Ask HN: equity split (engineer founder == ceo)

[jfdi]

Note: despite being a longer post, this is a pick your own ending style post with some clear choices @ the end. Your thoughts/feedback welcome across any of the content here-in...

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I'm the technical founder, and the business guy. I enthusiastically & regularly toil - investing my time almost exclusively on the product. The product and the company are going to be blockbusters.

I feel like I'm making decent progress but could be moving [faster, better, stronger] if there was a way to divide and conquer, and would love a brilliant mind to brainstorm with --- i.e., co-founder.

I don't have any technical hackers in my network, and the guys I'd like to meet probably aren't going to networking events. So I kept the process casual and met with the best people in their respective fields, landed on one recent potential person...

I recently met with a co-founder-worthy (assume true) person, who's a 'business guy'. This person is talented w/marketing, and a good guy - thru separate avenues we both had landed at the same conclusion and were hoping to start companies in the same space. This guy works currently at a company with lots of awesome engineers, and is friends with some of them (as much friends as an engineer and marketer could be) and so his main value add for me was effectively buying access to the engineers in his network.

To take the potential fit further, we filled in Dan Shapiro's equity calculator together (and some others) and that's where I am at now, and looking for some feedback from you guys...

Maybe it's a function of crappy calculators, maybe my expectations are way off, the calculators spit out 55% me, 45% him, including the fact that I'm building the product myself, and we were basically evenly matched on other categories. It left me feeling confused, and the potential co-founder with the sense that it was fair.

The potential co-founder talked to his MBA buddies who think 30% is minimum for being involved. Even if we did Dan's calculator wrong, I still feel like 30% is absurd for a business-only hustler in the early stages (pre product) here. If we need an amazing hustler business person downstream for certain things, what prevents us from hiring that? Is it really worth all this, to just get access to the engineers in his network?

Wanted to get some HN feedback & suggestions on next steps, what are your thoughts?

  1. Part ways amicably with potential co-founder
  2. Partner up, much lower share for him
  3. Partner up, that 55/45 split sounds about right
  4. Something different?

For #2 & #3, was thinking about using vesting terms as a way to have him be accountable for bringing the right engineering candidates into the hiring/3rd-founder funnel, know of a better way?

Thank you for taking the time to read this!

[ohashi]

So you want someone to cofound a company for less than 30% with 2 founders? I wouldn't partner with you if that was your mindset. You're basically saying your time is worth 3x my time and we should work full time on this. With that sort of disparity at the beginning and a glimpse into your mindset, I would get out. Not worth the hassle.

Of course there could be caveats like he isn't working full time or you've already built the product or something to skew it that dramatically.

I think the problem here is you honestly. If you're unhappy with the equity distribution and that's all that is on your mind instead of building a good team to bring your product to market and make it successful, you're doomed anyways. Option 1 is always on the table, option 2 won't happen or lead to a good ending if your partner feels cheated from the start (assuming he would even go for it) and option 3, you're the obstacle, can you get around yourself? Option 4, you compromise until you both are happy.

[jfdi → ohashi]

Interesting take, thanks for taking the time to post it.

Maybe it is me, I'm trying to sort that out. We would both be part time, however I'm building the product from scratch - so my hours/week is about 30-40 (with another full time job), whereas he might find a way to fill that much time but it's highly doubtable given no product touch. He'd be researching ways to market it and really come into his own once we have shipped, but then again, so would I as the company's CEO. I've already built the alpha solo, it's pretty cool but has a way to go yet until it's really shippable.

I see the value of the marketing co-founder in the mid-long term, but more as a glue and access to his network of engineers. In the immediate term, the term that makes or breaks the company, we either build the product and ship or we don't, and his role in that is limited to giving and perhaps managing feedback.

That's the rub for me - 45% (or 30%) at this point is challenging for me to get comfortable with...

After reading this extra context, you still think I need to check myself here?

Again, thanks.

[ohashi → jfdi]

I get the distinct impression you don't want a cofounder. You seem keen on having engineers, not this guy. You imagine this guy as a conduit to engineers. You don't think he's going to add value anytime soon. I don't think you're going to be able to work around these issues personally. You won't be happy with what he's bringing to the table and I suspect he will be unhappy given your perception of him.

I don't think there is a right or wrong here, it's going to be about what you're comfortable with and what he is comfortable with and finding a balance if he's going to cofound with you. To me it sounds more like you want another engineer or two, why not just skip business person and get them as cofounders. I know you mentioned difficulty finding them, but partnering with someone who doesn't help you (in reality or in your head) isn't a step forward.

[sawyer → jfdi]

Yeah, it sounds to me like this person isn't the right fit for you. My initial reaction to the fact that you've already gotten the project rolling is that you'll want more than a 50% share in the resulting company, but you should find someone who you want to share the other 30-40% with who will actually help bring the product to market.

If you create something people love it won't be difficult to market when the time comes.

[jaddison]

Definitely have a vesting period, otherwise the person could leave after a couple of months with n% equity having done little to help.

Vesting and conditions will set the stage for expectations in the business relationship as well as ensure responsibility and accountability.

Regarding the actual % split, iron out what needs to be done by both of you and estimate how much effort will be required. Attempt to apply a percentage on this information.

Also, note that you can always add more shares to your organization later (dilution applies), so if the situation changes, you create another million shares and revamp the vesting agreements. I think.

In other words, get legal advice!

[jfdi → jaddison]

Thanks jaddison, agree completely on the vesting notes & legal tip here.

[coryl]

I think that its concerning that you've spent this much effort into thinking about shares. The fact that you're second-guessing his contribution or value means something very bad will happen between the two of you. It also means you think you don't need him - if so, then don't partner up. If you truly wanted him as a co-founder, how could you dismiss him over 10-15% of a currently valueless startup?

Cofounding a team shouldn't be a dissection of options. It should be obvious that you haven't found the right person.

[gamechangr]

Sounds about right.