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Imagine the following scenario:

1 founder and self proclaimed CEO , created an idea for a new website internet services, and started developing it. The core of the system is done, he decides that one co-founder is needed and invited an friend, another very skilled developer, to be the CTO, retaining 30% of the company.

Both are also starting the initial costs, which are pretty much, clouding computing services to host the solution and books about subjects that help them make the it happen.

Both have their regular 8 hours job, and invest their time working on the startup during nights and weekends, they are doing good so far!

In their FIRST!!! attempt to search investors, an Angel Investor group, became very interested in the solution claiming 40% of the company shares by investing 300,000 US dollars.

Both founders are very satisfied, but before accepting, they face their initial argument.:

Founder wants to quit his job to work full time in the project for 1 year in order to accomplish the Angels agreed goals which is pretty much start creating a module to start making revenue. Founder also expects the co-founder to quit his job to do the same, which disagrees.

Co-Founder suggests to keep their jobs, and study to possibility of hiring developers to work remotely(from their homes, since there is no office) in order to achieve the Angel goals to justify the initial investment.

Most of the current development time, Founder is more into the project then Co-founder (spending more time of development) . Founder start believing Co-founder doesn't have the same level of commitment and don't deserve the 30% of shares...

As you see, there are many dilemmas in the story above... the questions that come up are: How do we define how much shares a co-founder should have? How to deal with Co-founder that doesn't have same level of commitment? How to re-negociate slipping shares after first offer of investment?

thanks

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2 Answers

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If someone from the outside like the angel investing group is investing in your company I think there are some expectations that you are going to give it a solid shot and really try to make the company a success.

That typically means that the founders are working 40 - 80hrs a week trying to make it great. I don't think that founding a company, working on it casually part time and trying to hire some outside people to build your idea would warrant a 30% stake.

What RISK has actually been taken, what money or expenses have actually be incurred to have earned 30%.

Sounds like there is a huge opportunity to use the angel money to really make something out of the business and if I was an investor I would want the founders fully committed on making it a success.

So the person at 30% would need to step-up and figure out how they can be an active and vital part of the business, or everyone needs to discuss a way to make it work out.

But if you don't have sales if you don't have customers and aren't making money then you don't really know that the Core is done... the system is never done :)

If everyone believes in the idea whole heartedly then make something of it. If not, then that person should probably just be bought out now.

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up vote 1 down vote

Step one: talk. I've been in a comparable situation, but I ran a consultancy business with predictable income streams. That made things probably go a lot smoother than in your case, but it still took a lot of talking and sharing ideas to smooth things over.

I think your main problem is not the perceived lack of commitment from your partner (that's the symptom). You fundamentally disagree on one of the most important parts of your business: how your MVP should be build. Unfortunately, you need to reach an agreement there, or split ways.

Personally, I would always keep the essential development of my product close to myself. Especially for something as important and unpredictable as your MVP. But I'm a webdeveloper, so I might be biased there.

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