65% of startups fail due to co-founder conflict, according to Harvard professor Noam Wasserman. To help you avoid conflict, we’ll give you the tools you need to determine the right equity split, including the framework to measure contributions, case studies and more.
Another one to help (free) is: http://foundrs.com/
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.
Great venture Nerea. Design and Operation aren't exclusive of each other. I
do understand that you are working full time for 8 to 10 hours a day. You
might feel that you need a major stake in it. It would good if you can get
your friend's opinion on the percentage of a stake. If you feel that he is
asking too much, you can talk of it. Be generous if he is asking
less because it's very natural to work passionately for someone who is
Good Luck Nerea.
I do understand Nerea. It is always good to talk and interact. Because lot
of misunderstandings and perceptions can be cleared through an interaction.
I would suggest not to delay your interaction because the more it gets
delayed, the more difficult it would be for you to keep on trusting him.
Good Luck Nerea.
@ Peter, the problem with looking only at "outputs" rather "inputs" is that this situation as is almost always the case for equity splits/options, is that equity discussions are forward looking rather than backward looking. If Nerea can wait until after this potential partner has actually grown the business due to his participation that would be ideal for Nerea - like paying sales people for performance. But Nerea wants to have the discussion now - trying to anticipate the value he will bring to the venture in the future. If she can convince him to wait until he's proven his value then more power to her.