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I came in as 4th co-founder with some old friends but am the only developer. I am doing all of the work right now and quit my job to work on the project. Two of the other guys are learning how to code and contribute some non-coding work to the project. They spend about 4 hours per week each working on the project. One member does less than an hour per week. The idea is very good, but nobody else is going to quit their job until the site is making enough money to replace their current income. Should I be concerned?

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Is the split even? ie 25% to each? After the initial coding, what will they contribute? Money? Time? – Landon Swan Apr 14 '11 at 17:51
The split is not even. The first founder is splitting 40/20/20/20. – user9478 Apr 15 '11 at 0:40

4 Answers

up vote 9 down vote accepted

Are they funding your time?

If yes ... is it comparable to your current wage? if it is then you should feel ok.

If no to either of those you want to have a serious talk about a sweat equity multiplier.

Basically your time * an agreed amount per day/week = your direct contribution that is comparable to you earning else where.

You are taking the risk earning less or nothing while doing all the work so you take your contribution above and apply a multipler to it say 3X or 4X.

EG.

  • You agree that you normally get paid $5000 per month = ~$60,000 per year.
  • They can pay you $1000 per month
  • Your net contribution is then $3,000 per month
  • You invest 6 months at this rate so you have $3,000 * 6 = $18,000 your out of pocket
  • You agree that you will put a 3X multiplier on this so 3 * $18,000 = $54,000 that you should be paid ahead of the other guys in order to consider yourself equal.

As the company starts to make a profit (assuming it does which is your risk), everyone starts to draw earning from the company.

You get paid this $54,000 out as a higher rate of pay over the other peoples earnings for the same period.

This is fairly reasonable as its you in the worst position now.

The other way to look at this that the $54,000 owed to you by the company buys you a greater amount of shares in the company.

As other people start to contribute you would just have an "Account" for each person to record what their amounts are sitting at and agree a prorata basis of payment.

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They are not funding my time. This is a great answer. I think it will go over well also, which is something I've been thinking a lot about. side note:I assume you mean "They can pay you $2000 per month". right? – user9478 Apr 14 '11 at 15:42
Yeah, if they are still working full time, they may contribute a % of their wage each to support you while your not earning. The difference is then what you factor. – Robin Vessey Apr 14 '11 at 22:19
up vote 1 down vote

"Should I be concerned?" - YES.

"...Statistically, if you want to avoid failure, it would seem like the most important thing is to quit your day job. Most founders of failed start-ups don't quit their day jobs, and most founders of successful ones do. If start-up failure were a disease, the CDC would be issuing bulletins warning people to avoid day jobs."

I'm quoting this good post on things that will kill a startup

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up vote 0 down vote

I think you should be concerned about the fact that they are no quitting their jobs. Why are they not doing so? There is a lot more to do in a startup than just code. Unless they cannot add value to anything, but then they shouldn't be your business partners.

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up vote 0 down vote

I would be concerned, yes. If they don't quit their day job, it means they are not fully committed to the new idea/project/company. Their main priority is the day job.

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