Hot answers tagged shares
22
Developer, offered share in small startup company in return for large rate reduction - advice needed
I think the share might be way too low.
Let's say you sacrifice $50K of pay per years for 2 years, or $100K. Is $100K less than 5% of the current value of the asset and company? If not, then you are just cheap labor.
Here is a set of formulas I use to keep the discussion real:
What is the probability of success? Realistically 10%. So you have a 10% ...
12
Share dilution is when the percentage of a company's stock that you hold is decreased through the issuance of more shares or the company issuing convertible securities. While the absolute number of shares that you hold remains the same; the total number of outstanding shares is increased, thereby reducing the percentage of shares you hold.
As an employee, ...
12
Developer, offered share in small startup company in return for large rate reduction - advice needed
First of all, your motivation is key. If you find the product especially interesting, and you have a long-term dream of doing a startup, then read further. Otherwise, decline politely.
Next: two years is way too long. Do not commit to more than 3 to 6 months of your life to a venture that doesn't pay the bills. If you love it, you can always extend.
...
10
20% sounds like way too much, considering what you are getting in exchange is unclear. I'd give 20% to someone who is my co-founder and will take a very active role in running the company.
If you want, give 20% with vesting over 4 years. So most likely, you'll get rid of this non-performing academic and all they'll have is 5% (still too much in my opinion).
...
9
Free Options
You have a friend that either owns a company and has a spare desk he is willing to let you use until its taken.
To introduce some variety during your work day you could try to work from different coffee shops for part of that day a few times per week.
Paid Options
Hubs or Workspaces. You pay membership and you get things like free wifi, a ...
7
Sadly for you it doesn't work like this. These guys have the vision and the money, so all they need is the capability to deliver which they can get from any decent developer. Yes, you built it, but just like when a property developer gets builders in to build that fabulous house, it isn't the builder that takes a big slice of the profits. You just pay the ...
6
As a developer, I can honestly say that the work never decreases. If you're developers aren't doing anything, then your business isn't moving forward.
It doesn't matter if you have the best app in the world; if you're not updating it, providing new features, and releasing new apps, then you will be outdated just as fast as last weeks milk.
6
Honestly?
Between zero and maybe 5% of the initial shares -- and 5% is on the high end, for a really extraordinarily good effort. In most cases, I would say a business plan is worth nothing at all.
By business plan I assume we mean ... the usual business plan. 10-15 pages of text with good market research, a loose idea about what the final product should ...
6
What am I sacrificing by letting him having 55% of the shares, other
than the profit?
Control. Generally, decisions are made based on the majority vote of the shareholders. If he holds more than 50% of the shares - he decides everything, and there's nothing you can do about it.
6
I would draft up an agreement that outlines you are leaving "XYZ.com" and that your friend has 100% of XYZ.com can keep the domain, the website etc. It's 100% his. The outline would also say you are welcome to pursue this concept and market with a new company in the future if you want with no obligation to your friend or XYZ.com for any royalties, ownership ...
5
Developer, offered share in small startup company in return for large rate reduction - advice needed
One of the best thought experiments is to suppose you had $100K, your salary loss, in the bank and the founders asked you to be an angel investor? Would you put the whole $100k into their company when you could use it to buy a house, buy bonds, invest in a mutual fund, or into any of the thousands of publicly traded companies in the US?
5
Vested: you own the shares out right, if you quit then they won't be returned to the company.
I've been in your shoes, I feel your pain. I think you are being sold out.
It is time to play hardball. The director(s) are not just selling the company, but also selling you. They've even codified it in the due diligence documentation. It sounds like some of ...
5
Don't give anything away if you don't know what you're getting in return. General smoozing without time commitment does not sound concrete enough to me. Either try to get him to commit to a certain activity, or (even better) have them pay for your stock. If they are willing to put their money where their mouth is, you know that they are really interested. ...
5
Assuming he is fully vested and the stock is not restricted in any way then clearly he owns it and it is his property. Trying to take something away from him against his will is tantamount to theft; the best you can do is buy it from him at whatever price you can agree on.
Your other option is to simply walk away from the company. You state it has no money, ...
5
Until it's in writing, all you are is setting yourself up for disaster.
Get equity in writing, by a lawyer, now. Otherwise you're just being taken advantage of, and you're one disagreement or flash of greed away from being out the door with nothing.
Assuming that's not already the plan.
Protecting yourself and demanding things be done right isn't being ...
5
To start with, let me ask you, "Why are you not happy with 45%"?
Merely getting a website done is not building business. If you friend is one who:
Came up with business idea and decided to go in the business.
Going to take care of operations and business side of things.
then he probably deserves his share. He can always get the same technical thing ...
4
Do the math.
This is a great question, and one of the most important issues facing early stage companies. When it comes to ownership, try to quantify everything. This helps to eliminate subjectivity and protect each party involved.
Simply coming up with the IP, the business plan, and early stage work to get to the point that you are currently - this is ...
4
Tough call. Ideally you would want someone who would bring as much to the table as you. Hence the terms co-founder and partner. If this person will single-handedly create the project and you market it, 50-50 or 60-40 makes sense.
You can't count penny by penny and try to see who will bring more value to the table. If you are a designer or a software ...
4
In general it is a bad idea simply because you will encounter every possible type of situation as the life of the business unfolds. You will be tested to the Nth degree as will your business partner. The business will strain the relationship to its limits.
That said, I'm living proof that it can work quite well. I own a business that employs my wife and ...
4
In my opinion, for getting out there and doing the 'smoozing startup activities', the best person for the job is you: the founder himself. Who better knows your startup and its goals, and who else best stands to personally benefit the most from these activities other than you?
Regarding UX, as a designer, I've always been skeptical of people who label ...
4
He cannot GIVE his shares back (unless that was in his employment contract via a vesting clause). The corp (or you) can BUY the shares (buy all the shares for $1, if you both agree).
One key issue in legal stuff is the concept of 'consideration.' In short, this means someone cannot give something without getting something in return. Fair doesn't factor into ...
4
Strategy 1: Dillute the shares. Award yourselves options based on your performance. You have majority ownership so push through an options package.
Strategy 2. Salary. Pay yourselves a lot. From his equity.
Strategy 3: Chicken. If you are the assets in the company. You play a game where you raise capital based on high valuation. If he is in, you are not ...
3
Paul, if you feel you are worth 20% negotiate towards that. I don't know about you but if I felt I was going to add that much value and felt like the compensation wasn't fair, I would start to resent it after a while - which isn't good for your relationship or the business. So you have to be happy with whatever you negotiate or it's not going to work.
I ...
3
Developer, offered share in small startup company in return for large rate reduction - advice needed
I just pulled the plug on a similar situation:
Promising Market
Sole Developer brought on
to convert and upgrade an existing
product
Offered Profit-Sharing and the
promise of a big payday down the road
It was just a part-time gig.
However, I definitely put in my fair share of hours supporting/developing the product.
The pay was nothing in ...
3
No offense, but it really seems you aren't ready to start this business, especially not as a dot com. If you can't think of at least 5 ways to get $1000 as initial funding, and actually go get the $1000 you probably aren't serious about the idea. This could be as simple as working an extra minimum wage job for 2 months after hours and saving the cash for ...
3
I would say avoid offering equity at all costs. It's something VERY hard to get back, and potentially very expensive even if it is "free" up front.
Plus the best developers will want a salary and you'll likely get more mediocre or inexperienced developers for an equity only offering.
Instead look into outsourcing small parts of the project and putting ...
3
The obvious disadvantage to this is that if you deserve 35% of the profit, there is no good reason why you shouldn't have 35% of the say. You have built in a system where someone gets to privilege their interests over yours.
Second of all, these shares are themselves going to be more difficult to market - you can't simply sell them as is as a tagalong to ...
3
Look for incubators as well. Here in Cambridge we have a few science parks and innovation centers which boast a range of services from desk rental (hotdesking) to small office spaces and fully managed incubator premises. As well as co-working, check out the incubator facilities and search for "shared office space [city name]". St Johns Innovation center ...
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