Ask HN: what happens when founders are in different stations in life?

https://news.ycombinator.com/item?id=1587478

by verbeno • 16 years ago

25 9 16 years ago

news.ycombinator.com

I've been invited to found a company with an entrepreneur who is quite older and already established (has had startup success). He (I presume) would be majority owner. He brings experience as an operator and a wealth of connections; I bring technical skill. Given this dynamic, can anyone speak from personal experience on what this kind of partnership was like in practice?

c1sc0• 16 years ago

I'm in the same boat & would absolutely love some good arguments to help me claim my fair share.

anamax• 16 years ago

> good arguments to help me claim my fair share.

There is no such thing as a fair share.

You're bringing something to the table. So are other people. The deal doesn't have to take place and it can take place with different people, so the question is "what does it take to make a deal".

fbnt• 16 years ago

I'm looking forward to hear from people who's had direct experiences, but in general I'd be more than skeptical towards someone significantly older than me, with no technical skills, asking to "partner" in a startup project. Chances are that he is somehow using your technical baggage in order to achieve his personal goals, with no real interest in creating a true partnership and using your status of so-called 'cofounder' as an expedient to get the job done almost for free. It might not be your case, but I'd stay with the eyes wide open anyway.

jbooth• 16 years ago

Yeah, if the guy's not providing technical know-how or a desparate, need-to-make-it hustle, he better be bringing money.

verbeno• 16 years ago

I know him well enough to know that he's not taking this angle, but thanks for your concern.

In terms of partnering, I feel the equity split is the real reflection of the commitment of the relationship.

One more data point: he'd be financing the thing until we raised money.

hellweaver666• 16 years ago

My co-founder is considerably older than me, but is effectively a silent partner giving me free-reign on the project while providing the cash to get it moving. He does have some experience in accounting and big-business though, so he has some useful skills, but will mostly be staying out of the way.

If he had come to me with an idea, I would have been much more sceptical about working with him as he has pretty much zero technical knowledge.

philiphodgen• 16 years ago

These arrangements require strong people willing to be rigorously honest with each other.

Too often I have seen "Mr. Brains" partner up with "Mr. Wallet." Sooner or later Mr. Brains thinks the business would be nowhere without his ideas. The business would have launched successfully with a nickel of capital. Mr. Wallet sooner or later thinks the business was self-ordained to succeed and even a monkey could have launched it. His capital was the critical ingredient and you could have been replaced by minimum wage high school kids.

In this situation -- far more than any other -- you need extremely good legal documentation. (Define this as a buy-sell agreement, with extremely clear mechanisms for how to deal with the situation where there is a disagreement and one of you has to leave.) Otherwise you, as the person with the thinner wallet, will lose if things come to push. In legal battles the win usually goes to the person who has the financial staying power.

From your brief description of the situation, you are facing an odd hybrid of getting a co-founder as well as getting an investor. Analyze the situation from both perspectives.

In my experience, things seem to work better when business partners face approximately equal risks and expect approximately equal (maybe I should say proportional) rewards. Otherwise, the weaker one is a disguised at-will employee with a contingent, equity-based salary.

exline• 16 years ago

I've had 2 experiences. The first was with an older entrepreneur who was also very technical. He handled most of the business work and his share of technical workload. He was open to letting me (and others) learn and take as much of the business work as we wanted to gain experience. I had known him for many years prior to doing this startup. Even though the startup eventually failed, it was a great experience.

Second one was with an with a entrepreneur who was technical enough to be dangerous. He had clear ideas on what our product could/should do but was completely hands off on how we implemented it. Again he was willing to let me into the business side if I choose to get involved in it. He had a much larger ownership percentage than I did, but he also brought about most of the business contacts and had a huge amount of domain knowledge (recognized expert in the field.) He also personally financed the company when there were cash flow issues. He had a personal line of credit to pay the bills that I did not have to worry about.

So in both my cases, there was a clear establishment of ownership and responsibilities. I think think the ownership and personal trust is the key. In both my cases I didn't have to worry about getting screwed over by either one. That is always a possibility, but it really pays to know who you are going into business with. The saying that it is like a marriage is very accurate. It is important to establish the value that each person brings to the table. At both startups, there was a large amount of work done 'at risk' that was converted into equity. I'd get that formula defined up front so that it is established. This helps ensure that your work has value in everyone eyes.

shaunster• 16 years ago

It all depends on the type of business your establishing. If the business ties into the physical world in some way and the agreement is that you handle the technology while he handles everything else then this arrangement seems like a good match. If instead, the business is entirely virtual then you may be setting yourself up for frustration.

I have run 2 virtual-only businesses with partnerships such as the one you have stated and each time it ended in frustration, unlike my real+virtual businesses which were successful. The problem with being the only person with technical skills in a virtual-only business is as follows:

1. Your effort and risk is typically front-loaded, meaning that you are required to create the entire product before your partner is able to utilize the majority of their skills operating the business.

2. If he is financing the business then prepare to feel like an employee. The money guy is usually the decision guy as well.

3. Prepare to possibly be taken for granted. Many non-technical partners read media headlines regarding overseas outsourcing, teenage tech geniuses, and turnkey software. This avalanche of information gives them the impression that technical work is easily and cheaply contracted or purchased. The truth is that paying for technical talent capable of creating a quality product is still ridiculously expensive. Unfortunately this is something that is usually learned through past experience so hopefully your partner either has that experience or is smart enough to see through the media hype.

4. The work never ends. Unlike a technical partnership where everyone carries equal workload, you are responsible for it all. Every bug, every update and every post-launch adjustment that takes your partner 5 seconds to request and you 5 hours to implement. It's all on you, and as a startup don't expect to get quality technical help anytime soon.

5. We are all biased. Nothing is more annoying then spending 18 hours coding only to see your partner make a few phone calls and call it a day. Even if your partner was doing their job perfectly with those calls it is still only natural to have days where you feel the workload is "unfair". This can apply to both business partners when the responsibilities are different.

Ask HN: what happens when founders are in different stations in life?

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