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Senior Quantitative Analyst | Data Scientist
October 27th, 2015
First, take a look at the fantastic The Founder's Dilemmas, by HBS Prof.
Basically, the full-time/part-time split is going to be very difficult to
sustain. It will be hard to balance time vs. contribution and translate
those into equity stakes.
You should start with you owning the entire thing, and give your part-time
helper equity as time goes on, based on hitting some milestones and
time-commitment requirements. That way, you make sure he stays engaged.
Don't forget that equity stakes are almost always re-negotiated once VC's
start to take control of the company. That means that you should both
include in your contracts willingness to re-negotiate stakes if required
if he literally wants to be majority, as in more than you, that's so wildly unrealistic that you should cut bait right away. If his assumption is 50/50, as the above reasons indicate, that should be modified by any of those models mentioned (eg Wasserman), with things like vesting cliffs and such as well. Is he putting up the cash for any of your expenses (server costs, business cards and brochures, etc.), or is that all you as well? Having 'a partner' who you know is committed, will share the stress and responsibility and stay up all night making presentations happen, updating the website, delivering for your first customers... is verrrrrry important, but it doesn't automatically mean 50/50.
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October 27th, 2015
I recently read a very interesting book that addresses this very question. It defines what seems like a very sensible method of sharing equity based on actual contributions.
He needs to work now and pay his bills, so he works part time with this company. When our company launches, he said he wants to give it his all and work full time there, but will need a salary to pay his bills.
How long has he been working and what was your agreement for the time which he has already worked? It sounds like there are two issues here. The compensation (equity or cash) for the time he has already put in and the equity moving forward. For the equity split moving forward, the factors you mention are exactly right. Look at what each bring to the table in terms of risk, time, and expertise. If he wants to take less risk by not committing full time or quitting his other job, then you should have more equity. Hopefully, compensation or consideration for the time he has already put in has already been worked out.
sounds like you two are pretty far apart if he is part time and can't contribute more than part time until after you launch/raise money and he is expecting majority ownership/voting. Sounds like he sees his contribution as more valuable (need for majority equity and/or voting) even if if/when you both are contributing full time. The words you used in your question/statement indicate that you don't quite see him as an equal partner EVEN IF/WHEN he is contributing full time as you are. That's a wide gap to bridge. You need to decide if you are prepared to walk away and how that might work if you did (legal issues, schedule set backs, time to find/recruit another partner, etc.). Not saying you should, but you need to go through the calculus as its seems to me you two are far apart. that said, A dynamic equity split like Dennis suggests sounds great, but the devil is in the details - it is something to consider. The challenge, even with a 'dynamic split' is that you still need to agree on a 'currency' (typically hours) and how that currency is valued (what is the value of an hour of your time and an hour of his time and an hour of time for each contributor). then you need to agree on a method to track/account for these hours. Not as trivial as it sounds. This is where you will stat to test your partnership/relationship/flexibility/negotiating skills, etc.