the language in the NDA as it may be), is a recipe for failure. Recently someone approached me with an NDA, and had a business for something that millions of people need (not a want, mind you, a need), and they'd each be willing to pay $100/year for it. I wasn't told what it was until I signed the NDA, which I didn't. But I asked "how will you deal with the competition?" and was told "there won't be any". "Really? You're creating a market that doesn't exist right now, and generating hundreds of millions of dollars in revenue within a few years, and you think there will be no competition at all?" "Correct". I politely declined at that point, and pointed out that even if I'd signed the NDA, I wouldn't be able to 'partner' with someone that naive about business.

reefoctopus 14y ago

I was in this exact situation recently with my employer. They offered me equity and capital in order to bring one of my nascent private projects under their roof. After 6 months of "getting the paperwork ready," they offered 13% of the new company. All of the capital went to the old company to pay for my work. I immediately quit when the terms were revealed but reconsidered after negotiating a bit. Although it isn't quite what I had hoped for, they are paying me a salary, the work conditions are great, the other partners are entrenched in the industry, and I'm not the one taking a risk. They also removed all strings attached to my stake.