I've been working on SwitchDin for 8 months and have self-funded the product development (no salary). We've built a platform for managing solar energy and battery storage and with the help of some great contractors I already have a good prototype and have a few pilot sites up and running. We've had great feedback from pilot testers and channels partners and I'm gearing up to start selling. I anticipate our first paying customers in the next quarter. I'm not an experienced software engineer and have been looking for a co-founder to take the lead on these matters but so far the right person just hasn't emerged ... until now. Considering the investment i've made and the traction i can demonstrate I don't want to give equity away for nothing, but I still want them committed for the long term. So I feel they should buy-in but still take on a reasonable split. I would not expect them to take a salary until we raise or have the cashflow. Any tips on how to approach this arrangement or some models which are fair and equitable? How to handle the valuation? Also what about using vesting? I had in mind a cash buy-in to reflect current value but then a vested component to account for sweat?
So a few options, you could create a phantom tracking stock and never give any equity away, and this can structured like a contract, with profit sharing, exit sharing etc. Or if you really want to give equity, make sure to come to an agreement on the percentage, and that they will be diluted with new shareholders. You should issue 100% of the shares up front, and make them forfeitable or cancelable if they leave, under-perform etc. You can pull back that equity. And they get the benefit of lower base cost, less accounting etc. Options are the worst, and warrants may be a good method also. Or find yourself a company to JV with and add some serious horsepower to your plan. We do this with Startups to jump-start them into platform businesses.
Answered 8 years ago
Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.
Already a member? Sign in