Ask HN: How to Fairly Share Equity?

[technicalsailor]

I'm a freelancer and started to develop a prototype in my spare time which already caused a lot of time and energy. As everyone I think it also has a nice market fit and with some work I should be able to develop a full product and find a few customers. Though, I am not a sales guy and I think someone with sales expertise would definitely help to push it forward. Hence, I got in touch with another small company and they suggested that I (including the prototype) join their company as CTO. The company offers consulting in the same area and consists mainly of one freelancer who engages other freelancers depending on the projects. I know him from previous business and some of the freelancers as well so they are not complete strangers. I suggested to found a new company to clearly separate it from the previous work but they stated that it would be too much effort.

Now I am a bit unsure how to approach the situation: - should I insist to found a new company? how would you split the equity in that case? is there any best practice? - what would you demand in case I would decide to join as CTO? Equity? Since it's already an established company it has a certain value but the value is actually only based on the current/previous consulting gigs which makes it kind of difficult. Also, I don't know what happened in the past and do not know if the company has any liabilities. - if I join them, how can I "protect" the code so they cannot simply fire me afterwards and take it for them? how can I ensure that I can still use the code afterwards? - is the code really worth anything at the moment?

Thanks for your insights!

[jd_illa]

This situation is a bit confusing. From your summary, it sounds like you have an idea and product you are building and you need some help with sales. It sounds like you only have a prototype at this stage. It feels very early to me to join an existing company with a prototype just for their sales consulting. Is there a reason that you won't hire this company as a freelancer first and then maybe consider a partnership if it works out?

What does this other company do? Is it just sales consulting? Or do they have a product?

[technicalsailor]

Thanks for your response! The other company is just about strategy and sales consulting. They would also help to fill and maintain content but they don't sell any products or have own products. The reason why they want me to be part of the company is that they are very excited about the idea/prototype and they also bring in own ideas. So I see value in it to be honest. They could already start to market the product before it's 100% ready.

However, I don't want to transfer my work to someone else before I have seen any outcomes so that's my dilemma.

[jd_illa]

Ah OK, if you don't want to transfer your work before you see outcomes, I think it makes sense to hold off on starting a new company with them, especially since they are a consulting company (which is a totally different business). I would probably engage them as contractors initially -- if the relationship is going well, then perhaps you can create a new company. I'm having trouble understanding why you would roll your product into an existing consulting company.