Equity discussion ended a cofounder discussion
TLDR: 15% offered to technical cofounder of 2 person DTC venture
I started a company with a few folks in 2018, we went through YC's startup school (the remote version) and we followed their advice for company org and more. We split equity evenly among us 20% each and left 20% for the future. Vesting over 4 years. So the 4 of us are for all accounts equal on that front. I am the technical team member who built our web platform and our react native app that we didn't launch yet. But that's another story.
Recently I was looking for a partner on the website cofounders lab. I have a solo project in the works, but thought I would like to pair up with someone and bring a different/their idea to life. Found someone pretty cool. They have a promising DTC idea and have done their market research. Over the course of 3-4 weeks, we had 4 video calls and a dozen plus emails and various google drive documents about my proposed architecture and the roadmap/tasks to complete to get our V1/MVP. To me felt like was moving along and I was building out our front end, backend and configuring our cms. We are both in NYC, but current times means in person meets wasn't possible.
I had thought we had larger team of 4 total, but I realized it was just the 2 of us. They have low 5 digits money for capital. Thinking about this being DTC and the team members not being 4, when we had a call and equity came up, they suggested 15%, and i suggested 33%. I saw a lot of our current and also future tasks would be in my bucket since DTC platform. I thought was a casual discussion and we would continue to talk, but ultimately this became our last phone call. There are other considerations I think they want a cofounder they know well, such as a friend or friend of a friend or colleague, and we parted on good terms. I wish them well. I also agree and not sure how anyone can form that strong relationship of trust to go into business with someone you meet recently. (some cofounders call this a marriage)
But long story short, IH's is this normal across the community? Are more of us solo founders? I will have my first solo venture up in few months or sooner, but if I were to partner up with someone in the future are there other strategies for equity discussion that IH's have found to be successful? I'm mostly familiar with YC - even split, and have read the Slicing Pie and few other things on the web, but am curious what IH's experience is?
Thank you for your time! Happy coding!
Agreeing to an equity partnership to literally a stranger (someone you just met for a few weeks) is not a good move. You don't know his work ethics yet, you don't know his background, you don't know his real skills (apart from what he states on paper)... but most importantly you don't know his character and whether he is a good fit for you and your company.
I'd suggest starting with small work contracts and see how he delivers. After a few of these you should have an idea of the person. Then decide if he is worth it for you to extend an offer.
That's how I found my co-founder.
Best of luck!
Very good advice!
I've been musing over bringing a partner in. What usually drives this is where you perceive your weakness is. What I noticed is that usually I overestimate that weakness. I always hold off on sending emails at least a day to make sure I'm doing the right thing.
Starting off on small work contracts sounds great. I'm assuming these are paid contracts, right?
In my experience you'll always find one founder doing more work than the other. We are all built differently. My first co-founder was someone I worked with for 3 years before breaking out on our own. 6 or 7 years later I had to ask him to leave. We were 50/50 and it was a messy break up. In 2010 I founded Hunter with a new co-founder who was introduced to me by a friend. We met and started working together (albeit from different countries) and after a year. Basically I don't think there's any rule and every situation is different. So go with whatever suits you.
It is not normal to cut the equity discussion like that. Unfortunately founders tend to overthink cap tables in the beginning and especially overweight preliminary works like code, landing page or market research. I think the advice what YC gives are in the good directions.
Finding co-founder is hard. But the mechanisms of common vesting agreement especially the one year cliff provision is there to mitigate most of the risks coming from the fact that you are working with strangers. Organizing that first year of work therefore become really important. You have to have success and failures in that period in order to get to know your partner and your reactions to this extreme events. Than you can have better understanding wether the partnership will work.
I'm building a DTC myself, and was wondering if you can share the architecture you had come up with. I'm going with headless Shopify + Prismic CMS + Gatsby. It looks like shopify doesn't do a great job with subscriptions though.