How to utilize your friends as your first employee
I am working on a Startup where in I am developing some Web and Mobile Applications.Now, all the monetary investment as well as development is done by me. I once learned that friends are our best resources and we must utilize them appropriately. Now, I have few friends who are good in development and I am interested in using their services, but I also know that they will not be able to devote much of their time , for longer term, because they are more focused towards their day jobs.
My questions are,
How can I convince them to work for my startup as a part time (except the being a friend reason, they believe that the application will work ) and what would be the best agreements to pen down so that their interests remains in the application and still they have an easier exit point.
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possible duplicate of [Forming a new software startup, how do I allocate ownership fairly?](http://www.brightjourney.com/q/forming-new-software-startup-allocate-ownership-fairly) – Littleadv 12 years ago
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@littleadv: I don't think this is a duplicate of that one. The title says "stake", but it's not specifically about splitting up equity. It's mostly about how to convince your friends to come along for the ride. Does that sound right, Mohit? – rbwhitaker 12 years ago
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"stake in the company", aka "interest in the company", aka "partial ownership", aka "partnership" - different words that describe the same: equity split. – Littleadv 12 years ago
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Why does it have to be ownership? If they're only doing it part-time, they're not putting in nearly as much time, effort, and money as you, so why not hire them as contractors? If you're generous and want to keep them connected/invested, a revenue split for individual products/apps for N months/years might be good too. – Casey Software 12 years ago
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@rbwhitaker yes that is correct. It is not about ownership or stake. It is about how to make your friends your first employee. – Mohit Kumar 12 years ago
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@MohitKumar That's a good edit. Makes it more obvious what you're getting at. – rbwhitaker 12 years ago
1 Answer
Things are never easy whenever money is involved.
It's nice to work with friends / people you know, but that makes it doubly important to make sure that a fair arrangement is understood and agreed to up front - otherwise animosity, jealously and all sorts of other problems arise (lynch mob "not pulling your weight" accusations) that can kill friendships.
If you're not splitting up ownership, then pay them as consultants. Have a system in place where you can log hours and pay reasonable rates. Like any consultant agreement, make sure IP assignment and non-compete clauses are in place.
All the other stuff (workload, product market acceptance) isn't their concern - its yours. You want their time / expertise and are willing to part with cash to meet your goal.
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Make it as explicit as "here is what you *are* responsible for" and "here is what you are *not* responsible for" for them and create a same set of bullet points for yourself. When you have clear boundaries on day one before money is involved, it goes more smoothly.. or you find out that one side wants something the other doesn't and you can part ways less painfully. – Casey Software 12 years ago
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@jimg i understand. The problem is should i really involve paperwork here? I am more concerned to keep it low and just on mutual basis. – Mohit Kumar 12 years ago
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IF you search on this site, you'll see that the number of problems related to lack of formal agreements is extremely high. Most require much more cost to remedy (if even possible) than simply setting up agreements in the first place. The choice is yours. – Jim Galley 12 years ago
