WE'VE MOVED!

We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

Shared partnership?

mach777mach777 subscriber Posts: 1
edited May 2006 in Business Planning
Hello,
I am a system developer/designer who just got contacted by a friend who has an idea for an internet based startup company. His idea is really great, and it would be so cool to see it done.
I would be creating the site, which I calculate would take about 300-400 hours of work initially, and perhaps a few days a week to maintain, to begin with. He would do the other work, such as advertising, logistics, and so on. I`m pondering what is reasonable to ask for. I`m mainly interested in a 50% partnership, since from my point of view, I would be doing most of the work initially, and thus (in my point of view) taking most of the risk. He is not interested in shared ownership.
He does not have the capital to pay wages or pay me a set sum, so we have to solve compensation in some other way. There is, of course, a high risk this business doesn`t take off and the hours we put in will be "lost", so what is really reasonable for me to ask for? Based on what I charge as a professional in my normal daytime job,  I`d be putting in ~$40k or more to get the idea up and running.
How are these things usually solved? :]
Andreas
· Share on FacebookShare on Twitter Share on Google+

Comments

  • theswaynestertheswaynester subscriber Posts: 15 Bronze Level Member
    Would he be willing to accept a portion of the equity, or is he against any form of partnership?In my opinion, you are incurring all the risk and none of reward. If I didn`t get some form of earning potential, I`d probably pass.But that`s me.
    Matt
    · Share on FacebookShare on Twitter Share on Google+
  • keyconkeycon subscriber Posts: 34
    Andreas,
    Your friend contacted you. Wants you to help get the business off the ground. He has no funds to pay you. He doesn`t want to give up an equity position in this upstart. Someone will have to compromise.
    You have to decide if you are willing to discount $40K worth of work. I think an equity position exchange  is a reasonable request. Why does your "friend" not want to give up equity in the business? Do you really want to be in business with this person? Do you think you can be a partner with this person long term?
    Weigh your options. Write down the pluses and minuses. Make a decision. $40K is enough of an investment for some piece of the pie - IMHO.
    R@
    · Share on FacebookShare on Twitter Share on Google+
  • ChuckChuck subscriber Posts: 6
    Even if he was able to offer some discounted rate for the work you`re doing Andreas, I`d still insist on an equity stake in the company.  Assuming you just charged him at 25% of your normal rate (to pull a number out of the hat), you`re arguably providing a tremendous asset to your friend at a crucial stage in the development of the company - it`s unrealistic for your friend to think he can obtain that without providing some huge upside potential for you.And if the technical development is a huge barrier for him in realizing the potential of the business, it just doesn`t make any sense for him to be so resistant to offering an equity stake - ownership is offered for far less tangible resources in most companies.
    · Share on FacebookShare on Twitter Share on Google+
  • mach777mach777 subscriber Posts: 1
    Thank you all for comments, I`ll take another look at what he brings to the table and probably request an equity stake.
    Best regards,Andreas
    · Share on FacebookShare on Twitter Share on Google+
  • davennydavenny subscriber Posts: 2
    First I would like to say, it is nice that your friends
    trust you with talking about his idea with you.  Second I have read the
    posting in this thread and we are not looking at all the options.  First
    the facts.

    Work to be done around 40k value.
    Potential business revenue for the first year?
    Amount of work your friend will be doing in the first year?

    Ok these are the need facts.  However we can still come up with some
    negotiations without all the facts.

    First, you "loan" your friend the 40k in services, with monthly
    payments beginning when work is completed.  Have a business risk interest
    rate somewhere between 10-20% on the loan.  (This is probably a good
    option if he doesn`t want long term partners)

    Second, You take a look at potential revenue for the first year in operation. 
    You would take X cut of revenue, you would probably want the potential opportunity
    of somewhere between 100-150k because of the risk.

    Third, You agree option some equity split, example: 70-30 example.  The question
    you have to ask yourself with a 50-50 cut is do you want to be liable for this
    business debt if things do not work out.  It does not sound like you will
    be doing the day to day work and so I would assume the answer is no.

    There are several other options but this post is long enough, go a head and
    email me if you would like to talk more about this topic.
    · Share on FacebookShare on Twitter Share on Google+
Sign In or Register to comment.