I started working on a startup idea 6 months back. Built an initial demo/prototype. Met investors and raised some angel investment to build and launch initial product in the market.
One of my friend who recently left his job, likes this idea. He can surely add value to company and execution going forward with his product management skills. However, he doesn't have any technology, sales or fund-raising experience. He already left his job and is exploring other options.
First question is should I bring him as a co-founder at this stage? Second, how much equity I shall offer him to be fair to him?
I would recommend to look at it from the following angles:
- Do you really need him? Can he relief workload with a quantifiable results worthy of a co-founder?
- Do you believe you can attract better resources considering your funding level?
- Do you believe he can take a company to the next level or are you settling?
Don't forget this is business and you must attract like minded individuals that are able to provide real value and move mountains. You can do charity later when you get to the next stage of development. Don't mix friendship with business, this is a recipe for disaster.
You can offer a role with some equity, but have an understanding that at later time he might be moved to a new role.
Apologies for the blunt delivery.
Regarding equity, its really up to you. Sounds like you are very early in your process ... I've given up as much as 45% as long as you see the value.
I would advice not to mix friendship and business. These two things are not compatible in most cases.
You can, possibly, hire him as an early employee with some salary and a minor stake.
I do have a somewhat similar experience, and would like to share few of my thoughts.
I am in complete agreement with #Utkarsh Asthana and # Alex Vagner and to add , do evaluate the fallowing thoughts as well.
- Do you need him/her at this very moment ? Do you have any urgent or important requirement of him or can you go on without him/her ?
- What value does he/she offers ?
- It could be anything that benefits you and the business that might be Time , Manpower, Business Intelligence , Experience, Finance.
- Is he/she replaceable or can you hire someone with similar caliber ?
- If yes go with salary and or very low equity if you have to.
- There are a few types of equity ,evaluate which is the best type in exchange for his/her values.
- Quantify his/her value using shapley value .
- Have your terms all cleared out before you work together.
- About the Equity these is no hard and fast rule as such its usually by quantifying value and mutual agreement.
- There is a very fine line between liking and believing in an idea, make sure that he/she believes in it and can go on with you in your ups and downs something that you expect from you life partner .
- Finally DO Make a Sensible ,Rational, Quantified ,Conscious , Well Informed , Well Thought and Well Discussed decision other wise both of you will have to face a unexpected outcome.
Hope that helped
Please evaluate how much he can bring on board with him & only take decision based on that criteria & yeah please don't forget to set the terms straight with him before joining on various use cases no matter how close friend he is.
He is potential at first, to the growth of your company. The years of experience as a product manager is very vital and also there is a need for you to encourage him to gain more skills in the areas he is deficient for his added advantage... Until he is fully equipped the areas you mentioned, then make him a co-founder. To the equity part, it's up to you because you know what you need and the best you want from him.
Adding value is really not the issue, almost anyone can. The issue is adding value that is critical and likely missing at this early stage. Another problem is the need for him to make a living. Unless your business is at the stage of generating cash flow and salaries are being offered I suggest that he is not a good choice to fill even a critical position.
I want a person to make decisions that are best for the company and not influenced by a personal need for income. This advice include you and every person on your team. One option for everyone involved is to get an income source that will not weigh decisions. With outside incomes there will be plenty of motivation to get the product to market since you all want to end the long days. But long days will not cause the taking of excessive risk that the lack of income will cause.
First identify why he had to quit the job , and discuss with him your startup idea to identify
how will his skills be useful for your startup
does he share the same passion for the business or dreaming high as you
its best not to mix business and friendship if you dont have a rigid personality and cannot risk losing that friend of yours
share of equity depends upon the responsibility he is willing to bear , or if you think having him is really benificial offer him a job
samall business should be start