Hi everyone! My co-founder and I are planning to start an LLC. We came up with this idea because our biggest investor, who happens to be my co-founder’s step-parent, wants us both to start a company together since we’ve successfully completed numerous projects together.
Regarding equity, our investor is seeking 45% since they will bring clients to the company. My co-founder argues that I deserve 20%, while they deserve 35%, primarily because they are related to the investor. I believe that without my contributions, our investor wouldn’t have suggested starting the company for us, as the previous projects wouldn’t have been completed. I also believe that I possess more essential skills for the business than my co-founder.
I find myself torn between two choices:
- Accept the deal to gain more experience, even though it may not feel entirely fair.
- Inform my co-founder that they may not be the ideal business partner I’m looking for and decline the deal, which also feels like missing out on an opportunity.
I would greatly appreciate any insights you have to offer. Thank you all in advance!
Get their money and run, LOL
Your cofounder should get less because you have to deal with the risk of a) family diaputes affecting the company, b) family team up to overrule you or remove you.
I’d run away unless you decide the experience is worth it alone.
Your cofounder should get less because you have to deal with the risk of a) family disputes affecting the company, b) family team up to overrule you or remove you.
I’d run away unless you decide the experience is worth it alone.
first of all, no round should dilute you more than 20% at most. so 45% is out the picture. Give him a commission for bringing clients. Secondly, being a stepchild is not a fucking qualification or a skill. It’s probably your investor feeding him that shit going by him wanting 45%.
This is my feeling as well. The 35% claim is a distraction for the 45% requested by the investor
Is this a small business or a startup? If it’s a small business it may be fine if they never plan to get more investment. Additionally he mentioned it’s an LLC which makes me think small business. If it’s a startup trying to raise multiple rounds it should be a delaware c corp
Wait, so technically the investor (& his family) get 80% of the company while you get 20%, for being the most valuable player?
That doesn’t look like an opportunity in any world. 🏃 🏃 🏃
🚨🚨🚨 Walk away.
Did the co-founder actually state that the reason he/she deserves more is that he is related to the investor, or did he/she state that the investor would not have invested without them.
If they said the former, you shouldn’t partner with then you know you have a problem. if it’s the latter, you should go back to them and ask them to get the investor to state that this is what they wish. In fact you should raise it with the investor.
It is likely that the investor would not have know that a step child is behaving in such a way, and if they are a savvy investor would take him aside to tell him to differentiate between business and family. if they insist, you know you are being taken for a ride. Take your skills and bring it to another investor and partner.
Walk away now. Any founder with any sense of entitlement needs to be removed for a startup to work.
You all have to sacrifice so much, to get through the pain, hardship, difficulties, and failures along the way, and anyone who says they’re due more just because, can f right off and needs to be removed from the startup ecosystem overall.
They know someone??? Please, have this anonymously sent to them, have them message me, and I’ll tell them they are a detriment to founders everywhere.
You EARN your equity by doing the work that needs to be done. They vest. You vest. What work needs to be done? Marketing, sales, develop/deliver. That’s it. Anyone not doing that work, themselves, without resources, needs to go.
Yeh, thanks and no.
Walk away and find higher quality people to build with. Ideas are worthless, startups are all about co-founders.
This comment is assuming investment is easy to find which it isn’t. I agree about cofounders relationships being essential but also a lot of cofounders don’t come with a ton of capital.
This sounds like a family business and all the drama and unprofessionalism that goes with it.
Regardless of the equity split, you’re essentially always be competing 1 v 2 at the board level. They can kick you out as soon as you’re not needed anymore. Tread very carefully.
I can’t imagine how he pretends more.
He pushed you in a corner. Maby he wants from you to quit now when all it’s put in place.
IT’s ure problem If You didn’t had a discussion about procentages. Now it’s 20% or nothing. This is what You get now, You have to choose right.
If it’s a good business will bring you money to start another rocket company or to give charity.
And a valuable lesson about life.
Run
most important thing is team and partners. A bad business with good partners has a higher chance of survival than a good business with bad partners.