Just say "partial ownership" -- they may have just been objecting to the term. If they don't care about that, then you're right, they're not right for a startup. As just a job, it's a pretty horrible job: long hours, high stress, low job security; you have to want to be a part of what's being created.
Still, I think the outcome proves that they're not ready or not willing to go through the necessary steps to spin up a startup.