Business co-founders in tech startups are less valuable than they think • Hacker News Board

Re: Business co-founders in tech startups are less valuable than they think

#41

Post by JumpCrisscross » Sun, Apr 27, 2025, 9:07 PM UTC

_bin_ wrote: post #35

dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

Very typical. I've run into cases where an "idea guy" basically says "you do all the product and tech half, I'll do marketing and strategy." Which is dumb, because sometimes I'm legitimately better at the strategy half too. Generally these people want ridiculous equity splits of that nature. It's worth anyone technical's time to build skills in strategy, marketing, finance, etc. The technical co-founder always gets s…

> worth anyone technical's time to build skills in strategy, marketing, finance, etc.

This leads to jack-of-all-trades types. Good non-technical folk exist. They’re just not easy to find for obvious reasons (same as good technical founders who can see the forest for the trees).

A good technical founder dilutes their comparative advantage e.g. negotiating with suppliers and prioritising payments ahead of a close.

Re: Business co-founders in tech startups are less valuable than they think

#42

Post by derektank » Sun, Apr 27, 2025, 9:07 PM UTC

j45 wrote: post #11

dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

Partnerships should be about leveraging opportunity in the market, not partners leveraging each other. With business idea guys, the tech guy could own 100% of the shares until business founder shows up with paying demand and repeatable and scalable demand. The technical founder invariably builds and creates value in working software. It's tangible. If the business / "idea" person over values their share it's likely d…

>Technical co-founders are perfectly capable of learning all aspects of business.

If you assume the technical co-founder doesn't need to sleep or has a magical source of extra time, sure. But in the real world, failing to bring a product or service to market at the appropriate time can be the difference between failure and success. I certainly agree that a technical co-founder's knowledge is harder to replicate in the abstract (OP's story about a co-founder suggesting an 80:20 split is nuts) but trying to be a jack of all trades can leave you a master of none.

Re: Business co-founders in tech startups are less valuable than they think

#43

Post by greesil » Sun, Apr 27, 2025, 9:07 PM UTC

quantified wrote: post #25

Very pro-labor/anti-capitalist take. Not that it's wrong! > In reality, it should flipped! The technical person is the one who breathes life into an idea and should get the lion’s share.... The riches are in the execution. The work done. Labor is what makes capital useful. Otherwise it's just a pile of money sitting there.

You're thinking of VC vs startup, not business skills cofounder vs tech skills cofounder.

Re: Business co-founders in tech startups are less valuable than they think

#44

Post by kirubakaran » Sun, Apr 27, 2025, 9:08 PM UTC

ElevenLathe wrote: post #30

eezurr wrote: post #23

Earlier quoted context omitted.

Hmm, if it were me, I would have asked how his 80% share would have made my 20% a good investment [than all the other options]. It's all about what each of you are bring to the table. It's possible he priced the tech side perfectly AND being the best option available to make you better off.

You're of course right in a game-theoretic sense but I would never start a business with somebody who thinks like this.

It makes sense to walk away even in the game theoretic sense. Many people think in terms of prisoner's dilemma, when it is actually iterated prisoner's dilemma.

Re: Business co-founders in tech startups are less valuable than they think

#45

Post by dgs_sgd » Sun, Apr 27, 2025, 9:09 PM UTC

JumpCrisscross wrote: post #29

dgs_sgd wrote: post #8

I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes). My advice is to have this conversation wi…

Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably. (Even in the cash state, the better play is vesting, not an unequal split out of the gate.) If you want an unequitable split, hire an employee. If you can’t (or won’t), you’re not the hot shit you think you are.

> Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably.

When he asked why I thought 50/50 was fair, this pretty much sums up what I said. I'd be happy to take an 80/20 split with an industry insider or celebrity, someone who's guaranteed to attract buzz and attention. But he wasn't that guy.

Re: Business co-founders in tech startups are less valuable than they think

#46

Post by 6stringmerc » Sun, Apr 27, 2025, 9:09 PM UTC

tptacek wrote: post #31

In reality, it should flipped! The technical person is the one who breathes life into an idea and should get the lion’s share Then you want an employer/employee relationship, not a cofounder relationship. I would run, not walk, from a company with a founder arrangement where some subset got "the lion's share" for reasons like this.

As a business guy, getting “it should be flipped” wrong and going to print / ready for audience viewing only emphasizes the importance of being able to meet certain expectations such as basic communication when wanting to be taken seriously. This is not a unique instance I have observed. It is not directed specifically at this writer, it is using this writer as an example of hypocrisy in self-serving pleadings.

If you’re going to de-value the role of somebody who can do what you can’t, be prepared to get called out on it or brushed aside without explanation because you blew it. Harsh but true. I know this because I worked sales support with technical people and not technical people in high stakes business relationships.

This is why startups don’t hire people like me because they don’t value what I do and frankly I’m okay with this mutually dismissive relationship. This forum is a frequent reminder of why so many startups are unsuccessful.

Re: Business co-founders in tech startups are less valuable than they think

#47

Post by JumpCrisscross » Sun, Apr 27, 2025, 9:10 PM UTC

dgs_sgd wrote: post #45

JumpCrisscross wrote: post #29

Earlier quoted context omitted.

Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably. (Even in the cash state, the better play is vesting, not an unequal split out of the gate.) If you want an unequitable split, hire an employee. If you can’t (or won’t), you’re not the hot shit you think you are.

> Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably. When he asked why I thought 50/50 was fair, this pretty much sums up what I said. I'd be happy to take an 80/20 split with an industry insider or celebrity, someone who's guaranteed to attract buzz and attention. But he wasn't that guy.

> with an industry insider or celebrity, someone who's guaranteed to attract buzz and attention

Even then, I’d argue no. 50/50 to start. Performance-based options that get them to 80 if they deliver on certain things.

Re: Business co-founders in tech startups are less valuable than they think

#48

Post by neilv » Sun, Apr 27, 2025, 9:12 PM UTC

One thing I've wondered about for awhile: How do you find a business co-founder you can trust?

For one example, the article says that some of the best value that a business co-founder can contribute is disproportionately building the relationships. But those relationships can be more connected to the business cofounder themself, than to the company.

It's a bit different for the technical co-founder, since your perceptible contribution is usually IP expressed in in artifacts like code that is owned by the company, and can't legally be taken with you.

There's also the perception of the value of that IP: much like a novice programmer might think that most of the value is in their own software/knowhow/grind/brilliance, the novice business person might think most of the value is in their own ideas/leadership/network/hustle/brilliance.

The business person might also perceive the technical contribution as being commodity skills, and ones that can increasingly be done by "AI" robo-plagiarism for $20.

So, if the business person is, say, having second thoughts about the 50/50 split, they can make a backroom deal with investors to cut out the technical cofounder, or bring their new relationships with investors and/or customers with them to a different (or 'different') startup.

Obviously, one defense is for the technical co-founder to somehow be a superhumanly valuable non-commodity, and to make sure that the business co-founder understands that.

But, realistically, doesn't the technical co-founder probably need a lot of trust in their character and commitment of the business co-founder? Maybe even more than vice versa?

Re: Business co-founders in tech startups are less valuable than they think

#49

Post by dentemple » Sun, Apr 27, 2025, 9:13 PM UTC

fairity wrote: post #26

As is the case with most complex problems like this, the correct answer is: it depends. In this case, it depends on what the crux of your business is. Sometimes the crux is building world-class technology. Sometimes the crux is customer acquisition. If the crux of your business is customer acquisition, then an exceptional business co-founder will actually be the most important ingredient to long-term success. This is…

I think you've just argued yourself out of a position of "it depends." This is one of the few areas where there's no wiggle room. A worthy business co-founder MUST be able to bring something practical to the table, and in my experience as it also seems to be yours, there's only really two ways they can do so:

- Be great at customer acquisition (or at least as the original article says, bring in a "customer waitlist")

- Have or bring in actual funding

If the business co-founder can't even bring one of these two things to the table, there is no justification whatsoever for them to hold a meaningful share of the startup's ownership.

Re: Business co-founders in tech startups are less valuable than they think

#50

Post by tptacek » Sun, Apr 27, 2025, 9:13 PM UTC

6stringmerc wrote: post #46

tptacek wrote: post #31

In reality, it should flipped! The technical person is the one who breathes life into an idea and should get the lion’s share Then you want an employer/employee relationship, not a cofounder relationship. I would run, not walk, from a company with a founder arrangement where some subset got "the lion's share" for reasons like this.

As a business guy, getting “it should be flipped” wrong and going to print / ready for audience viewing only emphasizes the importance of being able to meet certain expectations such as basic communication when wanting to be taken seriously. This is not a unique instance I have observed. It is not directed specifically at this writer, it is using this writer as an example of hypocrisy in self-serving pleadings. If yo…

I'm actually not making a case for business cofounders being undervalued. Maybe they are maybe they aren't. But if you think they're overvalued, put up or shut up: hire them instead of partnering with them. That doesn't happen because strong business cofounders won't accept those terms, which to me is a pretty clear indication that "it should be flipped" is false.