Planning on building a startup and then retiring from it without alienating my co-founders [closed]

Question

I am a professional software developer with substantial experience in my industry. A year ago I was approached by an acquaintance who runs a small local brokerage with another partner.

I started a website, supporting the two brokers to grow a side business in exchange for a three way revenue split deal. That site has been growing ever since and is rapidly overtaking their old offline brokerage in terms of revenue. We are now talking about incorporating and building a full blown company with a range of products.

I am committed to kickstarting everything and see to it that all products grow to maturity, hiring junior developers along the way and teaching them until I am no longer needed. Then I would like to retire from the business, (mostly) attend to other interests and - of course - still collect my share. We are probably talking about a 3-4 year timeframe here during which I would be on the team full time and phase out my involvement from the day-to-day business. They, however are in it for the long run - they are not after some kind of exit.

The two other partners see my wanting to withdraw from a "9-to-5" mindset at some point as me saying: „My time is more valuable than yours“. Which, considering I would quit an extremely well paying job for this opportunity and my talent being in more demand than theirs, it probably is. They, however, take offence at this viewpoint and think I am being selfish.

What is a good way to convince them otherwise in a diplomatic way? What’s a fair proposition?

Answer 1

There should be a difference in the total compensation a founder receives if they are continuing to work full time for the business compared to just drawing a share of profits.

There are several ways to set it up. The cleanest is probably to separate what the business is paying you to work for it from what it pays you as a part owner. Each founder, once you are past the initial start-up phase and have revenue, would be paid a reasonable salary that counts as an expense to the business. Job income before going into the business full time would be a good starting point for determining salaries. The profit share would be based on the net profit after expenses, including salaries.

When you retire, your income would go down by the amount of your salary, just as it would if you retired from a business you did not partly own. The business could use that money to pay a replacement, if necessary. If they do not need to replace you, you would get one third of it back in increased profit share.

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One way of testing fairness is to imagine yourself on the other side of a transaction. Suppose you are still working on polishing the software, hiring junior developers, and teaching them. One of your co-founders gets a job offer they can't refuse. Or wins the lottery. Or wants to go live in a commune. I know the brokers do not currently plan to leave, but circumstances change.

Would it be fair for them to go on collecting the same amount as you and the remaining broker are getting, while not doing any work for the business? Or would you want the company's total payment to them to drop by a reasonable salary?

Answer 2

Do you have a contract? If not, you should work with them and one or more lawyers to write up exactly what share in the company each of you has and how much work each of you needs to commit to the company to keep earning your share.

Once you have a contract, it's unreasonable for them to expect you to stay at the company forever. Your reasons for leaving are pretty irrelevant, it sounds like you are trying to do right by them by hiring and training your replacements and planning on leaving the company without leaving it in a lurch (although I wouldn't expect that you'll keep earning an income from them if you aren't actively working there).

To be honest, I don't think it is a worthwhile pursuit to try and convince them that you are not trying to snub them if they've already decided you are, but if you really want to try and avoid burning bridges you can try and explain that you don't have any ill-will toward them, but you want to move on to new projects. Perhaps it will make more sense to them if you explain that while they are actively brokering new policies, as a developer your work is mostly done, with the exception of possibly adding new features every now and then. In a way, you're doing them a favor by hiring people who they can presumably pay less in order to keep their site working, so they can take home more of the profits for themselves.