founders cap table - sticky problem

StreamlineStreamline Posts: 1subscriber Member
edited May 2018 in Business Planning
Hi,

About a year ago a good friend of mine told me a very interesting scientific idea he was researching related to film. His motivations are artistic and scientific, not business. Me being a small business owner and artist immediately gravitated to the idea and saw the business potential. At the same time my brother who is a producer in the TV industry has been telling me how much he wants to get into startup culture and tech, so I brought him in and the three of us started a company, one third each. The technology is looking like it will have quite a bit of impact and if rolled to market properly could be quite successful. 

 My brother has been learning alot about start up culture and legals etc. Ive been kind of keeping a foot in all areas and trying to stay level headed and make sure we head in the right direction but the problem is that I can only invest about 50% of my time into the startup due to my other arts business. My brother isn't happy with this and wants me to have a lower share in the company becuase of this even though we are still in alpha stage and have not made our first sale yet! 

This is a bit upsetting for me considering I brought him into this venture. His argument is that when we get a vc on board that they won't invest if one of the founders has an equal share but only pulling 50% of their weight. 

I'm worried about cutting my shares at such an early point in the game, considering I was  a founder and the global potential of the technology. 

Is there a solution where I can chose to keep my other business going but maintain my share capitalisation? Perhaps through altering the founders wages? 

Should I just bite the bullet and accept a smaller slice of the pie or should I refuse and try and work out another solution? 

Thanks so much! 


Comments

  • ProductHQProductHQ Posts: 12subscriber Bronze Level Member
    In an early stage before you are launched or funded, it is accepted that you are working on your business part time and not full time since there is no funding or revenue, and we are all people, we have bills to pay. I would not worry about the fact that you are working and putting as much time as you can into the project. As long as your intention would be to go full time on it once funded or once you get it launched, then that is all that matters when it comes to investors. The reality is when you setup your cap table, you should never give out equity to everyone upfront. Everyone should earn out their equity over a vesting period so if you were to earn 50% it should be 10% a year for 5 years for example so that if you become inactive with the project, you walk away with what you earned but no more.
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