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I have been working on a big web app/mobile app for students in my country. It's a project that should take me 6-8 month as a solo developer (full stack Next.js)

Right now, I'm focused 100% on finishing the code, but I had a friend of a friend who proposed to be a co-founder to help develop the society, business plan, talk to universities, and some marketing and stuff (he is very talkative, skilled, emotionally intelligent).

What bothers me is that he asked me for 50% of my next company share if we work together. I have been working for 3-4 months on this idea, and there are still 4 month to go for it to be finalized

Is this a good deal, or is it asking for too much?

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  • 8
    It is unlikely that anyone other than you can evaluate whether something is a good deal or not. It will depend on your evaluation of how much the friend of a friend will increase the value of the company. 100% of x is worth less than 50% of 10x. Jul 26 at 7:37
  • Also if you want to avoid your question to be closed because the answers can only be based on the people's opinions, you should change your question. Example: "What is the share ratio of most tech founders in the first few years?
    – Pierre44
    Jul 26 at 7:47
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    You can demonstrate your talent by finishing the app and showing that it works. Can your friend prove that, in the past, he has been a talented salesman where he successfully sold a new software or product to a company or university ? If not, then don't trust the idea he is showing you that "he is very talkative, skilled, emotional intelligence". Jul 26 at 8:02
  • 1
    All you have to decide is 50% of your business worth NOT having to do "business plans, talks to universities, and some marketing stuff"? Hopefully, this individual must meet certain metrics, otherwise they could do "a horrible business plan, really boring talks to universities, and very little marketing" and still get 50% of your company.
    – Donald
    Jul 26 at 17:34
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    This may sound like a trite comment, but seriously take a look at a couple of seasons of Dragon's Den. They will point out more beginner's mistakes in a few hours than you will find in a year of academic study.
    – Tetsujin
    Jul 26 at 17:48
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A good non-technical partner is worth 50% easily. There's a big difference between a company with code and a company with revenue. I hope that is obvious. And there's a lot of hard work and talent that is expended to get from one to the other. Writing a bunch of code that attracts no interest is probably the #1 outcome for developers who try to make a business.

What you have to do is find out if your potential partner will be a good one. This is hard because it's a judgement call about something you have little expertise in. Look at their track record and ask others about them.

You should also try to reduce risk in case your judgement is wrong. Make sure to create a decent founders agreement that protects you. Perhaps have them work up to their equity progressively based on goals (like each time they bring in business, sign a university etc).

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  • Thanks you for your response, by the way its more like a Saas learning and social platerform for students, so it won't need any company/university approval (only to send marketing mail to student in this university)
    – karim
    Jul 26 at 8:15
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    @karim I really hope that your marketing plan isn't just to spam university student email addresses... plus I'm not sure how that melange of buzzwords is supposed to deliver business value to the customer (whether that's the students or the universities) - even if your core business plan is to sell student data to advertisers, you still need to offer them something that they'd want to use to begin with.
    – nick012000
    Jul 26 at 17:46
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    @karim the details of the product aren't terribly important. What matters is the fact that you have to actually sell it to make a profit. You can have the best product in the world but it does you absolutely zero good if you can't convince anyone to buy it. If you want the business to get off the ground, you need someone who can sell your product. Whether such a person is worth being given 50% of your company is something only you can decide but this answer opines that it is. And I would agree.
    – aleppke
    Jul 26 at 19:10
  • of course the application itself is very useful for students, i didn't plan to sell users data but not against it, right now i'm going to lunch it using a subscription model, @nick012000
    – karim
    Jul 26 at 19:10
  • Oh, yeah, I mean to say it could be 50% and that the OP probably undervalue non-dev work. Not to say that it can't be less (or more) or that this potential partner deserves that. I'm not really sure yet how to advice the OP on exactly what makes a good percentage, and that wasn't the question at the time I answered. Other answers have pointed out that an important difference between 49% and 50% is control over your business Jul 26 at 19:57
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You think like an employee: I worked X amount of time, I deserve Y amount of shares.

You should think like a business man: I have X, if I don't invest, what will be my income Y? If I invest part of X, what will my income be?

So if you give him half, will he more than double your income? Than it's worth it (mathematically).

The next question is: What's the minimum amount he would accept to join? (So gain as much as possible while spending as little as possible). This can be part of negotiation.

Then there are power dynamics: If he gains 50%, you are now equal partners with equal say. If he gained e.g. 30%, you would have the ultimate say in things. Maybe he doesn't want that. So think about if you would accept him as equal, and if that would benefit you.

If you give him any shares, research contracts and especially the details of splitting up again. Let's say you give him 50%, and after one month you don't like what he does and you want to get rid of him. If you didn't prepare for that, he now can hold your whole product hostage and basically demand whatever he wants.

Trouble between founders is the #1 killer of Startups. So you should prepare for that to make it survivable.

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    If you are going to give away 50% of your business you most definitely should have quantifiable metrics to earn that 50% of your business.
    – Donald
    Jul 26 at 17:37
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A lot depends on why you are building the app.

If you already have a market then it's best to retain as much ownership as possible at the start. You can collect money, consolidate and upgrade then get more serious about sales.

If you don't have a foot in the door, then you're just looking for funding on speculation and that isn't worth much.

In terms of the guy himself, check him out, what achievements does he have so far? If you're both doing it on speculation then it's of lesser importance so long as he has the marketing skills. If not then you need someone with existing connections, not just talk. A salesman without a network isn't worth much, but a salesman with an existing network in the industry he/she can leverage is a huge asset.

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  • actually i have done some market analysis, this is a nich where there is not many concurrent and i can easily have millions of users (analyzing similar website but with far less specialized code and more like a generic script ) but its still speculating
    – karim
    Jul 26 at 8:50
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    Why do you need anyone if you can easily have millions of users? Do the concurrent have millions of users? Are you expecting to generate your own users, or take competitors users?
    – Kilisi
    Jul 26 at 10:01
  • basicly my idea was that with two people with differents skill : me (technical) and him (management, administration, marketing) we can do something better ? but on my side i can see myself creating a company, putting the website/app online, and doing some seo stuff/marketing using social media and others means. to generate users i can both take from competitors with a not so good similar product, and generate my own users(students) from marketing in universities. so its possible to go on my own or togheter, but its my first time creating a company so i still need to learn a lot
    – karim
    Jul 26 at 11:20
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    Better off with an accountant then, they know how to do all the new business stuff. Sales people are a toss up. Sometimes work out, other times not, but don't care enough if it's on spec
    – Kilisi
    Jul 26 at 12:09
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Paul Graham from Y Combinator has a famous helpful answer to this question.

http://www.paulgraham.com/equity.html

Whenever you're trading stock in your company for anything, whether it's money or an employee or a deal with another company, the test for whether to do it is the same. You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 - n)% you have left is worth more than the whole company was before.

For example, ...

It's worth reading the blog post in its entirety.

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Rule of thumb for the small business is:

"Use your strengths and staff your weaknesses"

50% partner its not just financials, decision making is a very big part of it as well. Can you trust that your and his vision are aligned?

Are you sure that his contribution as co-founder will net more than his salaried / commission position?

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Who contributed more to to the success of Apple: Steve Wozniak, or Steve Jobs? Do you think Woz's net worth is more, or less, for his partnership?

Every company needs a product, and marketing. Are you able and willing to devote time and ability to marketing? What's it worth to you, to have someone market it for you?

Some people manage to do both, but it's much more rare to have both the technical ability and the marketing ability; and even when that's true, having time to do both is difficult.

All this said, of course, the question is, are you talking to Steve Jobs? Or Bernie Madoff? There's no good way to tell, so consider having a lawyer draw up the contract very carefully so you are protected if the person doesn't actually contribute meaningfully.

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  • Lots of people made lots of money listening to and working with Bernie Madoff. Perhaps pick an individual who made lots of money but eventually had no money like John McAfee?
    – Donald
    Jul 27 at 2:05
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I have been in a similar situation. Before you consider shares, consider a founder's agreement written by a solicitor.

You need a business person with contacts and a proven sales track record. You also need to guard against them literally sitting around and doing nothing (I have seen it happen to others).

You can write the founders agreement such that as they work or make sales they are entitled to shares. Perhaps an initial grant of 10% would be appropriate to get things started.

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Surprised no one has mentioned this yet but why not offer him 49%? I think that's reasonable because it's a negligible monetary difference but then you can retain majority voting in the case of a disagreement.

I feel that being your original idea, this is a very fair compromise.

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