

Ask HN: What is good advice going forward in my negotiations? - VB64

Currently I am one of three young cofounders (CEO, developer, marketing/customer development). We have been working with an outsourced developer for a bit of time now and he has been very involved in the business and has been acting as an advisor.
Due to the three of us thinking he would be a good fit on the team  and wanting to get more code pushed quickly, we have offered him the  option to join us as a cofounder. He is much more senior than us and  adds a lot of credibility to the team, and he has many connections that  have proven useful many times. He was the CTO of another startup years ago and has been advising many other companies since then while coding.  He has agreed to join us but we are having a bit of difficulty on the  terms of it.
He would like 24% of the company vested over two years with a six  month cliff, and he would work around 30 hours a week or more probably on  it. (The three of us are vested over 4 years with a one year cliff and  are fulltime and own equal amounts of the company) He would have to work  on other projects, however, since he has a lot of debt to pay (kids in college, mortgage, medical bills, etc). Basically, he wants 1%/month for  the next two years and he is pretty set on that. I would much rather have him vest over three years at the least, and some investor friends of mine have agreed with this. They think an investor would want him to vest a bit longer to ensure he stays. We were thinking of maybe doing a deferred salary contract to get him to agree  to three years and 20% once we are able to raise a seed round. At the moment we don't have the type of cash to pay him his market rates and we can only give him equity and the promise of a small deferred salary/incentive bonus later on. Once we raise a seed round we could pay him a small salary and he could work more on this.
How should I continue the discussion with him and is what he is asking for fair to us and him? Will this cause headaches down the road?
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robertlaing
You have a number of negotiation points here: \- Percentage ownership \-
Vesting length \- Vesting cliff \- Hours you expect him to work \- Cash salary
\- Bonus \- Title

And some questions to ask yourselves: \- How long have you been working on the
project before he got involved? \- How much ownership in the idea/IP does he
have? \- Do you all have the same definition of success? (e.g. does he want a
long-term business or an acquisition? what does a 'successful exit' look like
for you all) \- Is this going to be his only job or is he consulting on the
side?

When you're all very clear about the above, it will be easier to come to a
reasonable agreement. The "What does success look like?" question is the most
important, and something that many startup founders are afraid to ask until
it's too late.

A 2-year vesting schedule is not insane, but it begs the question of whether
the guy thinks he is key to the business. It is certainly something that seed
or A-round investors will want to increase if he is vital, and if he's not
vital he shouldn't get 24% :)

Good luck.

~~~
VB64
He was involved as an outsourced contractor very early in the process. He
doesn't have any IP.

We all have the same definition of success of the company being a profitable
business.

Assuming he goes to three years at least, with 20% equity, and an incentive
bonus/deferred salary of around 30k is that fair to us and him, in your
opinion?

