Cofounder · Founders

What are some best practices when one Co-Founder is full-time and one is part-time?

Liz Lentis Marketing & Sales Professional with an Entrepreneurial Drive

January 23rd, 2015

My Co-Founder and I are almost a year into our business since its idea conception, and have been steadily making great progress.  It likely will come to a point soon where one of us will become full-time (to bring us to the next level) and one will keep her current job.  What are the best practices in regard to pay, equity, workload etc. to making sure it's a fair situation in which both partners are satisfied and motivated?  Any advice is greatly appreciated!

Lalit Sarna Business & Technology Leader

January 27th, 2015

Congratulations Liz! What an exciting time for you. 

Building momentum in a new idea is hard. Well done! 

I think it is wonderful that you are thinking about addressing one of the hardest issues that most co-founders face.
 
Neeraj has some excellent points around structure and legalities. I would like to offer you another offer another point of view.

Much like marriages, founding teams have their own rhythms. So I would definitely use advice from experienced folks as a starting point, however remember that in the end the only strategy that matters is the one that works for both of you. 

That being said ,I urge my peers to have hard conversations about Risks and contribution sooner than later. 

Risks:
Financial risk is rather simple, it's the perception of opportunity cost that gets tricky. 

Allow me to explain with an example:

Independent of how much money do you have or need , if two co-funders each give up a job worth 100K, then both are taking equal risks. 

However 100K job at Google and 100K job at an unproven start-up have very different opportunity costs.

There are many other variations to this equation. So I urge my pears to discuss this issue come to an agreement upfront. 

Leaving things open to interpretation is one of the major causes of breakdown of founding teams. 


Contributions: Resources and Skills

When quantifying contributions, I've found that it is much easier to break down the tasks that need to be done and their value to the business.

Similar exercise can be done with resources, which include funds, times, talent, network etc. 

I believe that objectively thinking about challenges and resources helps all involved develop a realistic understanding of what each player brings to the table. 

Start-ups are hard, and things get tense. So hard conversations are a must. Their is no silver bullet, other than complete transparency and trust.  

Hopefully having these conversations will help you guys become a stronger team.

Neeraj Sanghani EVP Products & Strategy

January 23rd, 2015

Liz in case you'll have not yet formalized a founders agreement this might be the right time to do it. Few clauses to consider for your situation:
- Determine an additional amount that the co-founder working part time will contribute to the business. Usually based on the market value of the expertise so that it is fair to the other co-founder. Remember the person working full-time on business is not just putting in more time but also taking additional career risk stemming from new business
- Set a milestone when the co-founder comes on-board full time. Most investors will expect the core team to be working on the business full-time. The milestone could be based on business growth, investment related or time bound
- Not directly related to the specific situation you mentioned, however, equity vesting needs to addressed. How much is each person's share, what is the vesting schedule, is there a cliff to vesting, if one of the co-founder leaves within the cliff period how (keep equity, get paid a fixed amount for each month served etc.) they get compensated for the time served...it is important to have this clearly laid out so as to avoid any confusion for investors too.

Hope that helps. Look forward to hear comments from others :)

Good luck with the business.