I am one of three founders (all part time) of a software start up which is still in early stages. Considerable effort has been logged even though no formal arrangements have been made. We have verbally agreed to equal ownership of the company though there has been no valuation. To date there have been no investments and only insignificant cash expenditures. Now we are discussing formalizing the arrangement. One of the founders intends to invest 500K of his own money in this venture. I am concerned about preserving equity after this occurs because I am not in position to invest cash. I'm not convinced such a large cash infusion is warranted at this time, and that we could grow more organically leading to a higher valuation when cash investment is required, minimizing dilution of my equity.
As I write this I anticipate the answer will be that this can be a problem and that our partnership agreement should include a requirement that all founders must approve of any equity investment or dilution. Perhaps this is always the case? Thanks in advance for your advice.