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What Are General Tips to Bring on a Co-Founder?

This question originally appeared on CoFoundersLab: Looking for a suggestion on biz arrangements with adding a co-founder

Answer from Charlie Zannorman, Full-stack developer

 

Splitting Equity:

Two co-founders working full-time who form a company together should expect to split equity between 90/10 and 50/50, depending on what each partner one brings to the table. You'll have to negotiate that.

 

I highly recommend against 50/50 and prefer 49/51 if you want "equal" shares. One of you should be the leader/CEO with the other as support. A partnership sounds heavenly at first, but they can fall apart when realities of your business change over time. This happens more frequently than you think.

 

Vesting:

Typically your shares vest over four years with a one-year cliff. That means you'd be completely vested after four years, but you’ll be left with nothing if you leave before the one-year cliff is over. Conversely, if one of you fires the other without "cause" (e.g. stealing from the company) before the cliff is up, the shares of the terminated party immediately vest the full cliff year even if it's only been a month. The cliff typically acts an incentive for both parties to work well together for a minimum of one year.

 

Read the full discussion on CoFoundersLab

 

General advice

Get a lawyer and do it right! Take things slowly and don't get in bed with strangers. If strangers are your only option for co-founders, try easing into the relationship by paying them a salary and offering generous stock options, rather than giving them an equity split. Many co-founders can feel like a great fit at first, but in the long run they can end up being a bad one. Unless you have done business with someone before, you cannot know what it's going to be like with them. Be cautiously optimistic about a four-year journey with a stranger!

 

 

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Looking for a suggestion on biz arrangements with adding a co-founder originally appeared on CoFoundersLab — the place to connect, meet, and collaborate with like-minded entrepreneurs.

 

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