I understand the spirit behind "don't nickel and dime me". But remember that stingy is a trait that comes in handy for negotiating investments, supplier agreements, pricing, and exits.
There's a crucial difference between someone who's stingy because they don't value your contribution and someone who's stingy because they're cheap. Run from the former, but you may find you like the latter once you're on the same side of the table... which you will be for many years to come!
I've never had a cofounder like this, but I've (almost) had freelance clients who tried to start the relationship by sending an aggressive, strongly-worded, and one-sided list of rules. (Rule 1: You shall not be paid until final delivery. Rule 2: You must provide 24-hour turnaround; failure to do so will result in a $250 penalty. Etc..)
It's not about the money, but the attitude it demonstrates. It tips you off that the person will be unpleasant to work with, and imagines themselves constantly defending against people trying to take advantage of them.
Never forget Rachel from Bladerunner. If a CEO offers you 1%, you aren't in the business, packaging up your skills and selling them on to other investors so the CEO can cash out while you stick around for your so-called options is the business.
If you offer me 1% of the equity, I’ll do 1% of the work. If you offer me 25% percent, I’ll do 25%. If you offer me 60%, I’ll insist on only taking 25% and I’ll work 24/7 for you.
I see this sentiment it it's non-sensical. You're going to join a start for 25% and put in a quarter effort? I don't think so. You're seriously going to give up most of you're equity just to demonstrate your generosity? Nfw.
There is that nice story of the two cofounders who both tried to give the other 60%. Ok maybe, but this 60/25 statement is just grandstanding. If you would seriously do this you are too foolish to be a founder.
Refusing 60% equity is nothing like refusing free money. Think of it this way. I start something. I come to you and give you 100% of it. 100%! You take it, code, contacts, everything.
Now, you need a co-founder. Hey, what about me? What are you going to offer me? You can pick any number you like, but the point is that if I really am the best person to be your co-founder, you have motivation to offer me a substantial stake in the going concern.
So don't think of the author as "giving away" equity, think of him as taking 100% equity and then granting the CEO and original founder 75% to motivate him so as to maximize the value of the equity he keeps.
You might pick a different number, 50%, 49%, whatever, but you get the idea.
In other words, a deal is only good if it's good for both parts.
I would offer a potential partner 100%, but make clear I then wouldn't do any work myself if I didn't got a share. If both are equally dependent on each other, then a 50/50 split sounds just.
That's interesting, but I think wrong. First, a founding CEO doesn't need 75% versus 50% to keep them motivated. Second, if your are both going all-in, and your partner thinks you are worth 60%, you'd better have good reason to think you're only worth 25%. I could understand talking yourself down to 50/50 or 40/60, but 25%? That's makes no sense at all.
As I said, "You might pick a different number." I'm only arguing that declining all the equity you are offered isn't a WTF in and of itself.
As for the specific numbers... I really couldn't say anything without knowing the parties involved. Maybe these are completely fabricated to make a simple point, which is that he doesn't want to be lowballed, and he isn't outrageously greedy either.
Yep, just grandstanding. Point being that the equity offered should be commensurate with the value of the co-founder. If you're only offering 10% to someone who is worth 20%, don't expect to get full value. That guy will have a side project going while working for you.
It may not be grandstanding if the technical cofounder believes it's in his best interest not to take 60%. Maybe s/he feels that taking more would damage company morale overall, thus harming his/her investment.
Wow... the grass thingie on the bottom is so distracting that I almost can't read the article with it there! Thank goodness for Chrome Dev Tools. Right Click -> Inspect Element -> 'display: none;'
From the perspective a potential founder interviewing with a company, beware of any partner who insists on maintaining their majority position -- particularly if you will be the third or greater partner. It good indication you will not be a partner, but an employee. A second bad smell are companies without revenue and no audited valuation that require a significant buy-in. This behavior indicates a lack of the critical business acumen required to succeed.
There's a crucial difference between someone who's stingy because they don't value your contribution and someone who's stingy because they're cheap. Run from the former, but you may find you like the latter once you're on the same side of the table... which you will be for many years to come!