

Ask HN: As a co-founder, should development of minimum viable product be free? - supervillain

I have an agreement that states that when a working product is available, I&#x27;m entitled of shares as a co-founder, depending of how much investment we have.<p>However, due to my hopes of being compensated in the future upon creation of the product, my co-founder expects me to create the product for free for several months. Currently I have a good full-time job, a father and have a family to feed.<p>Can someone help me clear things out on my side and also that I can communicate to my co-founder.
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bbcbasic
I will echo what I heard on startupclass.samaltman.com, which I think is a
very good source of information. I suggest you watch the series.

Basically a good foundation for a startup is the initial partners (ideally 2
or 3 people) get equal equity at the beginning. Any other arrangement would
raise eyebrows as to whether all the parties are committed and trust each
other.

It sounds like you only get your shares if you work hard and you get lucky,
whereas the other people get shares by default. Also "when a working product
is available" isn't watertight and is open to interpretation.

With the limited information available I would think the best option is to
walk away. Look after your family.

\-- Disclaimer: I have no experience in working for or starting a 'startup'.

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curiousgeorge
Complex initial agreements are a bad sign and suggest a lack of proper focus
on how to achieve growth and share success. But if you are getting pushed in
this direction, make sure the same agreement (ownership reflects performance)
applies to non-technical founders as well. Document the obligations of your
cofounders while you build the product, and establish ways to determine if
they have met their goals. The point is not to be the only member of the
founding team held to performance standards.

If the company cannot move forward until a technical product exists, you are
investing in the company at a much earlier and riskier stage, since in
addition to bearing product risk (will it work) and market risk (will it
sell), you are also holding team risk (are your cofounders productive) and
legal risk (if they bail, will you be sued for salvaging your investment as
necessary).

Higher risk should translate into higher pay/equity. Don't let anyone
negotiate your ownership down on any basis other than that their own
disproportionately large contribution to the company (i.e. cash investment).

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mtmail
I've done a 50/50 (well 49.9%/50.1%) unpaid deal once with a non-technical co-
founder on a side-project. The product (website) was a key piece of course but
while I started coding I gave my co-worker tasks, too. E.g. logo design,
project plan, research.

Worked great for two months. He was waiting for a finished product but I still
gave him tasks: write complete help pages, full FAQ, marketing plan, list of
bloggers to contact after launch. I waited 6-8 weeks and got various excuses.
At that point it was better to end the deal early.

What I'm saying is: make sure the co-founder is actually putting in time.
He/she can't just wait for a (almost) finished product to sell. Basically make
him/her work hard (with goals and deadlines and everything) for your
engineering time. If he/she doesn't doesn't put in time then you might see the
same low time commitment when it comes to fund raising, marketing or PR later.

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saluki
It's typical to not receive compensation till the company is profitable and or
funded.

Typically a 50/50 split is recommended between the technical and
marketing/idea guy co-founder straight away.

You'll both have to do lots of work to make this a success.

It's risky for both of you to end up putting in a lot of work and end up with
a cofounder not holding up their end of the bargain.

I'd recommend setting up the 50/50 split up front and then have a clause that
if either of you are not actively working on building the company they
surrender 50% of your share to use that equity to plug in a new marketing/dev
person to pick up the slack.

It's all in the execution, hard work to make this a success. If you and your
co-founder don't trust each other at this point it might be a sign he'll be
hard to work with. Typically this early it's all roses and excitement. Maybe
you are just getting to know each other though. The ventures I've set off on I
typically go with a 50/50 or 51/49 split from the start.

As far as family goes. I expect you're keeping your good full time job and
doing this on nights and weekends. Make sure you document that all development
is done on your free time and that there aren't any clauses in your contract
that would lead your company to believe they own any development you do on
your own time. You don't have to alert them to what you are doing but it might
be a good time to read anything you've signed.

Remember Ideas are the easy part and make sure this is a good idea that you
want to spend a few months seeing your family less to invest your time in.

Remember keep your MVP simple, just develop the minimum amount possible so
it's providing 'value' to signups. If the two of you can manually do
steps/processes behind the scenes initially do that, automate processes later
once you're growing and scaling.

Check out StartUpsForTheRestOfUs.com lots of great information relating to
your situation and startups in general.

Good luck in 2015.

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wmf
The conventional and formal way to handle equity includes a vesting cliff and
a shotgun clause. The result would be essentially what you describe, but be
sure to have it in writing. Hire your own lawyer if necessary.

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logn
That's what I'd think.

OP, given the current plan, why not keep the copyright in your name until they
let you join the company, at which point you can assign it to the company.

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symbion
Well, if he is also working for free, then it is "reasonable". If he is not,
then why should you ? Unless the reward/risk ratio is very good for you.

