Entrepreneur · Equity

I have a startup with one rev generating client. Cofounder wants to pivot, and I need to move on to other things. What % should I keep in the co, if any?

Min Oh Looking for a technical cofounder for a last minute hotel booking idea

Last updated on September 26th, 2017

Cofounder wants to take what we built but pivot the business. The business would be something different, but the foundation would be the same. I'm fine w/ that, but suggested I keep a percentage of the company given what we built so far. What we built wasn't much, but we do have 1 client generating revenue. Not sure what ownership I should take, 1%, 5%, if any?

Timmana Gouda D IDea with IDeals for consumer good in the lending space, empower , enable, engage and collaborate

September 26th, 2017

You should keep all of 5 % with dilution further or just 1% without dilution to have some stake in the company you have built .. that should help ..

Ryan Buckley Co-founder and Partnerships at Scripted.com

September 26th, 2017

I suggest a simple email handshake deal at 1%. Chances are it'll amount to nothing but if it becomes the next huge thing, 1% might make you rich and it will fly under the radar for most of its rise.

No need to spend a bunch of money on legal. Although I'm not a lawyer, my experience and understanding is that if your cofounder agrees to 1% in writing (get his emailed confirmation) then at this early stage it's as good as done.

And by the way, chances are if it does become big, the board will make it official then anyway, or try to buy you out, or something like that. Either way you'll get paid.

Sadique Khan Efficient inventor frugal

September 26th, 2017

Hi, Your ownership depands on how much you have invested into the venture, both from monetory front as well as the build, keep up or any other efforts. Based on this you can gauge how much you deserve out of it. Hope this is helpful.

Nuno Ribeiro Software developer... taking a step back

September 26th, 2017

The only risk of ownership is bankruptcy. Other than that, you're safe as liabilities do not get passed from the company to the shareholders, provided the company is created in a Limited Liability and not partnership or sole proprietorship. Now-a-days is rare to see companies other than ltd or inc. So if that's the case, it's just really a matter of 'Do I really believe my 10% valued now at 5 000,00 USD will be 10X more in next year?'

Do you believe in that? Then think of it as money in a risk investment, with the great news that you know the guy who is operating the company, and if you keep an eye to the accounting, you will be protected with your investment. But if he doesn't allow that, and if you are not able to sell the shares to anyone else, it's really a matter of having say those 10% valued at 5 000,00 USD now becoming worthless. Because value is always market driven. Value is something a group of people entrusts in something or someone (even to bank notes, coins and goods... think of how fast an iPhone devalues as soon a new version comes out to the market: was it the real market price? or was the value something the company equated to be the best profitable due to people trust in the device?).

Keep in mind that any situation where you do not have control is a potential risky investment, but even investing in a savings account in a bank is a risky endeavour. It's all about ROI, trust (in the co-founder) and market conditions.

Best of luck!

Stephen Ferrando Cofounder and CEO of International Designs

September 26th, 2017

It obviously depends on many things. What was the initial equity split?. Did you bring in the revenue generating client? How much was actually built? Regardless, I would say that you should keep something.

Timmana Gouda D IDea with IDeals for consumer good in the lending space, empower , enable, engage and collaborate

March 14th, 2020

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