Partnership - Investing time and not cash - What equity should I expect?


1

Hoping someone can comment or help.

I have been invited to join in partnership with two others to start a new company which is entirely there idea. I am not expected to make any cash investment.

They want me to take full responsibility for building the business and making it a success - eg: 100% of my time and sweat.

On the partners - one will invest cash only and a very very small amount of time and the other will invest cash and a small amount of time. Effectively they are both too busy with other commitments to be significantly involved. Both will contribute good contacts etc.

In return for this they have said that they will make me a partner and pay me a reasonable salary (i.e lower but not significantly lower than my current market worth)

In this kind of situation what might they offer? What would be considered fair? I know this is probably a very difficult question to answer !! but any thoughts are appreciated.

Thank-you..

Equity Startup Costs

asked Jul 5 '12 at 05:42
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Col
6 points

1 Answer


1

I think you should determine how much (in money) your time job is. Then determine how much is the value of your partners time and then the difficult items: how much is the value of their networking (good contacts)?, intellectual property (if any)?, marketing capabilities?

As I see, initially you gonna put most of the effort (and take most of the risk), therefore you should get most of the utilities in the first periods (months?). In later periods the utilities should adjust to reach an equilibrated level, if your partners contributions increase and have a reasonable impact, of course.

IMHO.

answered Jul 5 '12 at 12:10
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Nestor Sanchez A
690 points

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Equity Startup Costs