

Co-founder or employee? - Steve0

I'm working on a startup which connects customers to providers. The site is aimed at a specific niche.<p>Everything is sort of planned/worked out. I'm already in the coding stage. For this I could use some help (I suppose), but I'll probably will be able to manage by myself.<p>I told a friend of mine (who is a great coder) the concept and the mockups and he thinks it's a great idea. Even more, he wants to help as a co-founder.
The code written for the site will be of higher quality and less 'hacked together' than when I would do it alone.<p>This is the dilemma: I don't want to split 50/50 just yet. However, I would like his input. I'm able to pay him for a bit of work, on the difficult parts of the site. 
Also an option would be to pay him a lower salary upfront and a small portion of shares if the site takes off.<p>What would you do in a situation like this? Or have you been already involved in this scenario? For who have already 'startupped', is it possible to pull it off as a one-man show, or am I stupid to even consider this?
======
wheels
I think the right questions is, "Why don't you want to give up shares?" If
it's because you're worried about giving up equity, get over it. If it's
because you don't trust the guy's judgement, then it might be more reasonable.

Another thing is that you don't have to have a 50/50 split to be co-founders.
If you've got a 10+% stake in a company and come in pre-money, I'd consider
that a co-founder.

If you're just worried about giving up equity, you'll need to break yourself
of that. It'll kick you in the ass later on dealing with additional people
coming on or when talking to investors. You'd be much better off building a
team with "skin in the game". Just set out a vesting schedule with a 1 year
cliff or something so that if somebody doesn't fit that there's a period of
time where that can be evaluated. Be straight-up with them that that's
happening.

------
brandon272
To boil down some of the advice I've seen, follow this rule of thumb:

Make him a co-founder if his skills, motivation and interest in the company
merit him being a co-founder, but don't deny him the opportunity out of greed.

Having a co-founder to share in the risk and reward of a company makes the
process of building the company a lot easier. Would you rather own 50% of a
growing, successful company, or 100% of a company that never left the ground?

------
bena
Don't be Jimbo Wales. If you really want/need his help for the "difficult
parts of the site", then treat him fairly and make him a co-founder.

~~~
matt1
What's his story?

I tried Googling it, but it's hard to sift through all the fluff.

~~~
friedbaloney
Created wikipedia.

From his wikipedia entry: "Writer Rogers Cadenhead drew attention to logs
showing that in his edits to the page, Wales had removed references to Sanger
as the co-founder of Wikipedia."

~~~
ig1
I was involved with wikipedia at the time of creation (and the whole gnupedia
vs nupedia debate), and Jimbo was the driving force. Larry undoubtedly played
a major role as editor-in-chief but from the very beginning it was clear Larry
was subordinate to Jimbo (although that doesn't necessarily mean he wasn't a
co-founder of sorts).

------
brk
You are starting a business, and in many ways this guy has the ability to
positively or negative affect the outcome of your business.

You need to assess, whether on your own or through conversations with him,
where he fits into the grand scheme of things.

Employees carry out orders and implement code to a product spec

Co-Founders contribute business and product knowledge and opinion, on top of
their "employee" duties.

Anything and everything is possible. Successful startups (like the previous
fuckedcompany.com) have been built with just 1 guy acting as CEO, Janitor and
Chief Coder. Others have been built with 1 founder and a few employees, and
others with 2,3,4 or more co-founders.

At some point you'll probably want a co-founder. Both to bounce ideas off of
and to give credibility to the overall business. While you're in the
garage/basement phase this is not usually your prime concern. It's good to let
things just "happen" for a little while until you find your ultimate
direction.

For your specific case, given the limited details here, I would probably pay
your friend a fair rate to act as a consultant advisor/coder. See what
develops and if you feel he is of co-founder quality for this specific
project. Like anything there is a tradeoff, and the tradeoff here is that if
you later decide to make him an official co-founder, it will have come at the
expense of his consulting salary.

------
jyothi

        > am I stupid to even consider this?
    

I think few months down the line you would feel stupid yourself for not having
got him as a cofounder. Launch it together, aim for a higher value such that
your 50% means more than the 100% you would own otherwise.

~~~
midnightmonster
Yeah, you (OP) are probably stupid to try to do it on your own if you have a
capable cofounder readily available. I'm on my own, and if I knew someone who
was interested and whose skills and character I could trust, I'd jump at the
chance to bring him/her on.

------
pchristensen
Everything I've heard says that 50/50 (or actually any allocation that gives
away 100% up front) is a bad idea. Let "the company" keep some or most until
you have something worth dividing up. Give your self 25, give him 25, and
parcel the other 50% out over then next 6 months, year, or however long it
takes to make those percentage points worth something.

~~~
emmett
That's 50/50 "with vesting", and yes vesting is a good idea.

------
geebee
Sounds like you need to decide what you need from your buddy. Do you see him
as a way to get some high quality development done in a cash-poor situation,
or do you see him as someone who would contribute in every possible way to the
success of your startup?

If it's the first, then you're using equity as a way of paying him. You're
essentially saying: "Your work would normally be worth $20,000 to me. However,
I don't have the money. So I'd like to pay you in shares that have a chance at
being worth a great deal more than $20,000 down the line."

In the second case, you're saying "I need a partner, especially one with a
technical background. I see you as having the ability to make this venture a
success, in ways I can't even anticipate right now. This is a very early stage
startup, with all kinds of risk. This thing will consume your life for at
least a few years, so you'd be coming in as a cofounder".

It can be pretty difficult to get well employed, well paid programmers to take
_either_ deal you're offering, but I'd say the second is probably the best bet
in terms of getting him to agree to come on board. Mainly because working
equity usually means you end up working for nothing.

However, I would also caution you against making someone a cofounder simply
because you need his tech skills and can't afford to pay him. He's a buddy,
that's great. But you need to have faith in this guy's abilities as a
cofounder.

------
ErrantX
Whichever way you go make sure you write out and sign an agreement your both
happy with that sets out what each person is supposed to do, who the work
belongs to, and what rewards/position/monies each person would be entitled to
(and so on).

Check it with a lawyer, sign it and then leave it with the lawyer.

The guy might be a friend but it helps stops disputes occuring in the future
:D (i.e. you both know where you stand).

EDIT: have you already formed the company or not? I couldn't quite make that
out.

~~~
Steve0
Thanks for your reply.

No, I haven't formed a new company yet. I do have a business permit for my
one-man company.

------
markessien
Select him as a co-founder if

1\. He will stay motivated, even when you run of cash and motivation.

2\. He is in it for more than the money and the friendship, but because he
actually believes in the idea

3\. When there is a disagreement, he will allow you to make the final
decision, and not decide to leave

Don't go 50-50, because this guy may be a good coder, but he's just a coder.
The ideas are yours. Later you may bring in 2-3 other people, what percentage
do they get then?

I think your idea of a salary at the start + 10% to 15% is more reasonable.
Give him an option to get to 20% if he does some particular stuff.

But take him on! A one man show is really tough, particular later when
marketing becomes much more important. You'll need someone hacking away while
you market.

~~~
fallentimes
But how much is the idea worth without execution? And if he's a great coder he
can help make the idea happen.

~~~
markessien
An idea is not worth much without execution, but the actual code-writing is a
little part of the execution. If one has a bit of an ability to code and some
money, then one can 'manage' the development using cheap freelancers.

Giving up 50% to a guy who just will do the coding at the start is too much.
But if he is good at marketing, analysis, idea bringing and all the other
stuff that take a company over the first year, then one can give him 50.

------
jstride
Personally I would go with a co-founder if you feel you can work together. I
started my company on my own and it is the one thing I would do differently if
I were to do it again.

As people have said, having somebody to bounce ideas etc. off is hugely
valuable.

------
DaniFong
My false positive rate for 'cofounder material,' to date, is nearly 80%. Keep
that in mind when you consider splitting 50/50.

You almost certainly should vest. But a better way is to run a little trial
period of three months or so, maybe with a little bit of vesting, and then
negotiate. He should be happy to demonstrate his worth. If he can't you'll
have to make the hard decision, but at least it will be based on something.

Keep in mind that friendship does not, in my experience, really survive a
broken business relationship, unless you both go down with the ship. Even if
the split is respectful and equitable.

------
sonink
Take him as a co-founder - no doubt about it. Give him a 50/50 stake with
vesting. It is best if you also clear leadership issues and decide on a CEO.

The question that you should really be worried about is how to make it work
(read manage conflict) between the two of you. Consider him your startups
greatest opportunity as well as the biggest challenge.

Apart from the reasons others have already mentioned for having a co-founder -
You need a co-founder not just to save your startup but more importantly and
more frequently to save you from your startup.

------
lanceweatherby
I would not just give me 50% for walking in the door. I wrote a long article
addressing this a short time back: <http://bit.ly/StartupEquity>

------
swombat
One piece of advice: Whichever option you decide to go with, don't let any
"unspoken agreements" go unspoken. If you take him on as a cofounder, for
instance, you both need to be clear on what happens if either of you (yes, you
included - I've had a start-up where the main founder bailed out...) changes
his mind at points 1, 2 and 3 and get that down in writing ahead of time.

When the shit hits the fan it will be too late to have a friendly, productive
discussion.

------
ajju
Use vesting which will allow you to hire him now without writing over a
significant chunk of equity to him before he has proven himself. In a scenario
where two people are "equals" (more or less), vesting should usually be done
for both. However it seems like you are (or want to be) the "employer" or at
least the "senior" founder here and he is the "employee". And if he agrees to
this take on things, he may be agreeable to doing vesting for his share alone.

------
ojbyrne
A second person in a startup adds hugely to the equation - That's why
Ycombinator generally requires 2 or more founders. The ability to bounce ideas
off each other just adds greatly to the equation. There's no reason a split
has to be 50/50, and paying a small salary and a small portion of shares is a
good option. But, from past experience, and echoing what others have said, see
a lawyer, and furthermore, insist that your co-founder see a different lawyer.

~~~
davidw
Wouldn't it make sense to kind of decide what you want, in English, and then
go to the same lawyer to get help drafting it, and thinking of any details
that need taking care of? Going to two lawyers sounds like a good way for the
two lawyers to go back and forth for a while, driving up the price quite a
bit.

~~~
ojbyrne
I know lawyers cost a lot, but "driving up the price" really means
"representing your interests." I've come to regret skimping on a lawyer quite
a bit.

------
braindead_in
I'm right now doing a one person startup (more like an micro ISV). The best
part is you have complete freedom. If you know you are right, then you dont
have anyone to convince or talk others through it. The downside is, being
absolutely sure that one is right is tough. Having someone whom you can bounce
your ideas with is really nice. But yeah, you dont have anyone to share the
highs and the lows with.

------
epi0Bauqu
Yes, it's possible. But you need the right personality for it, e.g. a lot of
self-motivation and critical thinking.

Most people, even most entrepreneurs, don't have the right personality for it.
And so it gets a bad rap. But if you do, you can clearly make more money in
the long run by not giving up as much equity.

------
fallentimes
If he's a good friend, a great coder and he's willing to work as hard as you
are, I'd go for the 50/50 split.

If that's not the case, I don't really know what you should do. Few things are
worse than having one cofounder work harder than the other cofounder despite
an equal equity split.

------
Brushfire
Just because someone is a cofounder, doesnt mean they need to own an equal
share... Try an 80/20 split or something. Dont expect him to pony up more than
20% of the expenses though either.

------
mkull
my gut is that you make him a co-founder with a strict (and very clear-get
lawyer help!) vesting schedule

he also needs to have skin in the game, which means a monetary investment if
you have invested monetarily, and he needs to be full-time if you are full-
time (as I hope you are!)

------
Steve0
Thanks everyone for your comments, you've given me lots to think and talk
about with my friend. Cheers!

