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Ask HN: Solo founder and MVP. New co-founder equity split?

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Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#31

Post by notahacker »

Blackstone4 wrote: post #16
cl42 wrote: post #8

We’ve had lots of sales people come through our doors and I highly suggest you interview several more here. A few reasons: + MBA degrees prep you for corporate success, and rarely teach you how to sell or create sales collateral + Hesitation re: sales means he will never be a sales person, at least with that attitude. Many (most?) sales people fail because they are afraid to cold call, prospect, do the grunt work, et…

Thank you for your thoughtful response. I agree with you on MBAs. I think when it comes to sales, he is not very confident so he talks himself down. I suggested a sales book for him to read and we shall see where he comes out on that. I feel like he is personable and gets on well with people. He's also a hard worker. So I think it could work but I acknowledge it's a risk. Also I don't want him just for sales. I have…

If he doesn't see himself as a salesperson because he's not very confident (as opposed to because he thinks he can do other stuff as well) he's unlikely to an answer to your sales problem. Even if he's competent at the business analysis side of stuff, selling in the $15-100k range is going to take a certain amount of persistence and judgement.

If he can do the other mostly less critical stuff then the fact he wants to keep his current job is actually a good thing for you: pay him for his time and expertise when you need it and offer him a salaried job with options if/when you have revenue, funding and a proper position for him several months down the line.

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#32

Post by Blackstone4 »

wtvanhest wrote: post #26
Blackstone4 wrote: post #18

Earlier quoted context omitted.

Why would he not be a cofounder? At the moment, I have an idea and an MVP. I have three advisers who I brought on in a semi-formal capacity. Two are senior investment managers and one is a serial entrepreneur having started companies in the same area. I speak to them maybe 1-2 a month to get advice and they are listed on my website. In reality I have zero revenue and it will take 5+ to build this company. I've barely…

I have a similar backround as you with less coding experience (asset management blk). I also programmed my site at night and quit my job. When I started selling I resalized that I hadnt thought the product through properly. You need to learn whether you have by having direct conversations with customers. If you rely on a salesman you will blame him/her instead of figuring it out and making adjustments. After you get…

This was my original plan. The idea would be I sell the product myself. Win 2-4 clients and work closely alongside them to improve the product. Upon achieving product-market fit, I would hire a sales person using my savings. Possibly raising venture funding if need be.

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#33

Post by crdoconnor »

Blackstone4 wrote: post #30
crdoconnor wrote: post #27

Earlier quoted context omitted.

What would you view as a reasonable compensation structure for a guy like this for his first few sales? 50% cut on the first sale? Higher?

I was advised: * 20% of first year revenue on a cold call (deeded to be generous) * 7% of first year revenue on warm lead (incoming from website) * 2.5% of year revenue on a renewal

Interesting, thanks.

With or without base salary though?

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#34

Post by jdileo »

Blackstone4 wrote: post #18
mchannon wrote: post #5

He is not a cofounder, he is (potentially) employee #1. Cofounders don't get brought on to do sales. Employees do. Treat him like a good salesman- give all kinds of incentive payments (commissions, bonuses) contingent on sales performance, but be very shy with the equity. Plan on firing him as a default unless he exceeds expectations quickly. Equity corresponds to risk and skin in the game, and it sounds like he has…

Why would he not be a cofounder? At the moment, I have an idea and an MVP. I have three advisers who I brought on in a semi-formal capacity. Two are senior investment managers and one is a serial entrepreneur having started companies in the same area. I speak to them maybe 1-2 a month to get advice and they are listed on my website. In reality I have zero revenue and it will take 5+ to build this company. I've barely…

In the U.S. & around the world sales pro's earn multi-six & 7-figure incomes (Read: more than most physicians, attorneys, engineers, etc.), yet most founders fail to recognize their import. For example, startups regularly task a co-founder or, gulp, initial admin hire to engage a prospect list or subset thereof. It is an enormous mistake that yields suboptimal adherence to best-practice and crucially, a flawed data set that a founder may clumsily use to forecast growth, churn etc.

The sales talent required to build processes, identify most promising inbound/outbound prospect funnels, execute script/price-point analysis & closing ratio's, etc. to bring a v1 to market is immense. Respectfully, your friend is woefully unqualified to serve your startup well. A B2B with pricing model you've suggested requires a 10x pro.

Where are you located? Website?

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#35

Post by the-dude »

Blackstone4 wrote: post #32
wtvanhest wrote: post #26

Earlier quoted context omitted.

I have a similar backround as you with less coding experience (asset management blk). I also programmed my site at night and quit my job. When I started selling I resalized that I hadnt thought the product through properly. You need to learn whether you have by having direct conversations with customers. If you rely on a salesman you will blame him/her instead of figuring it out and making adjustments. After you get…

This was my original plan. The idea would be I sell the product myself. Win 2-4 clients and work closely alongside them to improve the product. Upon achieving product-market fit, I would hire a sales person using my savings. Possibly raising venture funding if need be.

Do this (and keep your friend)

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#36

Post by JasonSage »

Blackstone4 wrote: post #29

I feel like there is a general sentiment around my question which says "you shouldn't bring him on as co-founder but an employee". Why is that? Paul Graham advises founders to "get a co-founder" http://fortune.com/2014/02/25/y-combinators-paul-graham-get-...

I do not feel like you convince somebody to be a cofounder, they convince you they must be one.

If you're talking him into it and it turns out he just doesn't have the capacity or passion for it which you'd like him to have, you're in for a huge disappointment.

Look at it another way—you're trying to seal a larger commitment on paper so you're buying into risk without getting anything tangible back on that investment compared to investing in him as employee #1. Fallout from a bad first employee will never be as bad as fallout from a cofounder you want to remove.

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#37

Post by davismwfl »

My bigger question is why do you want to bring in a co-founder? Admittingly I didn't read every response here, but bringing in a co-founder entails lots of specifics and has a ton of good, but also a lot of baggage (not all baggage is bad, it is just there).

Are you trying to get external financing? Are you expecting to apply to an accelerator? Do you just not have the cash so giving equity is easier right now? Are you wanting to break up the load? How does employee #1 differ from co-founder in your mind?

My 2 cents. MBA's are fine degree's (and people usually), but in a startup I generally avoid anyone with an MBA unless they have been in industry for quite a while (5-10 years and at multiple companies). And as an early employee or co-founder an MBA is a red flag to me unless that person was part of the original team.

Honestly he sounds more like employee #1, but if you are looking for a co-founder to help offset the load you can absolutely bring him in as a co-founder. Just remember if the company is already legally formed there are a lot of little details you'll have to go through on the stock issuance/vesting/taxes etc -- e.g. get an attorney & CPA to help you.

Also, if you just need sales help that is much cheaper and easier to find than going down this path. If he isn't interested in sales you really should figure this part out. That said, co-founders have to do jobs that they wouldn't normally do until companies grow, so it isn't the end of the world. But in the case of sales, it is literally the lifeblood of the company, so it is pretty critical.

My last point. A Co-founder is essentially someone you will spend more time with than a spouse for the next 10 years. You will literally be seeing and talking to this person daily for hours everyday (at least in most situations). You are essentially married to this person, and they will call you at crazy hours and you them and you'll be under stress together and separate which means you have to support each other. If you have any questions as to this person get them out and into the open and make sure they do the same before you sign any agreements. If they smack their lips when they eat and that bugs you, get it out now cause when you are stressed and pissed and on the fourth meal of the day for the third straight day you'll eventually blow (I know stupid example but hopefully you get the idea). Personally, I'd rather keep a friend and not have a co-founder than think I got both and than lose them both in a year.

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#38

Post by ajiang »

switchstance wrote: post #14
mchannon wrote: post #5

He is not a cofounder, he is (potentially) employee #1. Cofounders don't get brought on to do sales. Employees do. Treat him like a good salesman- give all kinds of incentive payments (commissions, bonuses) contingent on sales performance, but be very shy with the equity. Plan on firing him as a default unless he exceeds expectations quickly. Equity corresponds to risk and skin in the game, and it sounds like he has…

Great advice. Thanks for this.

It is not great advice. This early on, there is a big difference between someone who comes on as employee #1 vs a co-founder especially in terms of ownership, but not a big difference in terms of risk exposure. If you are positive you've found product market fit, hire a sales person but don't be surprised when the sales person can't sell due to a number of product problems. I would not expect that person to own the product in the same way as a co-founder unless you treat him as such.

Parent comment places way too much premium on equity at a time when equity is worthless.

Re: Ask HN: Solo founder and MVP. New co-founder equity split?

#39

Post by projectramo »

ryanbrunner wrote: post #19
evrydayhustling wrote: post #15

Earlier quoted context omitted.

There are good points here, but I'll present the other side. If you have MVP but no customers, funding, or employees, 98% of risk is still ahead. There are important, identity defining questions about the business ahead, from how you position yourself against competition when marketing, to your recruiting process, to a multi-stage financing strategy. From experience, it can REALLY help to have a co-founder who is mot…

I think this is a fair comment, but a couple of things give me pause based on the original ask: - Unwillingness / hesitation to do sales - In an early stage startup, and especially as a co-founder, you need to be willing to do what needs to be done, even if it's outside of your comfort zone. As the technical co-founder, you're still going to be involved in the business, and probably even selling yourself. People who…

But you are comparing this guy in a vacuum.

How many other people will have sales experience, commitment etc to a new product that has not even launched? Is there someone better than a person you trust (to be smart, competent, honest etc)?

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