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Ask HN: What is good advice going forward in my negotiations?
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2 points
by VB64
4892 days ago
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Currently I am one of three young cofounders (CEO, developer, marketing/customer development). We have been working with an outsourced developer for a bit of time now and he has been very involved in the business and has been acting as an advisor.
Due to the three of us thinking he would be a good fit on the team and wanting to get more code pushed quickly, we have offered him the option to join us as a cofounder. He is much more senior than us and adds a lot of credibility to the team, and he has many connections that have proven useful many times. He was the CTO of another startup years ago and has been advising many other companies since then while coding. He has agreed to join us but we are having a bit of difficulty on the terms of it.
He would like 24% of the company vested over two years with a six month cliff, and he would work around 30 hours a week or more probably on it. (The three of us are vested over 4 years with a one year cliff and are fulltime and own equal amounts of the company) He would have to work on other projects, however, since he has a lot of debt to pay (kids in college, mortgage, medical bills, etc). Basically, he wants 1%/month for the next two years and he is pretty set on that. I would much rather have him vest over three years at the least, and some investor friends of mine have agreed with this. They think an investor would want him to vest a bit longer to ensure he stays. We were thinking of maybe doing a deferred salary contract to get him to agree to three years and 20% once we are able to raise a seed round. At the moment we don't have the type of cash to pay him his market rates and we can only give him equity and the promise of a small deferred salary/incentive bonus later on. Once we raise a seed round we could pay him a small salary and he could work more on this.
How should I continue the discussion with him and is what he is asking for fair to us and him? Will this cause headaches down the road? |
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And some questions to ask yourselves: - How long have you been working on the project before he got involved? - How much ownership in the idea/IP does he have? - Do you all have the same definition of success? (e.g. does he want a long-term business or an acquisition? what does a 'successful exit' look like for you all) - Is this going to be his only job or is he consulting on the side?
When you're all very clear about the above, it will be easier to come to a reasonable agreement. The "What does success look like?" question is the most important, and something that many startup founders are afraid to ask until it's too late.
A 2-year vesting schedule is not insane, but it begs the question of whether the guy thinks he is key to the business. It is certainly something that seed or A-round investors will want to increase if he is vital, and if he's not vital he shouldn't get 24% :)
Good luck.