tech-company, equity, contracts, co-founder, business-capitalDoes anybody have any actual experience with a deal similar to the one described below? If so, please describe the terms you reached.
Co-Founder’s Proposal. I had a co-founder ask me to write the code for a startup. I was to contribute the code in exchange for shares. The company would end up having full ownership of the code I would write plus any additional code that I wrote that would have a bearing on the company. He wanted me to give him a list of all the things I have already built and anything not on that list that I would build in the future would belong to the company. That seemed unreasonable to me.
My Counter Proposal. Instead, I offered to write the code but give the company “use” of the code in exchange for shares. “Use” would be an indefinite and unlimited license. If the company wanted to own the code in the future, it could either purchase it from me or hire someone else to write its own.
My approach in the past was similar to yours, however I soon changed to Matiss’s view. The issue is a company needs multiple things to succeed, and sales typically happens after development.
Once I understood how to build the value of the company, the deals changed to dynamic equity splits based on future efforts.
Time spent during development, your co-founder is probably talking to customers and asking you to change bits of the implementation? While there is no tangible output, their feedback in itself is reflected in the value potential of your code.
Economically speaking, past effort is a sunk cost, the negotiation strategy should be about ensuring maximum returns, not recovering costs!
In a sense, neither of your proposals are fair - in the first one, company owns your current and future contributions, in the second - you vendor lock the company.
Direct exchange would be more fair in the term of how fair a business can actually be - exact amount of work for exact amount of shares/money.
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