Bringing in co-founder after launch


2

I have been bootstrapping for 1.5 years, coding part-time while keeping my full time job. I have also invested some 10k into my project.

Now, the workload seems to pile up over time, and I know I can't keep up with the pace of my competitors. Now I can bring in 2 friends to be the technical co-founders after me myself bootstrapped for 1.5 years. If I bring them in, I will spend less time in coding, more time in sales and marketing.

Questions:

  1. What is the recommended share should I give them?
  2. Should I ask them for monetary investment? The startup doesn't really need it, but I want it as a commitment.
  3. What happens if they are not working up to marks, and either I call the partnership off half way, or they quit? Will I have to pay them or buy over their shares?

Thanks.

Co-Founder Legal Partnership

asked Apr 5 '12 at 12:33
Blank
Victor
593 points
Get up to $750K in working capital to finance your business: Clarify Capital Business Loans

2 Answers


2

You need to have a lengthy and brutally honest discussion before making any offer. Some questions:

  1. Are you going to be in charge or at least have the last word or is this a 3 person democracy? Eventually a customer, vendor, or prospective investor will ask, "Who is in charge?" They may not prefer to deal with all of you at once.
  2. How much of a commitment will everyone make? Be specific. What happens when someone falls short?
  3. What is the end game? Can you sell the company even if they want to hold on since this is their job? How bad does it have to get before you give up?
  4. What compensation does everyone expect? If you're all in it for the power and the glory, that could be a problem.
  5. Does everyone realize you are risking your friendship?
  6. Since you're all developers, are there other skills and experiences your team lacks? Idenfity it now and have a strategy for a future solution.
answered Apr 6 '12 at 02:05
Blank
Jeff O
6,169 points

2

This is what I personally feel:

Since the idea is yours and you are the backbone handling everything, why have partners. Rather keep them on payroll.

But asking your friends to be on payroll wont be a good idea. Secondly since you stated that
" if they are not working up to marks", so if you are unsure about it than why risk.
Outsourcing is very cheap in India and has proved quite effective provided if you have the required money.

If assuming that you want your friends to be your partners, and if they entirely agree with the ideas that you offer,

1> Share given should be based on the amount of work that he does. Giving exact figures is difficult but in any case your share should be > 51%.

2> Asking for monetary investment is a good idea but then maybe you would have to give them more share/ stake in the company. [A probable loss to obtain the "commitment"].

3> Assign tasks and deadlines and make sure you be the project managing guy. If they dont work well, calling off the partnership would ruin the friendship [maybe] but business is business. Make sure you draw the partnership agreement carefully with clauses which defines not working up to mark so in case some situation like this occurs you are always in a safe.

answered Apr 5 '12 at 20:46
Blank
Umesh Moghariya
136 points
  • Thanks very much for the advice. It's very practical. – Victor 9 years ago
  • @Victor Thanks, reading your question made me recall the exact events happening to one of my friends at South America, who finally outsourced to my firm. So i felt the need to warn you about the pros and cons. – Umesh Moghariya 9 years ago

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Co-Founder Legal Partnership