Co-Founder or First Employee ? How much equity?


2

Joined together to create a new venture with my ex-boss, we shared a great work dynamics and gelled well together, had complimentary skills & liked the idea and hence I decided to start together.

From day 1, I wanted to be very clear on structure and equity but due to evolving nature of the venture, agreed to wait for 6 months.

I started working full time whereas the founder worked part time. Its 6 months and we have achieved good things and its time to go full on. But, its hard time we have clarity (probably its already late) over structure and equity and hence would like your opinion on the same.

Key Points:

He brings the original idea. I am being paid around 50% market salary and not investing any money (although i offered going without salary for few months and put some money which he said was not needed). He has the core domain expertise and around 10 years of experience whereas I have around 3 years of experience around online mktg, tech and product development and I am good at getting things done so can add good value to operations which is a complimentary skill to his skills. I *worked full time for six months whereas he worked part time during this time. *He is investing little personal savings and we plan to bootstrap and pay the bills via some workshops etc. and grow organically and later go for funding. Have been here from Day 1 while the idea was on paper.

The term core team member was always used to describe my association but I still don't have an answer to what that means: Should I be treated as a Co-Founder or First Employee ? What would be a fair Equity distribution ? Also I didn't get clear answer to these questions over last 6 months as they were always abstract like "Core Team Member", "Fair Equity" etc and I had certain expectations in mind and seems difficult to be able to accept sth drastically different from my expectations.

Co-Founder Equity Founders Agreement

asked Mar 31 '12 at 04:30
Blank
Roby
11 points

2 Answers


2

Roby, it is time you sat down with your ex-boss and had a heart to heart talk. The outcome of this should be everything laid out in writing in a fashion you can clearly understand. If he is unwilling to do this, then you should definitely think twice about proceeding as you are.

As for titles and labels, they are pretty much meaningless. It is the money that counts. As they say:

"You can call me anything you'd like, just don't call me late to
dinner."

If you were going for a job interview would you accept a lower salary just because it came with a better title? I hope not!

It is extremely hard to know what any particular start-up is worth, or even if it will be successful. Everyone wants to be the next Facebook and many experimenters think their new ventures are worth millions before they even make the first sale. You will need to decide for yourself what kind of deal is acceptable to you. Keep in mind that experience and learning can be valuable even if you end up moving on to something else.

What you should not accept is vague promises and hand waving. Everyone has the right to be treated in an honest and straightforward manner.

answered Mar 31 '12 at 06:14
Blank
Jonny Boats
4,848 points
  • Thanks a lot Jonny, makes lot of sense to me. Will have a discussion and should have decision by next week. – Roby 8 years ago

0

6 months is too long. I always advise to wait no longer than 1 month before having that discussion.

However, it looks like you have been paid for 6 months, so your situation is not so bad. It wasn't a complete rip-off.

The question always goes back to how critical you are: could you be replaced easily, and the founder could just pay someone else with the same cash you are getting right now? Then your situation is not good, and you should be treated like a first employee, with 0.5% to 5% of equity. If you are the heart and soul of the company, and you can't imagine it continuing without you, then you sound like a 50/50 shareholder.

answered Mar 31 '12 at 07:29
Blank
Alain Raynaud
10,927 points
  • Thanks a lot Alan, I have been insisting on solving this from day 1. Even I have been thinking on similar lines that what value do we see me adding to the venture and is it more than just my skills. If he feels not then I should be treated as a employee but then in that case I don't think I would like to be part of the venture n probably do sth else. – Roby 8 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 Equity Founders Agreement