

Ask HN: Protect yourself from majority cofounder? - throwaway-fp

Regular HN user here, posting under a throwaway account.<p>I&#x27;m in talks to join a small startup as a technical cofounder.<p>I&#x27;ve never had a cofounder relationship in a business before and only worked as a solo entrepreneur and a regular employee.<p>I really believe in this startup, and it&#x27;s potential but I&#x27;m risk adverse. I will be working on the startup alongside my day job and other (mostly-passive) side projects.<p>In this case, the partner brings a lot more to the table than I do (including their audience and especially their customer base). The project will not be a success without them (but could be without myself). So, I&#x27;ll be doing a lot of up-front pre-revenue work but taking a minority ownership.<p>With that said, what steps can one take to protect themselves, as a minority owner, from a majority owner?  And what things should I look out for?  And how have others structured similar partnerships?
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jeffmould
IANAL, but here is what I would do at a minimum. First and foremost make sure
you have a shareholder agreement that clearly lays out what your role is and
what is expected of you.

It really doesn't sound like you are taking any risk (i.e. you are keeping
your job, you are going to continue to work on your own projects), so the
bigger question is how much time and value are you really adding to the
startup? You will want to be clear in your agreement what your intentions are
and how much time you are willing to devote. While telling your co-founder
that you plan to keep your job and work on other projects sounds good in
theory, when something doesn't get done or a milestone is missed, you are
going to be the easy target for that failure.

Startups are risk inherent, and if you don't have any tolerance for risk they
definitely are not for you. Animosity can fester when one founder is taking
all the risk and the others are just along for the ride.

From your side things you may want to clarify are what your ownership
percentage is, what the vesting is going to be, are you getting paid and if so
how much, what your duties are, etc.. After you have a shareholder agreement
drawn up, it is better to spend a couple hundred dollars to have your own
attorney review it. Those dollars spent now could save you aggravation or even
costly expenses down the road.

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throwaway-fp
Sorry, one detail I should have added: the other founder is also risk-adverse
and is keeping her day job as well.

We've both taken on side-businesses before, and both solo. And both, while
working a regular day job.

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jeffmould
That makes a difference and is good. I would still get a clear shareholder
agreement in place outlining expectations and roles. It can avoid confusion
down the road and help prevent potential problems before they arise.

