What assurance can I have in case a startup fails?


1

I am a coder and have very little in-depth business knowledge. I was recently approached about joining a very promising startup with a great idea. Only problem is that they were unfunded and would need me to work for equity which i have never done before. So in a nutshell my question is this, as i am the technical person and really the only one that is investing a billable commodity, is there anything i can ask for in a contract that assures me some sort of return if the business never takes off or just dies? None of this is being done in bad faith and i have already asked them and they have agreed to me asking around for a situation that makes sense. Any ideas or suggestions would be appreciated.

Equity Partnership

asked Dec 21 '11 at 13:16
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Amin Brodie
39 points

1 Answer


3

In this situation it is very unlikely you are going to get anything if the business doesn't work out, you just need to make sure you are compensated enough for the gamble you are taking (ie. if the business succeeds and you end up getting paid what you would have in a normal company, that's not enough). Work out how much equity/reward makes the risk worthwhile to you and there you have your deal. If what you want is higher than they will give, then move on.

One thing you mentioned that is worth pointing out, technical skills aren't the only billable commodity, don't undervalue other peoples contributions because it's not coding, that will likely lead to conflict.

answered Dec 21 '11 at 13:24
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Joel Friedlaender
5,007 points
  • Ok, i appreciate that answer ... As a group we did discuss the fact that they would be willing to sign a promissory note to ensure that i would end up with a least a portion of my time compensated for if the venture didnt pan out. They are willing to sign as individuals. My question is this: Can a promissory note be issued in a scenario like this where I am not lending them money but rather a service that we agreed on the value of? – Amin Brodie 9 years ago
  • I don't know how legally binding it is, but of course they can issue one. It might come down to their integrity as to whether they honour it or not. – Joel Friedlaender 9 years ago

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Equity Partnership