Equity Approach on Startup Weekend

AAnonymous ·January 23, 2015 ·6 answers

Going to a startup weekend and have an alpha product that has interest from a city government in our area.

I have 2 successful companies right now. One I own and the other is a partnership. The biggest thing that I learned is that I should not have given equity to my partner up front, it should have been eased over time.

I am strong with development and managing people. I am weaker in Finance and Sales/Marketing.

During a startup weekend, when is the best time to have and approach the equity discussion? I don’t want to give away equity unless someone produces results continuously over time.

6 answers from the community

AAnonymous· Jan 23, 2015

Confused. Is this for one of those competitions? If so, realistically, it should be split evenly and vested over time and performance. That way if someone quits, the company gets it back.

If you're starting a company in 3 days and that 3 days ends in a customer check, it sounds as if everyone had done their job, not just you.

AAnonymous· Jan 23, 2015

It is a competition. I'm not suggesting that noone get equity. I just don't want to give equity to someone for a few days off work unless that work was instrumental or they do well over time. I already have most of the code and have had the first 3 customer meetings for product creation.

How would you recommend approaching that discussion upfront?

AAnonymous· Jan 23, 2015

He/she just said it - a proper vesting schedule with a 1 year cliff. You can set these expectations from the start, but be honest that you plan to be the primary share holder/CEO and nothing will be formally signed until you incorporate.

AAnonymous· Jan 24, 2015

Yes, you are right. I learned too this the hard way. Don't pay up front or give up equity until one sees results.

Structure every deal in segments - I get this for this level of results; I get this other stuff for this level of results, etc.

Unfortunately, most people's eyes get too big - pay on performance and results and equity is the like the star at the top of an X-mas tree.

Best,

Pum

AAnonymous· Jan 24, 2015

I'd also factor the government bit into the equation. If you're looking for more than the "no approval needed" limit - typically $25K - then it will be weeks if not months before an RFP is issued and you <em>may</em> get a contract, and some time after that before you actually get paid.

In a situation like that, you really need a much stronger commitment than just what might pop up out of a single weekend.

AAnonymous· Jan 24, 2015

I think it's worth adding that the success rate for startups coming out of these sw events is extremely low despite all the guidance and expertise around them. Given the signalling around that issue i would avoid them entirely. Just build it in private. Fwiw Im an experienced founder with a very successful exit.

Equity Approach on Startup Weekend

6 answers from the community

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