Equity contracts · Equity distribution

Co-founders participation and equity

Pablo Damian Filmmaker and producer, inventor & problem solver...

April 14th, 2018

Hello guys!

I´m launching a new ecommerce startup and I have been developing the site for more than 7 months now.

A few weeks ago I invited a friend to be a cofounder but he has no idea about tech or entrepreneur world.

Also I invited another acquaintance to join. He is more techy but not as much as me.

Also I´m looking for a CTO since I´m not a coder.

The problem is that this guys are not 100% free so the time they can put into the project is very small, like 10 to 15 hours a week.

I´m currently working about 90hs a week

I was thinking about keeping 60% equity for me, and 10%, 10% and 15% for the CTO, the other 5% is for my CIO/investor.

The problem I am struggling is the vesting proposition.

I can´t control how many hours the cofounders will put into work, and now the "goals" are not quantitative since there is so much to do.

Any advice how to make the formal proposition... and what should be the obligations on my cofounders so I don´t get stuck with someone who its not putting all into the field.

Looking from the outside I would suggest (myself) a vesting proposition that releases 5% after the first year, another 5% after the second year, and in the meanwhile a small income to get going...

Looking forward for your comments!

And Happy Co Funding!

Marian M afersu.com

April 15th, 2018

Pablo, maybe I did not get it right but if you are getting given 5% each year it takes 12 years until you get your full 60%. That is quite a while. Usually it is 4 years (although there are exceptions and I don´t know your project).

I needed more information to provide detailed advice, but what I know so far I suggest focusing not on the "amount of hours” your co-founders work but on the accomplishments/milestones they have to achieve. Agree on KPI (Key Performance Indicators). Who does what, within which time frames and at which budgets? You may also consider cliffs (usually 1 year).

Other clauses that are common: Full acceleration on exit of all shares, no vesting/cliffs of shares bought for cash or intellectual property. In your case, not all of your total ownership may be subject to a vesting schedule given the 7 months of “sweat equity” you have already invested. You may negotiate this with your peers.

Take into account that you may have to offer some equity to future employees (ESOPs), advisors, non-executives, etc.

I am a bit skeptical with respect to the salary, but you may negotiate that with your investor, too. Hope that helps.

Shawn Kernes New Company or Tahoe Rim Trail?

April 19th, 2018

There are a million answers to this question, and all or none of them may be right for your situation.

Start out by searching "splitting the baby startup"... And remember dilution will happen, future equity grants will happen, cash compensation will happen... or the company will fail and none of it will matter anyway.

Also remember that you and your cofounders are in this tougether. You need to make sure that you choose an equity model that does not cause frustration or resentment early on.

Jeremy Graham Lure.is can build your MVP to get funded or scale into a profitable organization

Last updated on April 19th, 2018

How much are your friends really helping? If you're bootstrapping and putting in 90hrs a week you'd almost be better off hiring a CTO or firm and reserving your equity for investors. You'll probably get a better product too.

If your friends are really into it and believe in the dream then they should also be okay with postponing their equity negotiations until after you establish proof of concept so you can have a clear picture of who's good at what.

As far as your own personal vesting goes, keep everything until investors and yourself need to come to an agreement.