Bringing on equal partner after starting solely bootstrapped?


1

I came up with an idea for a startup, and after trying to start other ventures with non-paid partners I knew the only way to get this done right was to hire a developer straight up to code the back-end/db for my idea and designs. After about a year into the project we're starting to see some light at the end of the tunnel and the developer would like to be part of the company going forward, which I am also for since I really enjoy working with him.

What I'm suggesting is that I consider my time/initial payments to him as my investment, and that consider his current unpaid invoices and time going forward as his investment. We will both move forward as 50/50 partners in this venture going forward.

I'm not worried about our un-equal investment into the company at this point as far as time/money. My concerns are the usual about handling disagreements.

  • What if one of us stops working on the project (not going to be me), can one of us forcibly buy out the other so we can continue the project without risk the of that person coming back a year later with their hand out?
  • I've read about the 45/45/10 split, but what is the best way to go about finding the 10% person. Is that something that can be setup like a Board of Directors versus ownership in the company?
  • The only thing really in the back of my head is how do I make sure I don't lose my company down the road?

Bootstrapped Co-Founder Equity Legal Partnerships

asked Jun 15 '11 at 01:19
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Patrick
6 points

1 Answer


1

I'll respond to your first and third bullets (I don't quite understand the second).

I believe the central point is that the founders should be issued restricted stock (the following was first published in "Rewarding Key Personnel: Restricted Stock or Options?" ):

<<<<<

With restricted stock, shares are granted to the individual immediately but are subject to “reverse vesting”: If the individual leaves the company, a specified portion of the stock is forfeited to the company (if the individual paid nothing for the shares) or is subject to repurchase by the company at the price the individual paid. The portion that is subject to forfeiture or repurchase declines to zero over a specified number of years.

<<<<<

If you want to do this properly, you will need to retain a lawyer.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.

answered Jun 15 '11 at 09:36
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Dana Shultz
6,015 points

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Bootstrapped Co-Founder Equity Legal Partnerships