Ask HN: Terms when joining a company as co-founder

Posted by cies on Thursday August 04, 2011 @09:38PM
from the ask-hn dept.

I've been involved with building several successful products for a company that now wants to break those out into a new company. They've asked me to join as a co-founder. The mother-corp will make a substantial investment and will hold the majority of the shares -- the rest will be split over the co-founders (which includes me).

My fears are: - to be treated as an employee (not able to browse the bookkeeping, or not in the loop for important decisions) - to have shares that I cannot 'use' (heavily diluted, or unable to sell) - that there is some obvious mistake I'm making, only to find out several years down the road.

Advice is greatly appreciated.

( 2 comments | 5 points | on HN )

Re:Ask HN: Terms when joining a company as co-founder by gyardley on Friday August 05, 2011 @12:26AM (#2848951)

Everything you fear could potentially happen, and there's no way to guarantee it won't happen unless you never create a class of preferred shares, always own a majority of the stock, and always control the board of directors. The future's just too unpredictable for anything you do now to somehow contractually protect you from every bad outcome. Some of the things you're afraid of, like not being able to sell your shares without board approval, are standard operating procedure at venture-funded startups.

If I were you, I'd talk openly about my fears with my other potential cofounders and the parent company, listen carefully to what they say, and then go with my gut. That's about the best you can do here.

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Re:Ask HN: Terms when joining a company as co-founder by VicT11 on Friday August 05, 2011 @03:19AM (#2849281)

This is probably obvious - but I would approach it as if you were starting any start up that had outside investment. Have a lawyer review the terms and make sure everything is in your best interest.

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