Technical Co-Founder Contract
There are a couple startups I'm thinking about joining. They are in very early stages (seed round or incubation). I am interested in the position of technical co-founder.
They've all asked that we start by doing a project or two together, to see how we work together as a team. During this initial phase it would be totally noncommittal. No equity, probably just hourly wages. Then, after the projects are done, I'd come on board full time and gain equity and most likely drop the wages altogether (or at least very low).
Has anyone been in a similar situation? How did you handle it? How would you improve it if you could do it all over again?
If you agree that my plan makes sense, how should I go about preparing a contract? If you don't agree, why not and how would you improve it?
Thanks
Co-Founder Contract Equity Technical Lean
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The whole point of joining an early stage start-up as a co-founder is to get equity, not a wage. It's not a job, it's an adventure. – Frenchie 12 years ago
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@frenchie I agree. Can you re-read my second paragraph and let me know if that makes sense? – Scott Coates 12 years ago
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You want to be a _co-founder_ that gets a salary instead of equity? That seems unusual. Are these startups you're talking to in agreement with this scheme, or is this just what you want to do? – Zuly Gonzalez 12 years ago
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@zuly the initial period is a trial phase. Instead of equity, wages are used provided. If everything works out, I'd step in as co-founder. You say unusual but for the few teams I'm thinking of joining, this idea was proposed from all of them. – Scott Coates 12 years ago
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@scoarescoare: you can't expect to join a startup AND hedge your bets. My reco: just find out if you guys work well together in your trial period WITHOUT a salary. If you receive a salary from capital raised (because I imagine you're still pre-revenue) then you will never be accepted as the technical CO-founder. A good vibe is more important than money in a start-up. May be you were offered a salary because the teams you considered couldn't attract anyone without a wage; you need to find out if the start-up has a vision that could work long-term. – Frenchie 12 years ago
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@frenchie it's not me hedging the bets, it's more about the other teams. They've gotten decently far and for whatever reason they're seeking a technical co-founder. By the way, salary is not in discussion. It never was. The idea of contracting for hourly wages was never something I cared too much about, but the teams I'm interviewing with all suggested it. Teams from different parts of the county (u.s.) by the way. – Scott Coates 12 years ago
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_"... and for whatever reason they're seeking a technical co-founder."_ Shouldn't you know why they're in need of a tech co-founder? That's something you should've asked in the interview. So it sounds like you're not actually coming onboard as a co-founder. You'll be a paid contractor with the option of being a co-founder in the future. I wonder how many other people they've hired with the same promise. – Zuly Gonzalez 12 years ago
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Okay each team has various reasons for wanting to bring someone on. I won't spell it out for each one, hence "... and for whatever reason...". – Scott Coates 12 years ago
1 Answer
As frenchie stated in his comment, a co-founder position can't start on a wage basis and then equities later. As a co-founder you have to take your part of the risks. And that starts at the beginning of the project. You can't say: "for the moment I don't take any risks, but later if things go well I'll do". It's far too easy. So you should have equities at the beginning. It's good for them because they'll know they'll have an involved associate with them. And it's good for you because you are sure to be in the board.
However, I doesn't mean necessarily not to be paid at all on a regular basis.
Let me explain taking my own situation: people who I work with know I can't spend months to develop a project without any personal revenue. I have a child, a flat to rent, and so on. My part of the investment is not in money, but in time, motivation and technical skills. Your potential associates should know that. If they don't, then explain that to them. If they still don't understand, forget them, they probably think the technical part is secondary — and they're wrong. They can be great marketers or businessmen, they won't do nothing without a good tech engineer. Besides that, investors invest money for people first. Just for that: being able to live while the project is not done. This is commonly accepted.
Another thing is, starting in a startup project requires to have people which we can rely on. You can't start developing a project, and in a few weeks/months say you want to stop. Your associates need somebody developing the entire first step of the project. Not a part of it, otherwise they will loose a bunch of time finding another engineer, that will loose a bunch of time trying to understand and continue your work. And that's bad for a startup. Very bad.
At last, you can set up any contracts you want, but everything has to be based on confidence. You have to trust your partners, and they have to trust you and rely on you at any time.
Hope this helps. Another frenchie.
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Per my question, I would not start as co-founder. Many of the teams currently have tech resources and would not like sever all ties with their tech teams the moment I walk in. I don't blame them. A lot o these teams have made great progress without me and should absolutely protect their company. – Scott Coates 12 years ago
