founder, partnershipHopefully this is the right place to ask this question.
A friend asked me to join his startup (at this point it’s a little more than just an idea). I understand having a work/business relationship can be toxic for friendships. If I decide to join, what are some of the ways I can reduce the risk of ruining the friendship over some business issues?
The most important thing is TO PUT EVERYTHING IN WRITING!!! I’m amazed at how often people don’t do this.
The reason is not about trust, it is about making sure you all have the same understanding as to what is going on. When people have oral (or even email) conversations, it is very easy for the people to have different understandings of what is going on, but both people think they have the same understanding. Later on, the people realize they had different understandings, and then problems start.
The best thing, of course, is to hire a lawyer to make everything explicit. You may not have the cash to do this right now, and if that is the case, do your best to pretend you are a lawyer and write down all the important details of your relationship. Look at legal docs of other companies to see what kinds of things you may want to write down. Then have everyone read and sign it.
One very important issue is ownership and vesting. No one gets their full ownership share right away. It should vest (e.g., over 4 years with a one year cliff). Suppose you have 4 friends, everyone gets 25% of the company, and one friends quits after a month. He shouldn’t get 25% of the company for one month of work. With the above vesting schedule, he won’t anything until he hits the one year mark. After one year, he will own 25%/4 or 6.25%. Only after being part of the company for 4 years, would he own the full 25%.
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