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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?

#41
post #34

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…

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 s…

This x 10000. A salesperson is not a task where mediocrity is acceptable. Without sales nothing else you do matters. A great salesperson and crummy product have a chance at success. A great product and a crummy salesperson are doomed to fail. No product or service can outrun bad sales.

Your friend isn't a salesperson. If his pedigree and smarts can help then fine. But he isn't a salesperson. Candidly, you are the salesperson until you have 7 figures of revenue. I'm serious. No one knows the product like you. Find other people to do the other things and dive into selling.

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

#42
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…

Never forget Guy Kawasaki's method (paraphrased here) for how to value a startup.

For every engineer, add $1 million.

For every MBA, subtract $250k.

What's -$250k in startup valuation worth in terms of shares?

My offer to cofound your venture is still a far better deal because I pledge I will not lend my name nor contribute any work. That makes my contribution to your startup $250k greater than the other guy, so I should get $250k more worth of equity.

Just my nickel's worth of free advice.

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

#43
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…

I agree. It sounds like you are asking this because he seems like he's almost the perfect fit, but you know he isn't and you want us to tell you he is not so you can feel better about it.

I've been there, having an almost perfect fit immediately available is the easy path, otherwise you have to hunt and do dirty work and it can take awhile and you want someone you know well and you want it now, that is understandable. It doesn't sound like the guy wants to do what you want him to do, and it doesn't matter if you think he'd be awesome at it if he'll never do it, or only do it half-assed and begrudgingly.

You can't be a cofounder with one foot in the door and one foot out. He's gotta be all in. I've had promising startups that relied on co-founders with expertise, but they wouldn't take the leap and good advisors said the same to me, so I bailed and they never went anywhere. A cushy job is very addictive.

You have a need so the best thing you can do is find someone who will specifically fill that need with a passion. You probably don't have money to pay them, so you are looking for another way to compensate, but that's the rub. Good sales people will want to get paid, unless they are insiders who know they can make it work and just want to suck the equity from you and try to make the startup theirs. You could almost make that work, but good luck with that scenario.

It's hard to bring in a cofounder this late, especially if they won't go all in, you are looking at giving away at most 10-15% if they really are awesome, all-in, and stay for 3-4 years (and probably not getting paid). If they are bringing money with them to invest, then it changes a bit.

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

#44

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?

To my mind, a co-founder is someone who directly contributes to not only developing the solution to the problem you're facing, but choosing the problem as well. You've already decided on the problem domain (investments), how you're going to solve it (SaaS), and have an understanding of the potential growth models you'd look for (bringing someone in to ramp up sales).

Of course, if you're open to someone only working one day a week on it to come in and challenge all of that and potentially pivot into something else, then they might be a co-founder. But from what you've described, they're a very senior hire (and might not be right, with sales you want to hire for passion, rather than academic smarts), rather than your co-dependent.

I was employee number 3, but I certainly wasn't a co-founder.

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

#45

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…

The other part that's worrisome, and this could just be me reading too much into it, but it feels like Blackstone4's perspective is slightly paternalistic towards this potential cofounder. He's younger and recently graduated. He wants to push him into a growth area. He talks about giving him equity rather than how much equity the cofounder should get or deserves. But nowhere in the description is what this potential cofounder could bring to the equation. What is the startup missing that this cofounder would add? In what area would this cofounder be the authority because he's more capable than his cofounder?

That makes me wonder whether this person would be an equal in the endeavor or would he always be a second. A cofounder should be someone that covers your weaknesses and can support you during the trying times, because very few startups don't have those times. You should be wary of a dynamic where one person is more of a mentor to the other.

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

#46
> who is a friend

Do not cofound with a friend, as simple as that.

If you really want to be that generous with your work, get him on on commission and no flat until he can put in full time. Make it generous if you wish, even up to a third if it is sustainable, but never share ownership/voting power with family and friends.

Also, two cofounder is a good way to get stuck in decision bickering. Aim for three or one, any even number managing product direction is not going to work.

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

#47
What I've learned burning through about 5 co-founding relationships over the years is that, whatever you do, you need to have a 3-month probationary period where both parties understand they can leave with minimal loss and no hard feelings. Moonlighting is fine over this period (see the point about minimal loss). If he's good and really sees value in your idea, he'll get a LOT done over evenings and weekends, if not, he's not co-founder material, period.

A cofounder needs to be ridiculously motivated, self-aware, and hard working. 95% of people who would make good employees wouldn't make a good co-founder.

Another tip: if someone is hesitant about sales, he is not for sales. Good sales requires genuine enthusiasm and persistence. Especially in the early stages, where it's all about winning hearts, and less about "sales playbooks" or established processes. I heard Dharmesh Shah (CTO at HubSpot) describe early stage sales pipelines with two words: non existent.

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

#48
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…

I've done inside and outside sales, and have hired employees to do inside sales. I have a number of outside sales / manufacturer reps who I periodically talk too.

- Hiring is not that much different from sales in my opinion. If you are doing recruiting, you have to really sell yourself and your company on why a prospective company should work for you, over other companies. You need to vet many prospective candidates through cold calling, interviews, etc if you don't have enough prospective candidates in mind. In a startup with a lot volatility, a prospective employees first concern should always be bringing food on the table. In addition, you have to sell your company + ideals + yourself even more if you are hiring someone who you've never worked with (e.g. someone on indeed.com posting), and expect to have a probationary period (1-3 months) where you might have to fire them. Ideally, you should know from selling B2C or B2B experience how well that sales person should be performing (how many sales they should be getting per week, etc)

- MBA =/= Sales. MBA is for upper level management on corporate structures, and is not a necessary skill for selling at all. You stated you had advisors for this already

- Looking at your other comments, this sales person is going to be doing hard-sells by phone call, soft sell through website leads. Sales is a hard earned skill. Its really not something you learn in a textbook. The most difficult part of sales in general is dealing with the laborious grunt work task of cold calling people, coping with potentially high amounts of rejection, following up with CRM, etc.

- Your going to have to spend some time educating this employee on the software. Not to profound technical efficiency, but enough to answer all the questions a prospective business might need to know about it (e.g. how much is it [fixed amount, quote by quote basis, how does it help them save money/time/resources in the long run, do you have well known companies / competitors running your product, etc)

- A salesman with potential networks is worth more than someone who does not have a network. A good example of this a bank account manager. When a bank account manager moves banks, they generally take a large % of all their clients with them to the new bank. The same is true for lawyers who move law firms as well. Having someone with an "in" saves a lot of time since you don't have to deal with a decision maker's secretary at a potential business, etc. This "in" is pretty analogous to applying for job at a specific company and not knowing anyone at that company for referral, its a harder road to climb but still doable.

Those are just general things to consider. Have expectations clear in writing moving forward. What responsibilities he will be handling and what compensation he will be getting as a result.

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

#49

Earlier quoted context omitted.

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)?

I agree a little that experience can't be discounted, and a lot that trust can't be.

That being said, it's all pointless if they don't have drive. And the one-two punch of hesitation of doing sales combined with initially only wanting to work a couple days a week tells me that this individual is definitely not ready to commit. I think that can be a trap especially with more experienced people - it's easy for the startup to be something speculative that they take a wait and see approach with than something that is their sole professional focus.

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

#50
post #34

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…

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 s…

I completely agree that an excellent sales person is worth their weight in gold. Right now I don't know any. I would love to meet some.

I'm based in London but I was in the US for the last 4 years. Moved back because of with the visa situation it was just easier.

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