Hi there! I’ve been building tech startups for 30+ years. I’m doing a bit of mentoring to early stage startups through my local incubator and local university. I feel I need to give you guys a little advice on what is by far the most common regret I hear from first time founders.
Don’t blindly give away equity to advisors and co-founders you never actually worked with. Create a schedule with blocks (or %) of equity (ideally stock options) to be awarded over time based on crystal clear, measurable milestones for that person to accomplish. If that person does not deliver then you will not have to fight to get underserved equity back. Trust me, I have seen plenty of grown men (and women) in tears because the other cofounders were not giving themselves to the cause like they were. It can be soul crushing.
If your other cofounders don’t think it is fair, you can apply that mechanism to yourself too… You will give yourself to the cause, right?
also… if you have been recruited as a cofounder or a founding employee and have been promised equity, you have that in writing, right? RIGHT?!? Don’t be a fool.
Business broker here.
I occasionally talk to startup founders who made foolish mistakes giving away equity and are now looking to buy it back.
A common grift to watch out for in the startup space are advisors or fractional executives looking to weasel their way into the equity of startups.
The advisor offers to help the naive founders with his wisdom and connections in exchange for a modest salary plus equity. When the startup cannot afford the salary, the advisor settles on the equity.
Turns out, an hour phone call each week, worth at most $100, is a pretty good trade for 5 or 10% of a promising new tech company.