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Ask HN: How to bring on co-founder almost two years later?

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Re: Ask HN: How to bring on co-founder almost two years later?

#11

Post by AnotherMarc »

Congrats on the progress you've made so far. Personally, it doesn't sound like a co-founder. It's not clear whether you think he wants that title specifically or just a lot of equity. The former would be a red flag to me without some context.

As far as the amount of equity to give, 50/50 after a couple years, when you've gotten the company profitable, seems high. But that depends on why you started the company in the first place, and more importantly, where you want to take it from here and how he can help with that. If he's uniquely capable to accomplish things that you really want for the company, but can't or don't want to do yourself, you'll compensate him highly. If you can't afford the salary, you'll give him more equity. And that's certainly a valid decision, even if it's not typical. That said, the fact that you don't think it makes sense leads me to believe that it doesn't. I personally would have to have no doubt before giving up that much of the company that I"d made profitable.

Whatever you do, I would vest any equity too.

Re: Ask HN: How to bring on co-founder almost two years later?

#12

Post by alain94040 »

Disclaimer: I provide co-founder advice for a living [1], so take this with a grain of salt

I can see a couple of scenarios playing out here, here is the one that I think applies to you, but let us know if something else is going on:

That new person is mostly a sales person and you expect them to grow a fairly new product which is independent from your existing business. Fine. It's ok for them to have a huge incentive plan, where they earn most (half) of the profits of that new product. Compensation: decent base in cash, huge cut of sales, a small piece of equity (always vesting of course)

[1] http://foundrs.com

Re: Ask HN: How to bring on co-founder almost two years later?

#13

Post by charlesdm »

Let's keep this simple, and say you split this SaaS off in a new company (i.e. no consulting revenues).

He could be a co-founder. You have created some value. That is your achievement. But, do you want him to be to a co-founder? Does he have complimentary skills? Will co-owning the business mean you can achieve more, with the same resources?

Some partnerships end up adding up to 3 when you add 1+1 together. If that would be one of them, it's worth considering it.

What kind of business is it, and what is the exit plan? If you're running this as a profitable business without the intent of raising VC, you could get him to buy part of the equity at market rate (part of the payment could be deferred). Or you could 'sell' him half the equity, with vesting in place, but defer the payment by reducing it from future dividend payments.

Lots of possibilities, but in the end it depends on what he'll add to the business and if you are comfortable working with him.

As a friend of mine once put it, is he a creator of wealth or a taker of wealth? Most people are takers.

Re: Ask HN: How to bring on co-founder almost two years later?

#14

Post by dalerus »

davismwfl wrote: post #10

Ok, having started down this path a couple of years back and trying to bring in a co-founder here is my 2 cents. btw, I ended up not doing it but learned some really valuable lessons. Also, I am identical to you in that we are a consultancy that has 2 SaaS products. This will rarely work if you are using "co-founder" as a way to get a higher dollar (caliber) employee for a cost which you can afford today. Co-founders…

Thank you for the advice.

You've hit my major concern, which is trying to figure out if he is the kind of person that can do the co-founding thing, or if he just wants equity without the risk.

Re: Ask HN: How to bring on co-founder almost two years later?

#15

Post by dalerus »

charlesdm wrote: post #13

Let's keep this simple, and say you split this SaaS off in a new company (i.e. no consulting revenues). He could be a co-founder. You have created some value. That is your achievement. But, do you want him to be to a co-founder? Does he have complimentary skills? Will co-owning the business mean you can achieve more, with the same resources? Some partnerships end up adding up to 3 when you add 1+1 together. If that w…

"As a friend of mine once put it, is he a creator of wealth or a taker of wealth? Most people are takers."

Great point. My worry is he is looking at this at a take opportunity.

Re: Ask HN: How to bring on co-founder almost two years later?

#16

Post by dalerus »

alain94040 wrote: post #12

Disclaimer: I provide co-founder advice for a living [1], so take this with a grain of salt I can see a couple of scenarios playing out here, here is the one that I think applies to you, but let us know if something else is going on: That new person is mostly a sales person and you expect them to grow a fairly new product which is independent from your existing business. Fine. It's ok for them to have a huge incentiv…

Wow your site has some great resources, thanks!

He's not really a sales guy, most of our sales are high touch, and very technical. So I am the guy that handles all of that.

I would put him more on the marketing/strategy side of things.

Re: Ask HN: How to bring on co-founder almost two years later?

#17

Post by davismwfl »

dalerus wrote: post #14
davismwfl wrote: post #10

Ok, having started down this path a couple of years back and trying to bring in a co-founder here is my 2 cents. btw, I ended up not doing it but learned some really valuable lessons. Also, I am identical to you in that we are a consultancy that has 2 SaaS products. This will rarely work if you are using "co-founder" as a way to get a higher dollar (caliber) employee for a cost which you can afford today. Co-founders…

Thank you for the advice. You've hit my major concern, which is trying to figure out if he is the kind of person that can do the co-founding thing, or if he just wants equity without the risk.

You are welcome, good luck!
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