Vesting · Contractors

Contracting a company for share capacity

Charlie Obonyo

July 26th, 2016

We have been working on an idea for a long time but so far I haven't found a technical partner. Is it a good idea to work with a contracted company and allocate shares to them as compensation with all the vesting and cliff agreements in place? 
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Eric Gaze

July 26th, 2016

Hi Obonyo,
   I wouldn't go handing out any shares of my company until I really knew the dev team well and had vetted them thoroughly. Reason being, once they have shares, they're with you for life (of your company). 
   Why not begin working with them and if they're solid and you guys have a good relationship, then consider weening off dollars and get them onto equity? 
   If you're looking for a vetted team, I know a few people. Feel free to reach out.

Best,
Eric 

Richard Reed

July 26th, 2016

In the early stages of a venture when cash is very tight, equity compensation can be an attractive alternative if both sides have aligned interests. I have seen agreements structured where the company has the option to buy out the equity allocation before the term of the contract expires in the event that the equity is important to maintain and cash is more prevalent. To answer your question on clifs and vesting, certainly most companies would strive towards having both as with an employee, however, it will likely mean that cash compensation will have to be provided if equity is not granted for whatever reason.

David Pariseau

July 26th, 2016

What kinds of skills are you looking for?

Charlie Obonyo

July 26th, 2016

Eric and Richard, I do appreciate your thoughts and contributions. In this case, it's a technical guy/guys am looking for to help build the platform as more of operations and business development guy. Cash is certainly tight and it would only make sense as Eric says the relationship is key and I agree. I also know that at this stage it would only make sense to align our interests so we are on the same page. I will definitely consider structuring the agreement in a way I could eventually buy out the contractor.