'... take more of a back seat in return for less equity but also less initial investment ...'
Bummer, but all is not lost. This is actually a good thing to happen now, rather than later. How much investment? A lot? Can you do without it? Can you repay them back? Is it worth keeping someone on who doesn't really want to contribute but still wants some control?
'... we have been working on the project for a few months ...'
This is good. The longer you work on the project the more investment is required (time, money and effort). It's also good to weed out early someone who is not willing to go the full journey. So in this respect you are lucky. You haven't created a lot of value that has to be split up or given a dollar value.
'... What to do when your co-founder takes a backseat? ...'
Use the ejector button?
'... What do you reckon I should do? get another co-founder? ...'
Find another co-founder. Work out if you need your ex-founders investment, skills at a later date. If not re-pay the investment. Try to determine why the co-founder has left? Is it because of lack of interest, skill, commitment? Is it they found a better offer?
I admit it s good thing to happen now, I am not bitter in any way. i am almost glad.
1) The investment is not a lot in monetary value but I couldn't get started without it, in that respect it is "worth it" I could probably pay the person back if the company made even a little money. The person is still involved in the sense that I could ask for help and ideas etc but i would not expect proactive participation.
2) You are right, almost no value has been created as of yet, so if we were to shut up shop tomorrow, he would have lost out.
3) I think the ejector button would be too strong, the advice etc this person has given and i am sure will give will be invaluable. however, i would not expect a LOT of work in terms of execution. But then execution is what matters. If the company did well I believe this person would join. But i would not expect him to leave his job in uncertainty.
4) He left because he is just not THAT interested in Web Apps. No interest = no determination and no determination = no startup in all honesty. Maybe I should have seen this coming. I was visibly more enthusiastic than him.
I think I will push forward until launch (mid-summer) on my own but will look out for another co-founder. If anything this situation has made me more determined to succeed. I am reminded of Evan Williams at Blogger!
'... If the company did well I believe this person would join. But i would not expect him to leave his job in uncertainty. ...'
If this is the case I'd repay money and take the person on as an early employee but not a co-founder. This is okay. You know the person. But the fact is they did not think the idea, concept or work compelling enough to quit. Also don't be fooled into thinking early investment is some sort of ownership.
'... I think the ejector button would be too strong ...'
my co-founder has decided to take more of a back seat in return for less equity but also less initial investment. we have been working on the project for a few months. i think he realised he is not THAT into internet businesses/ideas/projects. What do you reckon I should do? get another co-founder?
Take the time to discuss in detail the reasons for his loss of interest. There may be some good ideas there. I'm not suggesting trying to convince him to stay, but it's never too late to change focus in subtle ways.
Should you replace the loss of the single most vital resource you have as a startup? I think so. Unless you've got the energy and motivation to make up for it yourself.
i have the confidence and motivation to go it alone, however, i think startups work better with twos. most of the initial work is done. but post launch a one man band may be a little too much!
Better with two if both are dedicated. Otherwise the second is a negative. You need a second to keep you motivated and moving when things on your plate slow down or get painful. A second that sits most of the process out is not part of that equation.
If you need their investment, negotiate based on it as an early investment rather than as a partnership (a partner gets lots of sweat equity and a pittance based on some small amount of cash invested--equity bought with cash is usually much smaller and on less favorable terms in the sense that small sums do not bring seats on the board, etc.). But you probably don't need that money. Buy back their share (if you've already incorporated and issued shares), and call it a friendship rather than a business partnership. You do not want to deal with these questions down the road when the company has assets.
Can I borrow your co-founder? I need another body to apply to YC. I don't need anyone else to do the work, just someone whose presence will tick YC's boxes.
YC will probably see through that, unless your faux-founder has a CS degree from one of the top departments, or some equally amazing credential. You might just apply and stipulate that you're looking for a co-founder, rather than go with an impostor.
You probably don't realize it, but that's a rather patronizing attitude. Not everyone works the same, and we don't all need co-founders to "to cheer [us] up when things go wrong."
Right, and a lot of people lead quite functional lives with just one leg. But I don't think anyone chooses that route if they could help it.
I don't mean to be patronizing (I don't see how it remotely is). Going at something with a partner isn't a requirement for success, nor is it only for "cheering up." Investors like to invest to successful ventures, and a business partner is a nice assurance for them.
But go ahead and show 'em, you rebel without a cause. ;)
Bummer, but all is not lost. This is actually a good thing to happen now, rather than later. How much investment? A lot? Can you do without it? Can you repay them back? Is it worth keeping someone on who doesn't really want to contribute but still wants some control?
'... we have been working on the project for a few months ...'
This is good. The longer you work on the project the more investment is required (time, money and effort). It's also good to weed out early someone who is not willing to go the full journey. So in this respect you are lucky. You haven't created a lot of value that has to be split up or given a dollar value.
'... What to do when your co-founder takes a backseat? ...'
Use the ejector button?
'... What do you reckon I should do? get another co-founder? ...'
Find another co-founder. Work out if you need your ex-founders investment, skills at a later date. If not re-pay the investment. Try to determine why the co-founder has left? Is it because of lack of interest, skill, commitment? Is it they found a better offer?