It's the final result that counts the most. If he wasn't pulling his weight I'm pretty sure the others would have kicked up a stink and given him the boot.
I actually talked with Steve about this exact topic a few months ago. The point he made was, in general, if you give a partner all the equity up front, kicking him out later doesn't make sense. Even if he's extremely unproductive, your only choice is to try to work things out.
Otherwise, he's just walking away with a huge chunk of the company.
'... The point he made was, in general, if you give a partner all the equity up front, kicking him out later doesn't make sense. Even if he's extremely unproductive, your only choice is to try to work things out. ...'
The "Ki" scenario. Remember in Startup.com (http://en.wikipedia.org/wiki/Startup.com) where a founder put an estimated 4 months + 20K then didn't quit his job. After negotiation he walked with 200K+ USD but this time paid for by his co-founders. There must be a better way.
Maybe increasing to total equity as progress is made, because you can bet with a group of four there is always going to be a chance of one founder for some reason or another bailing. But the way it's panned all, are paid. Maybe not as much as they theoretically could have. But money in hand (and a job), now is worthy objective.
'... Paul wanted to give Aaron Swartz, another YC founder, a birthday gift in November. More than anything else, Aaron wanted co-founder so Paul suggested the 'merger'. Merger is probably a bit hyperbolic for what actually happened, Aaron basically moved in with us and we made him a co-founder. ...'
They didn't push hard enough. This would have been the chance to negotiate ~ "What were some of the most flexible decisions you made?", http://tinyurl.com/39yobc
It must have seemed like a reasonable decision at the time; nobody had been nearly as badly burned by Aaron at that point as they have been since. If this reputed eccentric whiz kid hacker who wrote your web framework wants to join your startup, it doesn't occur to you that he might not produce and that therefore you should mess with the equity terms. I'd say that you shouldn't blame the people who made that reasonable of a decision for what happened since.
'... It must have seemed like a reasonable decision at the time; nobody had been nearly as badly burned by Aaron at that point as they have been since. If this reputed eccentric whiz kid hacker who wrote your web framework wants to join your startup ...'
I don't think I meant to say there would be a problem in taking on a new founder. The fact is someone joining at later time is more vulnerable and therefore you have a greater leverage. Joining later in terms of negotiating is a weakness that could have been exploited.
'... I'd say that you shouldn't blame the people who made that reasonable of a decision for what happened since. ...'
It's not blame, simply 20/20 hindsight. I say the founders in this case have done an exceptional job executing especially with this their first business. I'm just making an observation.
If you are taking him on as a cofounder, you obviously think he is very high-powered and will do lots of amazing things. Therefore, being a non-bankrupt non-scumbag, you don't particularly try to screw him on the terms of the deal.
Comments
It's the final result that counts the most. If he wasn't pulling his weight I'm pretty sure the others would have kicked up a stink and given him the boot.
I actually talked with Steve about this exact topic a few months ago. The point he made was, in general, if you give a partner all the equity up front, kicking him out later doesn't make sense. Even if he's extremely unproductive, your only choice is to try to work things out.
Otherwise, he's just walking away with a huge chunk of the company.
'... The point he made was, in general, if you give a partner all the equity up front, kicking him out later doesn't make sense. Even if he's extremely unproductive, your only choice is to try to work things out. ...'
The "Ki" scenario. Remember in Startup.com (http://en.wikipedia.org/wiki/Startup.com) where a founder put an estimated 4 months + 20K then didn't quit his job. After negotiation he walked with 200K+ USD but this time paid for by his co-founders. There must be a better way.
Maybe increasing to total equity as progress is made, because you can bet with a group of four there is always going to be a chance of one founder for some reason or another bailing. But the way it's panned all, are paid. Maybe not as much as they theoretically could have. But money in hand (and a job), now is worthy objective.
'... Paul wanted to give Aaron Swartz, another YC founder, a birthday gift in November. More than anything else, Aaron wanted co-founder so Paul suggested the 'merger'. Merger is probably a bit hyperbolic for what actually happened, Aaron basically moved in with us and we made him a co-founder. ...'
They didn't push hard enough. This would have been the chance to negotiate ~ "What were some of the most flexible decisions you made?", http://tinyurl.com/39yobc
It must have seemed like a reasonable decision at the time; nobody had been nearly as badly burned by Aaron at that point as they have been since. If this reputed eccentric whiz kid hacker who wrote your web framework wants to join your startup, it doesn't occur to you that he might not produce and that therefore you should mess with the equity terms. I'd say that you shouldn't blame the people who made that reasonable of a decision for what happened since.
'... It must have seemed like a reasonable decision at the time; nobody had been nearly as badly burned by Aaron at that point as they have been since. If this reputed eccentric whiz kid hacker who wrote your web framework wants to join your startup ...'
I don't think I meant to say there would be a problem in taking on a new founder. The fact is someone joining at later time is more vulnerable and therefore you have a greater leverage. Joining later in terms of negotiating is a weakness that could have been exploited.
'... I'd say that you shouldn't blame the people who made that reasonable of a decision for what happened since. ...'
It's not blame, simply 20/20 hindsight. I say the founders in this case have done an exceptional job executing especially with this their first business. I'm just making an observation.
If you are taking him on as a cofounder, you obviously think he is very high-powered and will do lots of amazing things. Therefore, being a non-bankrupt non-scumbag, you don't particularly try to screw him on the terms of the deal.