A friend and I are starting a company. I get 35%, he gets 65%, because he is putting in money, while I’m just putting in labor. 35% is a large chunk and, to be honest, I’m not the most skilled person for this job (He knows that).
So, after I build the app for us, but before the 1 year cliff, why wouldn’t he fire me and keep 100% of the equity?
We haven’t signed any contracts yet. Is there a way to avoid this potential pitfall?
If you're not getting any compensation other than equity it's never a good idea to agree to the cliff. You have tons of options. Ask for deferred salary if he gets rid of you before the cliff. Ask for a different besting schedule during the cliff. Just be creative and focus on being fair to both of you.
Honestly if you can't prove your worth in the 1st year and make it impossible for him to fire you, you're not worth the equity. Nobody wants to go 9 months through the shittiest phase of a no-income producing to try and pull one over on their main tech guy. I guess there are some dicks out there though from the stories I read.
He has the money, he's in the drivers seat. I agree with above, a vesting schedule would be your best option at each quarter preferably or on delivery of said app or the mvp of said app. Possibly some combination of both, as nothing is every in a finished state. You want to be a partner, don't look at it like you're an employee.
Deferred salary isn't worth much, I wouldn't waste your time fighting for that if this is something you believe in. That is just giving him or a future investor an easy out.
How much are you talking he's putting in?
Remember, this is the only time you will ever have the equity conversation. Fight for what you believe in and get it in writing.