equityI went to #websummit and bumped into a lot of people / startups / opportunities. One of the opportunities was exceptionally appealing - we met after hours, we had a productive conversation, we both agreed to find a reasonable and fair arrangement regarding finances and equity.
My strategy is to “lay cards on the table” - explain my current situation, expectations, needs of myself and other party to find something that will keep us happy, engaged, motivated, satisfied.
The product is “Uber for X”:
My intention is to work on this project for 3-5 years and make decent return of investment.
The original founding team is roughly 10 timezones apart. I offered them my full dedication to launch UK operations:
The original founding team is fully bootstrapped and owns 100% equity. I didn’t earn any rights to it but longer term I would like to have some percentage points. Reason for that - I am competent and experienced person - I am fully convinced that by working side by side for a few years I will significantly increase value of the company.
Since I’ll be using their technology it feels like the “mothership” should be eligible for some https://en.wikipedia.org/wiki/Franchise_fee
Yet another option (that I’d rather avoid it) is to rip off the idea and create my own platform. Personally I don’t like it as it would take me a while to build it from scratch and even then I would remain vulnerable to other copycats.
So the question remains - what is the reasonable and fair arrangement regarding finances and equity:
Maybe some of you know Uber / Groupon “franchise” model and how they solved issue of spreading out to other countries / cities? Such experience would be invaluable for me… Literally - I’m betting my next 3-5 years and I want to do this right - your advice will be greatly appreciated.
I believe that in 2015 this should be a common knowledge but still - I cannot find much information on the internet and need to crowdsource it… Even if your advice is “talk to a lawyer” by asking question now I’ll be better prepared to the conversation.
PS. Great read by Joel Spolsky: https://gist.github.com/isaacsanders/1653078
PPS. Previously I asked - https://startups.stackexchange.com/questions/7623/is-trip-to-websummit-in-dublin-justified - and the answer should be: “if you are sitting on the fence you should just go”
suggestion; Get everyone in the team to read “the partnership charter”, (or some similar book that covers this topic well), and then discuss what you agree or disagree with the books suggested, recommended approach. At the very least by having everyone read the same book you’ll have a shared vocabulary which will mean you’ll be able to discuss your “charter” with fewer misunderstanding’s caused by different definitions about core concepts of what is a “partnership charter”.
(charter) rough-ish agreement, often high level, bullet point, given to a lawyer to use as a guide to drawing up the shareholders agreement. (contract).
best of luck! The fact you’re asking this question means your core team is already (insert big % guess) more likely to succeed!
Don’t forget that by running UK operations, you are taking on considerable risk as well, which should find appropriate compensation. What exactly are the advantages as you and your partner understand them to open this “UK branch” for their startup? If both sides’ potential gains and risks are on the table, then you should be able to tell if you should be entitled to equity and how much. I do not like the franchise idea, as this seems to suggest that the “mothership”, as you call it, would be more or less free of risk.
All content is licensed under CC BY-SA 3.0.