Win 5% Startup Ownership by making a Kick-ass Design

by getp • 18 years ago

14 21 18 years ago

bprater• 18 years ago

Interesting idea.

5% of any company is a huge chunk, especially for just a few hours of work! (In one company I founded, I only held 10%.)

If you win and these guys exit, you stand to make a few dollars.

run4yourlives2• 18 years ago

Conversely, 5% of nothing is nothing. :-)

This is a great idea though overall. For one, it's an easy way to get a good design for "free" for the owner. From an up and coming designer's POV though, it's a great resume/portfolio addition that could actually have a payoff in future years.

Me, myself and I take note.

vlad2• 18 years ago

Equity should not be a prize in a contest. When a company gives up equity, it should be for a specific purpose to get something one cannot otherwise, such 1) in exchange for investor money (YCombinator), 2) in exchange for a professional service from a top firm to file articles of incorporation, trademarks, and advice on setting up bookkeeping, and, 3) for a key hire. I hope somebody who's done more than run a shareware company chimes in if I'm wrong.

wheels• 18 years ago

This is going to go over really well in due diligence.

Edit: This might make more sense if you created a special class of stock without voting rights. If you're essentially giving away 5% of a potential exit someday that's one thing. Giving away 5% of control is another.

dominiek• 18 years ago

@vlad @run4yourlives @wheels Your comments make good sense. Reading up on the contest laws now.

Perhaps I should start a 'Help me out with legal issues' contest ;]

vlad2• 18 years ago

I don't think you want random entries. Why not interview respectable designers and offer 5% to the the one who agrees as well as has the best portfolio, references, and ideas you like? That's a much more sane thing to do (considering somebody mentioned here at least one law firm in California offered to incorporate some companies in exchange for small ownership of the new entity, and small independent game developers often offer game royalties to artists in exchange for artwork.)

But the best plan, and one most congruent to advice you would get from both the programmers (successful game developers, business-savvy hackers, etc.) as well as the artists themselves (designers: www.no-spec.com) is this:

1) ask around for recommendations on designers who've done related work before and how they were like to work with

2) establish what you are looking for, together with the designer, and let him or her create the art, of course making sure to have a contract that stipulates what is to be done and allows for a couple of additional levels of iterations

3) pay an agreed upon amount, not stock options. Yes, although I mentioned that some indie game developers go the route of offering royalties to artists, the real advice is to pay a flat amount to contractors for art, sound, and music and then keep full ownership of the game, and save lots of time and money managing royalties for the entire lifespan of the game, worrying about trust and tax issues, creating contracts with others, and more.

As well, on the hacker side of the equation, the author of the submission mistakingly equates "offering a few lottery tickets that might win five to seven digit figures" with "attracting the best designers." If you want to have a good design, you will have to do the leg work, and not throw it to chance and then say, "well, I tried! Let me offer 5 or 10 more percent."

And here's a new submission that design contests might not even be legal: http://news.ycombinator.com/item?id=443758

calvin• 18 years ago

Why would somebody give away 5% of a company when they can pay ~$175 at a site like 99designs for a design?

Granted, you get what you pay for, but 5% is a massive overpayment even for "sweat equity."

old-gregg• 18 years ago

I wonder who got the first 5% for coming up with such terrible domain name?

atarashi• 18 years ago

I think it means cocktail in Japanese.

pclark2• 18 years ago

5% is a ridiculous amount. What does this show to potential investors? You either value 5% of your company at ~$1000 or you're insane.

charlesju• 18 years ago

5% is not a ridiculous amount.

You have to think about the expected valuation of the startup. What are the odds that this particular startup is going to exit. As a lifestreaming service, I'd say the odds are around .01% (sorry, lets be realistic, web 2.0 doesn't have that many exits).

Given an exit of about $1M, we're talking about an expected valuation of the company at about $1,000 at its current state.

Then the question is, will giving up 5% of the website at its current state increase the expected valuation by more than 5%. I think that with a "kick-ass design" we can raise the success rate to 0.05%. Which increases the overall valuation by more than 5% of the stock given up, which increases the overall expected exit price, ergo 5% is worthwhile.

pclark2• 18 years ago

it's one thing for founders to pluck valuations out of the air, and an entirely different thing for us to value the company.

You're quite correct. What if they don't exit? Whats 5% of nothing?

I'd take the cash, thanks

webwright• 18 years ago

Not when you consider that with any success/fundraising, you can just dilute him the 5% owner into virtually nothing without batting an eye. ;-)

daleharvey• 18 years ago

Seems to have missed a trick here, if you have a good application, but lacking an area (design), and its a small startup without many resources.

why not have the contest worded more to attract a design orientated co founder, 5% is a reasonable chunk of the company, for a template that can be knocked up in a few hours.

bkbleikamp• 18 years ago

In general, good designers will not participate in contest as it is spec work which is always a bad way to do design work (or coding work, or anything else). If you value good design, pay for it. This is why there is controversy within the design community over sites like 99designs or the Sitepoint Design Contest forum.

It creates an underlying feeling that design is less important than the coding of the app - if you want a designer, bring them on as a co-founder and offer them equity. If your app requires a good user experience, you need a professional, not someone who spends a "few hours" to win a contest. I put "few hours" in quotes because that is a very low estimate for the amount of time it takes to create a great user interface.

Holding a contest is just a way to look at a bunch of free work and only reward one designer.

tptacek• 18 years ago

Everything about this plan is crazy talk.

(1), a professional design job for a template costs $1000-$3000. You're setting your valuation at 20-30k?

(2), the equity you're offering isn't worth anything. In practical terms, all you're offering is the opportunity for a designer to work on contingency. They don't like that.

If you really want to give up almost as much equity as a CEO takes 2 years in, or almost as much equity as YC takes up front, don't trade it for a design; find a partner who can do solid design.

Dilpil• 18 years ago

"Kakuteru is an experimental lifestreaming service that pimps up your online activity"

Also: "Web 3.0 Enabled"

If anyone can figure out what they actually do, please reply to this comment.

rantfoil• 18 years ago

Contracting is a date. Salary is going steady. Equity is getting married.

You can get out, but not without a lot of pain and legal fees. Be careful who you give equity to.

ojbyrne• 18 years ago

I love the serendipitousness of HN, this link is currently the next one down from this: http://www.thelogofactory.com/logo_blog/index.php/logo-desig...

Summary: bad idea.

volida• 18 years ago

you think you need a graphic designer when in reality you need a user experience/user interface expert.

Win 5% Startup Ownership by making a Kick-ass Design

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