ASk HN: second thoughts about joining startup - what to do?
9 comments
You're talking to the wrong people. We can't fix the fact that your friend is mad with power, and has a weak grasp on the value of an idea without someone to execute it.
You need to talk to your friend, and tell him you would love to work with him on this, but the opportunity cost only makes sense if you are an equal partner in the venture. You simply can't take those kinds of risks, accept so little income, work those kinds of hours, without a reasonable expectation of equal sharing in the results of the work. If he wants you to work for him, rather than be a co-founder, he should be offering competitive market rates and benefits (or contractor rates and no benefits; you could even offer him the "friend" rate of $100/hour rather than the regular rate of $150/hour). He'll either realize he's being a douche, or yell at you to GTFO and never call him again. Either way, you come out ahead and you don't get screwed out of a couple of years of your life just to wind up in a crappy job where you're under-appreciated and underpaid.
You need to talk to your friend, and tell him you would love to work with him on this, but the opportunity cost only makes sense if you are an equal partner in the venture. You simply can't take those kinds of risks, accept so little income, work those kinds of hours, without a reasonable expectation of equal sharing in the results of the work. If he wants you to work for him, rather than be a co-founder, he should be offering competitive market rates and benefits (or contractor rates and no benefits; you could even offer him the "friend" rate of $100/hour rather than the regular rate of $150/hour). He'll either realize he's being a douche, or yell at you to GTFO and never call him again. Either way, you come out ahead and you don't get screwed out of a couple of years of your life just to wind up in a crappy job where you're under-appreciated and underpaid.
Sounds like you've hit a rough patch, but that doesn't mean you should skip out on the idea if you believe in it.
You need to establish expectations for your venture. Simplest is hours / week; if he's working on it full-time, he'll be putting in 50-60 hours / week. If you're putting in 10 hours / week, use that as a baseline to discuss both expectations as well as compensation.
Alternately, adopt a sliding scale of equity for you, out of his general shares. With my startup, we hired another coder on an equity basis, contracting out the specific deliverables he needs to come through with in exchange for specific amounts of equity. E.g., we defined the admin interface, then specify that completion of this by such-and-such a date entitles him to 10 shares. Add in bonuses for completing work early. The sliding scale means that he is protected if he needs to go hire another programmer.
However, make sure that he understands your desire to participate in the business side of things as well. As a coder and startup guy, I've often found the strategic planning stuff the most interesting.
And, finally, if he doesn't want to give you a reasonable amount of equity, remind him that he'll otherwise have to pay to have the website built, and that your prices range from $friend_price to $overloaded_price. And building the site needs to be your #1, 2, and 3 priorities right now.
Good luck! If he's not amenable to these terms (giving you a share of the company), you may not want to work with him. There are hundreds of great ideas out there -- don't limit yourself to this one idea. It's not the idea that will succeed, it's the people. You may be better off finding a better group.
You need to establish expectations for your venture. Simplest is hours / week; if he's working on it full-time, he'll be putting in 50-60 hours / week. If you're putting in 10 hours / week, use that as a baseline to discuss both expectations as well as compensation.
Alternately, adopt a sliding scale of equity for you, out of his general shares. With my startup, we hired another coder on an equity basis, contracting out the specific deliverables he needs to come through with in exchange for specific amounts of equity. E.g., we defined the admin interface, then specify that completion of this by such-and-such a date entitles him to 10 shares. Add in bonuses for completing work early. The sliding scale means that he is protected if he needs to go hire another programmer.
However, make sure that he understands your desire to participate in the business side of things as well. As a coder and startup guy, I've often found the strategic planning stuff the most interesting.
And, finally, if he doesn't want to give you a reasonable amount of equity, remind him that he'll otherwise have to pay to have the website built, and that your prices range from $friend_price to $overloaded_price. And building the site needs to be your #1, 2, and 3 priorities right now.
Good luck! If he's not amenable to these terms (giving you a share of the company), you may not want to work with him. There are hundreds of great ideas out there -- don't limit yourself to this one idea. It's not the idea that will succeed, it's the people. You may be better off finding a better group.
Replying to myself feels weird.
Anyway, if he's asking you to sign NDAs, he's probably off his rocker. IMO, the NDA in the startup world is a red flag that somebody is clueless how little their idea is worth. It's execution that matters. (NB: my anti-NDA stance doesn't apply evenly. A biotech startup would be well served by one, but most startups should never use one in this situation).
Anyway, if he's asking you to sign NDAs, he's probably off his rocker. IMO, the NDA in the startup world is a red flag that somebody is clueless how little their idea is worth. It's execution that matters. (NB: my anti-NDA stance doesn't apply evenly. A biotech startup would be well served by one, but most startups should never use one in this situation).
Dreams of grandeur corrupt the best of men. Give him a link to this page, it states your concerns very clearly. If he doesn't get it, don't continue with him.
> But my friend has other plans, it seems. Basically, he is about to be the sole founder and owner of the company.
He's trying to grab the reward and shift the risk to you.
Strict percentage deals often don't make sense, especially for minority partners. They're taking as much risk, if not more, and they're getting short changed on reward.
He's probably thinking big exit, say $100M, and doesn't see why you should get $25-50M. However, the likely best case result is a $5-10M exit. If you're putting in a couple of years, $1M is absurd. (Note that the typical result is a $0 exit.)
If he's fixated on the big score, he might agree to something like you get 50% of the first $5M and 10% after that. That shifts the risk back to him. If he's the genius that he thinks that he is, that's basically the same as a 10% deal. However, you get a decent payout if there's any decent exit.
However, I suspect that the right move is to walk away, as most of the other people are suggesting.
He's trying to grab the reward and shift the risk to you.
Strict percentage deals often don't make sense, especially for minority partners. They're taking as much risk, if not more, and they're getting short changed on reward.
He's probably thinking big exit, say $100M, and doesn't see why you should get $25-50M. However, the likely best case result is a $5-10M exit. If you're putting in a couple of years, $1M is absurd. (Note that the typical result is a $0 exit.)
If he's fixated on the big score, he might agree to something like you get 50% of the first $5M and 10% after that. That shifts the risk back to him. If he's the genius that he thinks that he is, that's basically the same as a 10% deal. However, you get a decent payout if there's any decent exit.
However, I suspect that the right move is to walk away, as most of the other people are suggesting.
You seem to have left your thinking about a lot of important issues to too late. You seem to have assumed that you would be equal business partners when the two of you should have been smart enough to work all this out in advance.
I don't see why you are concerned that you have signed an NDA. As you say it means you can't tell other people about the workings of the start-up, which is exactly what the NDA is designed to do. Why would you want to go and divulge information about the company to anyone outside it - thats really concerns me as a business owner. Your friend is working full time, and you might be capable of 3 hours a day five days a week by the sound of it so the relationship doesn't seem equal. Sure you have the technical programming skills, but the real value is in the idea and execution of the idea. He could just hire someone to do the technical parts but obviously he may not have start-up money to do this which is where your real value lies in being able to negotiate some equity for your work.
You shouldn't question trust in your friend because of the NDA, you should see that he is smart and looking to protect the start-ups ideas in the best interests of everyone (yourself included if you have an ownership share in the end). I am in a similar situation of executing an idea I have had for years, and its very scary to think about others stealing your ideas for their own benefit after you have put so much thought into something.
I don't see why you are concerned that you have signed an NDA. As you say it means you can't tell other people about the workings of the start-up, which is exactly what the NDA is designed to do. Why would you want to go and divulge information about the company to anyone outside it - thats really concerns me as a business owner. Your friend is working full time, and you might be capable of 3 hours a day five days a week by the sound of it so the relationship doesn't seem equal. Sure you have the technical programming skills, but the real value is in the idea and execution of the idea. He could just hire someone to do the technical parts but obviously he may not have start-up money to do this which is where your real value lies in being able to negotiate some equity for your work.
You shouldn't question trust in your friend because of the NDA, you should see that he is smart and looking to protect the start-ups ideas in the best interests of everyone (yourself included if you have an ownership share in the end). I am in a similar situation of executing an idea I have had for years, and its very scary to think about others stealing your ideas for their own benefit after you have put so much thought into something.
You can have a friend, or you can have a business partner. It's extraordinarily rare to achieve both (at least not in the sincere meaning of the words 'friend' and 'partner').
Generally, when you become a business partner with a friend, one relationship or the other will prevail -- that's really okay, and you should accept that as a natural consequence. To not recognize or accept it is folly.
Your case sounds like a very common scenario from the late 90s the dot-com era (except that then Greed excelled to greater dominance than now) -- an MBA-type has an idea that is wholly unrealizable on his/her own, yet he/she belittles the very technical skills it takes to truly succeed. There were (are) many examples of folks with very strong technical skills, but no marketable ideas or business sense and no appreciation for those who have them.
It only works when both partners recognize and respect the complementary abilities they bring, and recognize that the business will fail without _both_ of them.
Your so-called friend doesn't seem to see the equilibrium you see. Maybe he/she is delusional, or naive, or just dumb. The question in your mind maybe should be just how savvy that person would be when confronted with other 'executive challenges'....just as egoistic as now?
Reconsider your friends...and when you have one you cherish -- don't blow it by becoming business partners!
Generally, when you become a business partner with a friend, one relationship or the other will prevail -- that's really okay, and you should accept that as a natural consequence. To not recognize or accept it is folly.
Your case sounds like a very common scenario from the late 90s the dot-com era (except that then Greed excelled to greater dominance than now) -- an MBA-type has an idea that is wholly unrealizable on his/her own, yet he/she belittles the very technical skills it takes to truly succeed. There were (are) many examples of folks with very strong technical skills, but no marketable ideas or business sense and no appreciation for those who have them.
It only works when both partners recognize and respect the complementary abilities they bring, and recognize that the business will fail without _both_ of them.
Your so-called friend doesn't seem to see the equilibrium you see. Maybe he/she is delusional, or naive, or just dumb. The question in your mind maybe should be just how savvy that person would be when confronted with other 'executive challenges'....just as egoistic as now?
Reconsider your friends...and when you have one you cherish -- don't blow it by becoming business partners!
I don't see the need for NDAs unless his idea is patentable. If this is in the consumer space, that NDA would likely not amount for anything.
If you read enough startups, you'd know that the success of startups do not depend on the idea but on the founders.
With the situation you are in right now, you and your friend would probably not work well together.
If you read enough startups, you'd know that the success of startups do not depend on the idea but on the founders.
With the situation you are in right now, you and your friend would probably not work well together.
If your friend cannot give you a fair equity stake, its not worth your time and effort to make it work. Before signing the NDA (which is perhaps just legal due diligence), you should have been equally formal to make equity a pre-condition of signing, that would have been a good lead into negotiations. Or, maybe walked away. It sounds like you surrendered that opportunity because you're a nice guy and this is your friend, but..
This is business. I think you need to be honest, you feel like a "regular employee". Friends or not, you're going to be a sharecropper on your friend's land, and that's going to ruin your friendship if you keep quiet. What makes it better than any other gig? -- you said it yourself, you might as well freelance on honest terms up front as a contractor or as a regular employee at a regular company with money to pay you. Why should you risk investing your precious free time?
This is business. I think you need to be honest, you feel like a "regular employee". Friends or not, you're going to be a sharecropper on your friend's land, and that's going to ruin your friendship if you keep quiet. What makes it better than any other gig? -- you said it yourself, you might as well freelance on honest terms up front as a contractor or as a regular employee at a regular company with money to pay you. Why should you risk investing your precious free time?
For the past weeks, my friend and I have been discussing our new business venture. Actually, the idea is his and he has been planning it during the past years but it's only become serious during the last months.
I'm supposed to do the tech stuff for the company - coding, web sites, etc - but my understanding was that we both would be founders or atleast or equal partners. But my friend has other plans, it seems. Basically, he is about to be the sole founder and owner of the company. I can understand this to a certain degree; it's his idea and he's working full-time on the idea (I already have a job, so all my work is after my office hours). But I feel let down and hurt that he's decided to "demote" to an employee or contractor. Especially since I'm fully capable of discussing business ideas and development and actually discuss these matters frequently with him. What's worst, I've just signed a very general NDA that covers pretty much everything I'll do at the company and prohibits me from divulging information to other people. I felt forced to sign the NDA because I didn't want to let down a friend and because he insisted on it. In hindsight I realize this was incredibly stupid. Also, the NDA has made me really doubt my friend's trust in me and if I actually want to work with him.
I do want to make this startup work, but it feels that only a couple of weeks in, I'm in an inferior position and obviously more of an employee than a partner. Also, and this part is what I really hate, I've come to question my trust in my friend a bit because of the NDA.