

Ask HN: What's fair equity for cofounder without day-to-day responsibilities? - cofounder

As part of a fun side project my friend as I accidentally invented a product that has become successful in a niche hardware market. My partner, who is in a more fortunate financial situation than myself, was able to work full-time on this from the beginning with little&#x2F;no pay. I needed my day job so I spent nights&#x2F;weekends on this. For many many months I was doing 20-30 hrs&#x2F;week at the startup on top of the day job. He was working at the startup during the day as well as nights&#x2F;weekends with me so he was definitely working more than me.<p>We’ve since rented a building and hired employees. While we&#x27;re barely sustainable at this point, if I went full-time I would be making 1&#x2F;3 of what I make now and I would lose all benefits. I truly LOVE my day job and have realized that I’m not passionate about working at the startup. It&#x27;s successful side tangent in an arena we both know little about. I would also have no work&#x2F;life balance. I&#x27;ve also realized that I don&#x27;t work very well in business relationship dynamic that he and I have. He wants to pursue it, I no longer want day-to-day responsibility.<p>Obviously, a 50&#x2F;50 split isn&#x27;t fair any longer. We renegotiated our split based on amount of time spent working on the project-which I thought was a little dubious given the amount of time, money, hundreds of hours of design&#x2F;engineering work (both our names are on the patent), and the fact that it took us both to start up. Either way, I obliged now own a little less than 10%.<p>He&#x27;s now seeking outside investment and asked me to sell all&#x2F;most of my shares back to him (at a VERY low valuation) because he thinks it’s unattractive to potential investors to see a large stakeholder who isn’t full-time.<p>Questions:<p>1. Does he have a legitimate concern about the large stakeholder issue? I feel like I&#x27;ve already let go of too much.<p>2. If so, what percentage would be considered &quot;small enough&quot;? I definitely don&#x27;t want to throw away all my shares.<p>Thanks!
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alain94040
You don't intend to work on this startup full-time? I'd say the current deal
you have (10% for you, presumably 90% for the full time co-founder) sounds
fair to me.

I have advised many founders in how to split equity. Think of it this way: if
you had started at 50/50 each with the standard vesting, and you had quit
early on (6 months to a year later), your 50% would turn into 6.25% to 12%.
Pretty much exactly where you are now.

I don't think you need to re-negotiate. Once your founder raises more money,
you'll soon be diluted closer to 5%. Nothing that an outside investor would
worry much about, unless they are not seasoned investors.

Don't change anything.

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sidarok
He has no legitimate concern. You have already come down to a very fair
percentage, IMHO. 10% with no protection is fair, his will to throw you off
the company with a very low evaluation is opportunistic.

Serious investors will look at the potential of the company and the potential
of their return, the amount of time another shareholder spends is secondary to
it.

Good luck!

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eonw
i dont think he has a legitimate concern at all, tell him your stake came from
your investment of time, energy and ideas. if he wants to take that he should
offer fair compensation or sell his shares. from his logic, why should someone
providing capital get any stake? they arent working day to day either.

from an investor point of view, i wouldnt see it as a problem at all.

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sharemywin
if you care about keeping your equity you need to get a lawyer to look over
anything you sign.

