Ask HN: How to split equity share for non-technical and technical co founder?

https://news.ycombinator.com/item?id=7345402

by notastartup • 12 years ago

8 7 12 years ago

news.ycombinator.com

Non-technical: Has entrepreneurship experience. Has sales experience. Knows key people for the market (Korea). Has acquired a first customer through there.

Technical (me): Has engineering experience. Has experience in designing, building and shipping software. Does not know the market well (foreign market) but has a good idea of what to build and deliver.

Is 50/50 good or should I be taking less equity since the market validation and possible sales and marketing channels exists and accessible to only the other non-technical founder (I don't speak Korean very well lol).

The market we are targeting is already big in North America and Europe but not in Korea. I don't know anyone in Korea, I have to rely soley on the other non-technical founder.

allendoerfer• 12 years ago

I would go with 50/50 and focus on both committing as much as you can. I think this way, both of you will get the highest rewards in terms of absolute equity. Start simple and just execute.

iamwithnail• 12 years ago

Unless oNe of you is coming to the project having done a significant amount of work (product development or research) then I'd just go with 50/50. Just do it. If you agonise about 10% or so either way, it'll just be a bone of contention and one of you will resent the other. Assuming you're both going to be doing the same amount of work (I.e. You're both full time), it's difficult to argue that you should come up with some more fine grained split.

liamgooding• 12 years ago

Another perspective is go 51/49 (CEO 51, CTO 49) just so that later down the line you can resolve any "deadlocks". With 3 founders you'll never have this occur, but with 2 cofounders you will.

Remember you'll make a 10% employee/advisor pool and probably 10% to an Angel/Seed, making your 51% to 49% become 40.8% to 39.2%

By the way, we're all assuming that you'll both be committing to this 100% and full time. If not then a 50/50 split isn't right

brudgers2• 12 years ago

It is better that two partners reach agreement than that one has total control of the company, and that's what 51% is, total control. The 49% serves at the 51%'s pleasure. 51% can sell the company to their cousin for a pittance. 51% can decide the CEO's salary should be double the CTO's. 51% can put their daughter on the payroll as a consultant.

All 49% can do is take it or walk away.

brudgers2• 12 years ago

I don't speak Korean very well

Your cofounder probably doesn't write Ruby,JavaScript, Haskell, whatever very well.

This should be a business decision not a negotiation.

The ideal equity split creates value. The only means by which it can do so is to make future success more likely. It's not about rewarding the past, it's about making sure each person carries as much load as they can going forward. If you do a 60-40 split is one of you going to do 50% more work?

If your startup pivots, do you clawback equity from the idea guy?

notahacker• 12 years ago

50/50 is good.

Less may also be fine if he thinks he brings more to the table, but as that makes you more a contractor paid in equity than a founding partner you should probably expect to be paid something in cash too...

If he's offering you a significant share of the business instead of cash, that says something about how highly he values your ability to deliver or how uncertain he is of his own ability to get it to profitability with paid freelancers; probably a bit of both.

IndieDevClub• 12 years ago

This sounds like a bad idea.

If it's big in North America and Europe one of those competitors will be entering Korea soon. If they don't enter Korea there's a reason for it that involves the specifics of that market. But you wouldn't know those specifics anyway because you know nothing of Korea.

Unless you trust your cofounder like a brother, I wouldn't go for it.

Ask HN: How to split equity share for non-technical and technical co founder?

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