
Is my friend unreasonable? - master54

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npk
This kind of question is difficult for any of us to answer. First of all, this
is a subject I have no experience in, so I can't comment on how "fair" your
numbers are. I'll only offer general advice about negotiations.

You and your friend are about to form a business relationship. Therefor:
_really_ try to understand his opinion of fair. If both of you can not be
happy, then forget it and move on. Does he really offer something worth 50% of
your company? It seems to me that high-tech is a very competitive industry, if
you have something good, typically, you will find investors.

Personally, I do not like rewarding people based on the number of VC dollars
brought in. Reward him for actual work. Say that he will be paid X
shares/hour, plus some start-up bonus. BTW - Rewarding people for sales, is a
different story.

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master54
I created a 7 months old startup that is growing well. Not fantastic but ok.
Now i'm looking for someone to be the CEO.

He wants 50% equity, if he could get VC funding based on a high company
valuation, say USD 20 million (which i think is really high for my startup).
If he can't reach the target, then he'll settle for less.

Is this fair? I put in the hard work for this past 7 month. All the idea is
mine. now he wants to be on the same level as me, just because he can get
funding based on high valuation.

If not, how much do you think he should get. Considering that he's being hired
in an important position - CEO.

How much did Pierre Omidyar give Jeff Skoll?

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master54
Ok. This is what i have in mind. Do comment. The min. he will get is 10% and
the max is 40%. Starting from 10%, he get an additional 1% for every $1m
increase in company valuation during the funding.

So if the valuation is 30m or more, he get 10% + 30% = 40% If valuation is
20m, he get 10% + 20% = 30%

Fair?

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juwo
I dont know about actual numbers but here is what I have in mind when I talk
to potential cofounders: 1) trial period of min. 3 months

2) vest the other founder's equity. Dont just give him 10%. Make it 10% after
one full year - or 0% for any less. How do you know whether he is working on
your stuff fulltime?

3) Dont listen to empty promises. If he wants more, make him buy the equity.
Say, value your company now at $200K. Then let him give you $100K cash if he
wants 50%.

4) Ascertian a value for the work you have already put in.

I may be wrong, but this is my opinion.

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master54
Oh. He'll be paying for the equity. So assuming i value my company at 100k
now, he'll pay 40k for 40% equity now.

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juwo
Does he have startup experience? if he has so much confidence to pay cash now,
you are lucky!

It sounds like you probably have a killer app. Can you tell us what it is?

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master54
I was thinking of 60-40 or 70-30

