> where were they before the money started showing up?
Is that the question you are going to ask future hires who ask about equity as part of compensation? Equity is typically awarded to a broader base than solely pre-revenue founders - not for what have they done, but what will they do in the future, and at what compensation level and risk level. Equity is a tool to balance bad answers to other aspects of one's employment agreement, not (just) a reward for founders.
So before you come at this negatively, consider the best intentions - maybe they are sincerely interested in helping, and want equity to balance doubling down on their family risk by both partners being involved in a startup. If it fails, the whole family is in trouble, so some compensation for that risk is not unreasonable. At the same time, that needs to be balanced with the question of whether their talents are such that the company gets value back for that equity, and whether you'd make a similar offer to anyone else of similar talent.
If you can say yes -- that they have the correct talent currently needed by the company and anyone else with the same talent would get a comparable offer, then the board and employees should have no problem with the situation. But if you are awarding a nice position on the org chart and equity solely because of a family situation, it will likely cause concerns.
Where there are three, there usually becomes two and one. You're being invited to be the one and with both the two having their own bond, their equity will speak together.
Not a startup founder nor do I really have much knowledge in dealing with equity, but assuming that 51% of the equity remains with OP, couldn’t they give the spouse “equity without executive power”? I know I’ve heard of that concept somewhere but can’t remember exactly where from.
It's touches on various aspects of the relationship dynamics when one or both spouses are involved in starting a company. Here are some key points to consider:
1. Personal and Professional Dynamics: When both spouses are co-founders in a startup, there's often overlap between their personal and professional lives. It's important to set clear boundaries to prevent professional stress from affecting the personal relationship.
2. Division of Responsibilities: In cases where both partners are co-founders, it's essential to define roles and responsibilities clearly. Each person should have a distinct area of focus to avoid conflicts or confusion in decision-making.
3. Work-Life Balance: If only one spouse is involved in the startup, balancing work and personal life can be challenging. Long working hours and the pressure of building a business can strain the relationship with the spouse who isn't involved.
4. Emotional Support: Launching a startup is demanding and stressful. The spouse or co-founder needs to provide emotional support, helping maintain motivation and being understanding of the challenges that come with entrepreneurship.
5. Legal and Financial Considerations: If both spouses are co-founders, it's crucial to formalize legal and financial agreements to protect both the business and the relationship in case of disagreements or separation. This includes shareholder agreements, partnership contracts, and proper documentation.
6. Communication: Open and regular communication is key to addressing problems before they escalate, whether they're related to business operations or personal issues.
And others...
In summary, being a co-founder with your spouse or managing a startup while maintaining a relationship can be rewarding but also challenging. It’s vital to find a balance and clearly separate personal and professional matters to ensure both the business and the relationship thrive.
Reading your telling of the situation, my tingling sense are suggesting that their spouse is getting greedy. I'm assuming that you paid for the marketing services at a going rate. You have left unsaid whether you have a spouse and what their view is about the company, your cofounder and their spouse. I also get the impression that you and your cofounder might not be 50:50 partners. Of course, my comments assume that you don't yet have outside investors or stakeholders. If you do then they need to assist with your decision making.
Assuming you do need the full-time services of the cofounder's spouse, make her two offers, 1) at the going rate for that role and zero equity; and 2) at a discounted salary and with a small amount of equity, taken from the cofounder's share of equity.
If you don't retain majority of equity, then your company can be easily stolen from you.
wanting equity is very fair if that person is making the cash register ring.
those two knows the ins and outs, they can get rid of you and rebuild everything from scratch and also question what you bring on the table aside from being the idea guy or the visionary or the first mover.
id say be generous because if you three are well compensated, the only problem is increasing the size of the pie. make bold bets, you only got one shot to do this right. you and your cofounder already fucked up by involving family and friends, better go all in instead of planting seeds that can ruin your friendship with your cofounder or the relationship with the spouse.
watch michael and dalton vids on this, the product and the market can turn shit anytime, what matters is you all are working on your best because you trust each other and yall are well compensated enough in equity and money.
also have clear boundaries on each other roles so you dont overlap. review the airbnb guys.
> where were they before the money started showing up?
Is that the question you are going to ask future hires who ask about equity as part of compensation? Equity is typically awarded to a broader base than solely pre-revenue founders - not for what have they done, but what will they do in the future, and at what compensation level and risk level. Equity is a tool to balance bad answers to other aspects of one's employment agreement, not (just) a reward for founders.
So before you come at this negatively, consider the best intentions - maybe they are sincerely interested in helping, and want equity to balance doubling down on their family risk by both partners being involved in a startup. If it fails, the whole family is in trouble, so some compensation for that risk is not unreasonable. At the same time, that needs to be balanced with the question of whether their talents are such that the company gets value back for that equity, and whether you'd make a similar offer to anyone else of similar talent.
If you can say yes -- that they have the correct talent currently needed by the company and anyone else with the same talent would get a comparable offer, then the board and employees should have no problem with the situation. But if you are awarding a nice position on the org chart and equity solely because of a family situation, it will likely cause concerns.
Where there are three, there usually becomes two and one. You're being invited to be the one and with both the two having their own bond, their equity will speak together.
Not a startup founder nor do I really have much knowledge in dealing with equity, but assuming that 51% of the equity remains with OP, couldn’t they give the spouse “equity without executive power”? I know I’ve heard of that concept somewhere but can’t remember exactly where from.
Good point I had not considered. I also feel that mixing family with business is risky? I’ve seen it work once.
It's touches on various aspects of the relationship dynamics when one or both spouses are involved in starting a company. Here are some key points to consider:
1. Personal and Professional Dynamics: When both spouses are co-founders in a startup, there's often overlap between their personal and professional lives. It's important to set clear boundaries to prevent professional stress from affecting the personal relationship.
2. Division of Responsibilities: In cases where both partners are co-founders, it's essential to define roles and responsibilities clearly. Each person should have a distinct area of focus to avoid conflicts or confusion in decision-making.
3. Work-Life Balance: If only one spouse is involved in the startup, balancing work and personal life can be challenging. Long working hours and the pressure of building a business can strain the relationship with the spouse who isn't involved.
4. Emotional Support: Launching a startup is demanding and stressful. The spouse or co-founder needs to provide emotional support, helping maintain motivation and being understanding of the challenges that come with entrepreneurship.
5. Legal and Financial Considerations: If both spouses are co-founders, it's crucial to formalize legal and financial agreements to protect both the business and the relationship in case of disagreements or separation. This includes shareholder agreements, partnership contracts, and proper documentation.
6. Communication: Open and regular communication is key to addressing problems before they escalate, whether they're related to business operations or personal issues.
And others...
In summary, being a co-founder with your spouse or managing a startup while maintaining a relationship can be rewarding but also challenging. It’s vital to find a balance and clearly separate personal and professional matters to ensure both the business and the relationship thrive.
Reading your telling of the situation, my tingling sense are suggesting that their spouse is getting greedy. I'm assuming that you paid for the marketing services at a going rate. You have left unsaid whether you have a spouse and what their view is about the company, your cofounder and their spouse. I also get the impression that you and your cofounder might not be 50:50 partners. Of course, my comments assume that you don't yet have outside investors or stakeholders. If you do then they need to assist with your decision making.
Assuming you do need the full-time services of the cofounder's spouse, make her two offers, 1) at the going rate for that role and zero equity; and 2) at a discounted salary and with a small amount of equity, taken from the cofounder's share of equity.
If you don't retain majority of equity, then your company can be easily stolen from you.
Are you giving equity to everyone? Besides being a spouse, how the spouse different than any other employee?
Would you offer this deal to all employees spouses?
Were they paid a fair and equitable rate?
I can see your concern in the last line that the fear is they just waited for you at the finish line and want to get a piece of the prize money.
wanting equity is very fair if that person is making the cash register ring.
those two knows the ins and outs, they can get rid of you and rebuild everything from scratch and also question what you bring on the table aside from being the idea guy or the visionary or the first mover.
id say be generous because if you three are well compensated, the only problem is increasing the size of the pie. make bold bets, you only got one shot to do this right. you and your cofounder already fucked up by involving family and friends, better go all in instead of planting seeds that can ruin your friendship with your cofounder or the relationship with the spouse.
watch michael and dalton vids on this, the product and the market can turn shit anytime, what matters is you all are working on your best because you trust each other and yall are well compensated enough in equity and money.
also have clear boundaries on each other roles so you dont overlap. review the airbnb guys.