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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?

#21

Post by Blackstone4 »

cocktailpeanuts wrote: post #7

> He hesitates when it comes to sales because he does not see himself as a sales person. Having said that I think he could do it and his role would evolve over time away from direct sales into more of a management role. I've made this mistake before. Just because that person is super smart, doesn't mean he/she can pull of what you want from the person. To find out, you MUST try working with the person for a bit. What…

Agreed - so we are going to start out with him working one day a week plus weekends. That way he can understand the product and start doing some sales calls. We can figure it out from there.

I know potential clients or can get introductions where needed through my network. The real work will be in running the sales process + shoe leather. Then managing the company (i.e. legal contracts etc.). Building the product takes up a lot of my time.

The alternative is that I bring on a technical person and I do more of the sales.

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

#22

Post by Blackstone4 »

rajacombinator wrote: post #20

-fresh MBA -no existing network -hesitant to join -wants to moonlight All bad signs but you seem to think he would be a good person to work with so ultimately you have to decide. It sounds like what you need is 1 or 2 rich angels who have the connections to get your first few contracts, or an old guy like 50+ with actual connections and sales experience. (Pay him commissions.) Ideally you should be able to land your…

I know the industry fairly well but I have never done sales before. Mostly out bound calling / research where I've been the investor.

I know potential clients or can get intros through my network. 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.

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

#23

Post by Blackstone4 »

wastedhours wrote: post #6

I'd echo the sentiment around him being a top-level employee, not a co-founder. I had an option agreement as a CxO for 2.25% (never vested as I left before my cliff). I'm not deep in the tech space, so don't know about the whats/what-ifs of it all, but would think single digits would work? However, he doesn't sound like a good sales fit. If you value his strategic chops, can you cut him a much smaller percentage for…

What is your reasoning for top-level employee vs. co-founder?

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

#25

Post by Blackstone4 »

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…

Agreed on the commitment level. When working part-time, he would be a consultant (working for free) and would get equity when he comes on full-time.

>What would you think if your first dev hire was really more comfortable being a manager, but was "willing" to develop software for the time being?

Well put.... it's making me think twice...

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

#26

Post by wtvanhest »

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…

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 your first few sales, then hire your sales guy/women.

YOU DO NOT NEED MANAGEMENT. There is nothing to manage.

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

#27

Post by crdoconnor »

xstartup wrote: post #17

Sales guy here. I like being paid in cash because having ownership runs counterintuitive to my work. Better, I get cash compensation and other benefits but not ownership/equity.

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?

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

#28

Post by scribu »

Instead of a fixed equity allocation, have you considered a dynamic allocation system instead?

All contributions (cash, time, relations etc.) are converted into “slices”, with a certain multiplier for risk. For example:

* if someone contributes $X cash, they get 4X slices

* if someone contributes work that normally has a $Y hourly rate, they get 2Y slices for each hour

* if someone brings in a client for which they would have normally charged a $Z commission, they get 2Z slices

You freeze the pie when you are bringing in sufficient revenue to afford paying everyone a market salary.

% equity = slices owned / total number of slices

You can learn more about this method at https://slicingpie.com (not affiliated, just think it's a better way of going about this)

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

#29

Post by Blackstone4 »

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-...

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

#30

Post by Blackstone4 »

crdoconnor wrote: post #27
xstartup wrote: post #17

Sales guy here. I like being paid in cash because having ownership runs counterintuitive to my work. Better, I get cash compensation and other benefits but not ownership/equity.

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

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