8 ms·

Pre-emptive FAQ: Isn't this a horrible deal? Incubators typically inject more money for far less equity! I earn $10K a month, I could easily save up $8K in a f

• hmexx 14y ago
  If interested, drop me a line at hnproject2013@gmail.com If you have questions or HN-style critic on the structure/proposition, write below and help me build proposition version 1.1!
  • traxtech 14y ago
    US resident only / Europe / rest of the world ? Payment terms ? (upfront / milestones / finished) Future company as a delaware C/S-corp ?
    • hmexx 14y ago
      Still need to iron out the details but... World. Upfront will be small (possibly nil) to prevent time-wasters. We can agree milestones based on nature of project. Once code is flowing onto a shared repository for a couple days, I'll feel comfortable starting the money drip. C/S corp in Delaware sounds reasonable. A yet to be drafted, founder's agreement to be signed at project start also to protect both parties.
      • deleted 14y ago
        [deleted]
      • traxtech 14y ago
        Good. I still have 3-6 months of work to do for a customer, but after I'll get back to you if you still pursue this aventure.
      • coecoventures 14y ago
        What about terms? Would your ownership be participating preferred? preferred? common? In other words, would all founders be diluted equally?
      • aangjie 14y ago
        World, great... i have been having this idea running through my head for some time, but need to iron it out a little and do some research .. Am on a 3-6 month project here, will contact you after.
  • dropdownmenu 14y ago
    Interesting idea, but it sounds like you are just trying to have someone make a product for 8k which you can go and sell. Can you specify ways that you will be involved to justify the 50-50 split?
    • jmathai 14y ago
      Isn't the $8k to build it enough to justify a 50-50 split? We're talking about ideas that would otherwise never see the light of day.
      • jeremyarussell 14y ago
        You have to question why the idea would never have seen the light of day. If it's strictly because you have a cruddy job that pays minimum wage but you are smart and capable then yeah this would be the kind of opportunity one would be able to take advantage of. If you are like many of the people here, in that we aren't making terribly low amounts of money and can save up then it's not money that's keeping you from your dreams, it's you. I guess what I'm trying to say is it REALLY depends on the person. This isn't for everyone.
        • lifeisstillgood 14y ago
          The barrier to launching is rarely money - especially these days - sometimes just having one person pushing you is all it really takes - and it sometimes is worth paying for that let alone being paid.
        • yawaramin 14y ago
          In other news, going to college isn't for everyone. Getting married isn't for everyone. Working freelance isn't for everyone. Having a kid isn't for everyone. Nothing is for everyone, dude.
      • vik1211 14y ago
        Seed money plus active involvement in growing the business and creating traction could warrant such a split -- especially for an idea that was sitting on the shelf. Fifty percent of something is better than zero percent of nothing.
  • callmeed 14y ago
    Email sent. For the record, I think this is a great idea.
    • altuzar 14y ago
      Email sent too!
    • larrys 14y ago
      Send me your idea as well. I like what you've done so far.
  • jeremyarussell 14y ago
    I'd take you up on the offer, but for a couple things. Maybe it just means this isn't for me. 1 - That 50 - 50 split is a killer when I'm doing most of the work. 2 - You talk about taking a month or two and full time working on this project until completion. Trust me when I say I'd love to do that, the issue is I can't just go jump back into the same job as if I didn't ditch everyone here for two months. Like I said this is probably just not for me, but those are two things you may want to consider for version 1.1.
    • ednc 14y ago
      You're asserting that customer acquisition is easy and low cost. It's not. For a product that can be built in 2 months (per the guidance here), it is going to take much more time to develop the sales and marketing and acquire enough customers to make it profitable. I think this underscores why this may be a great deal for a (young?) developer with limited business experience. I learned a lot of hard lessons like this once I stepped away from an editor.
      • jeremyarussell 14y ago
        I see where you thought I was asserting anything, when I said the 50 - 50 split was a killer for me doing most of the work. I hadn't really meant it like that but since your right in that customer acquisition isn't easy for people that have never done it then I refer you to a comment I posted below. That this is really for someone who has a crummy low wage job and would stand to gain a lot out of the deal. As for me personally (which I said off the bat was the kind of answers I was bringing. Personal opinions on why I myself wouldn't do it.) I feel comfortable with my ability to sale to people and gain good traction and growth.
        • ednc 14y ago
          you're right - this is not right for everyone. I wouldn't do it either - but 10-15 years ago, this would have been great for me. But this is a killer opportunity, especially for someone younger who can live on the 5k and is not worried about family and mortgages yet. This could be better than an MBA for many people who want to bring a real product to market. Note: I have no context at all on the OP, so I'm making the jump that they have a strong business background and would not be flailing around once it was time to execute.
  • yajoe 14y ago
    The fact that some are offended by the deal you made the anonymous internet tells me you are on to something. Thank you for experimenting and being creative. A couple thoughts: * If you have a month to work on a project, consider taking this offer. Nothing helps motivate people (myself included) like a deadline and a partner. Don't get hung up on the equity split or other boring details -- just go do it. And be thankful you have the free month to work as you will; not all of us are so fortunate! * I am skeptical using 50-50 as a basis for a partnership in general, much less with someone on the internet I've never met. You are probably a chill dude, but I had similar optimism for too many girls I met online... :) Everyone claims to be funny and open to new things. If I had goals to work on this project fulltime, I'd be very concerned that the two of us might not work well together (I have no reason to believe this, but this is a risk based on past experience). I'd prefer some way to break ties. Either 49/51 split or something. If I had goals to work on this as an anonymous internet side project like my github work that happens to generate income, then rock on with 50/50 because it's simpler and anything else gets in the way of the product. * Would you mind documenting the outcome of this experiment? PG often cites YC's internal data as influencing their decisions. Not having access to that data and believing I see a large number of survival biases on HN, I'd be curious to see someone as honest as you document what actually happens. If anything, I imagine the outcome from the experiment will better inform you of improvements than any comment from HN. * Best of luck! I love creative experiments. No one here knows how this will turn out, but I know we all are interested to follow along.
  • deleted 14y ago
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  • fieldforceapp 14y ago
    I would recommend that in Version 1.1 you clarify the legal ownership & indemnification terms. $5k to build, with payment upon MVP completion... spend an additional $3k, including costs to establish a legal entity with joint ownership with no worse than a 50/50 split and friendly buy-out terms... Good luck!
  • bjourne 14y ago
    It would be much easier to evaluate the offer if you told something about yourself. Just an anonymous gmail address isn't trustworthy enough. For example what marketing experience do you have and where are you located? If you live in Japan, you likely are not interested in a business project aimed at the Hungarian market.
• phillmv 14y ago
  Just to counter some of the negativity in here, As a partner in a consulting shop just starting out, this isn't a bad proposition. It nets you rent money to work on scratching a pet peeve; if you're between clients and you've got something really simple you can wrap up in a month at a discounted rate this is a great idea. HN is filled with "passive income strategies" blog posts that revolve around short projects like this. Back in October I might've taken you up on it.
  • dos1 14y ago
    Completely agree. I'm a consultant and this is very intriguing. Sure, the money is low and the equity is high, but I have a ton of side projects that never get finished. If this offer was what it took for me to finish something, I'd say 50% of a company and rent money for a month is worth a lot more than an idea that's just languishing.
  • orionblastar 14y ago
    Yeah but doing this without: A NDA, a No-Compete Clause in a contract, and even nothing written down and signed and witnessed by a notary public just rings alarm bells in my head. What stops him from taking your MVP project and doing it with someone else? What stops him from telling others about your project so they can copy it or do it better?
    • larrys 14y ago
      "A NDA, a No-Compete Clause in a contract" A valid point of course but in reality anyone needing this type of arrangement wouldn't be in a position to sue to enforce the contract. Unless the idea turned out to be so super successful and if that were the case I'm sure money would be forthcoming to avoid any problems.
    • jacquesm 14y ago
      > What stops him from taking your MVP project and doing it with someone else? Nothing whatsoever. But then again, since we're talking about ideas that would be on the shelf anyway not a whole lot would be lost. And the OP would be outed and burned beyond recovery. Anybody stupid enough to risk that on a forum as widely recognized as this one would be seriously out of their mind. > What stops him from telling others about your project so they can copy it or do it better? Again, absolutely nothing. What stops YC from doing something like that when you apply to YC? This all boils down to basic trust, and at some point in the business game you're going to have to extend yourself far enough that you can get burned a little if you want to up your game. This guy is extending himself far enough that he'll get burned a lot if he abuses the trust he's getting here. That alone should count as some insurance. Imagine how many upvotes a post along the lines of "That hmexx dude is XXX YYY in real life and screwed me over" will get. Probably even more than "That hmexx dude is XXX YYY in real life, we did this thing and have just picked up follow on investment".
• hmexx 14y ago
  To those who responded by email. Please give me a few days. I may need to set-up a mailing-list/blog/twitter to broadcast info before getting to you individually as the response has blown past my expectations.
  • e12e 14y ago
    I'd be very interested to hear rough numbers on how many emailed, how many you considered interesting, and how many of those you end up funding/going ahead with. And I'm sure everyone will want a post mortem in 6 to 12 months :-)
    • cdcarter 14y ago
      Indeed, Pinboard's PIC-PC had over 300 applicants, and they are hearing responses already. I'd be interested in seeing how many also are applying for this, or if less are interested, since the stakes seem higher.
• reinhardt 14y ago
  I think you're on to something here. One suggestion for the 1.1 version: relax Premise 4. A talented developer/designer may not necessarily have good (or any) ideas. I could see myself taking up such an offer if I didn't have to come up with the idea but instead I liked and had a good hunch about a suggested idea by the candidate co-founder.
  • Mankhool 14y ago
    I find the OP's idea and post really interesting and this discussion enlightening. It has made me re-think the notion of angel investing as this is very grass-roots (one developer, one idea, one partner/investor). However, as a non-coder (not since 1984) whenever I have tried to find a technical co-founder I always hear the argument that coders have tons of their own ideas so why would they build mine - especially for 5-8K. The OP is calling out the coders WITH ideas - it would be interesting to see how many really have undeveloped ideas vs. how many do not.
• brudgers 14y ago
  The time commitments which come from an incubator are related to why YC's stakes are in the range they are, and why it consists of partners. How many investments are you making? One or two, maybe 50% equity is fair for your efforts at building traction and growing the company. Ten, probably not. A hundred, no way. On the other hand, a 100 investments is probably what is needed for the chance at a real payday. On Graham's premises, it doesn't really matter how much equity one takes because the return on the home runs is so large. Thus the 50-50 indicates that the goal is not home runs but more modest exits.
  • absherwin 14y ago
    If this were a one time game you'd be correct. Assuming, he can quickly filter out a significant portion, it's possible to be very involved and have a significant chance of a large exit. This, of course, assumes that he's good at what he does which is an underlying assumption of this whole proposition. Rationale: Let's assume a home-run rate of about 3% which is my rough estimate of what it is for YC startups. That means that funding 75 startups yields a 90% chance of at least one home run. Now one might ask how long this will take. If we assume that 50% of the companies can be marked as failures quickly, he will only need to invest substantial time in ~37 companies. If he can focus principally on 3 at a time for a period of 6 months, it will take approximately 6 years to achieve a 90% home run probability. Of course, he'll almost certainly have had some modest successes before then. Again this is all predicated on hmexx being good at selecting and advising startups. For most people, the odds are much worse.
    • brudgers 14y ago
      That's a good argument except it depends on: (a) one person being able to do the job of the entire YC team. (b) that person having equivalent relationships with additional capital. (c) one might make the case that the relationships to capital must be better because ventures are likely to be located further from conventional sources of capital. 50% equity is a lot to give up for two months of effort unless the other co-founder is only expected to put in the initial two months. And if that's the case, why bother?
• notahacker 14y ago
  The thing I'd want to know most is what you expect you and your fellow entrepreneurs' respective contributions to be after the initial development phase and marketing push when there's more work. You imply that they'll tend to be fire-and-forget type projects (iPhone apps would work well I guess) but even most of them need some significant attention further down the line. Who puts in the extra dev work or marketing efforts (or even further investment) if it's worthwhile/needed further down the line and how are they compensated if that split of work is very uneven?