Co-founder @ 10-year mark?

Eugene Gekhter CEO, Memorable. Founder, SharePay.

December 14th, 2013

What are the options for bringing on a co-founder when a company has been in business for over 10 years and sees a steady $1MM+ in revenue per year?

I still consider our company to be in start-up mode and the data collected about our customers and industry over 10 years has all been part of an R&D effort to develop the best product/service on the market.

This new product/service that we would offer to the market relies heavily on software solutions, integrated systems, and web development projects, and hence we need a brilliant developer/programmer that would join as co-founder and would see our company's vision as their own, and make it a reality.

Besides salary, what would be an appropriate equity offering with such a scenario? Let's say a rough valuation of $4MM for the company present day.

What would entice interested parties that are looking for more than a 9-5 gig in jumping on board as co-founder 10 years later? Do situations like this intimidate otherwise perfect potential co-founders as opposed to starting a new company from scratch?

Any advice, anecdotes, or other information is greatly appreciated in this matter.

Anthony Zeoli Digital Strategy and WordPress Consultant and Trainer

December 14th, 2013

The problem with bringing in a technical "cofounder" ten years in is that he/she really is not a co-founder in the truest sense of the word. Co-founders grow together with the organization from its inception. If you bring someone in now as a co-founder, they may come from a very different culture and the old way and new way may clash. You want to be careful of that. Plus, it might confuse your employees in terms of leadership - who's in charge. In my mind, it's far better to bring this person on as a CTO or CIO with a cash + equity compensation package. If you bring someone in as a co-founder, I would think you would then have to change your corporate structure and list that person as an officer of the company too. You have to ask yourself, is it worth all that trouble. Unless the person is making a direct investment in the company as a partner, I don't know that making a person a co-founder (which is really a partner) is a wise decision but culturally and for management reasons. But, it's up to you to do what you feel is right. Tony Zeoli, Founding Partner WordPress | Digital Strategy | IA & UxD 810 W. 4th St, #309, Winston-Salem NC 27101 ✉ az@digitalstrategyworks.com | Visit Our Site ☎ 917.705.4700 My profiles: [image: Facebook] [image: Twitter] [image: LinkedIn] Contact me: [image: Google Talk] djtonyz [image: Skype] tonyzeoli More words: BuddyPress - Build Social Networks with WordPress

Archer Hobson

December 15th, 2013

I think its very simple, founders are there at the inception of the company, this person wasn't so they are not a co founder. Making them one dilutes any efforts put forth by others that were apart of the company previously. There is a difference between a company having a startup mindset and actually being a startup. Ten years and a million in revenue signals an established company with an established product hence not what a startup actually means, a company searching for an established product.

Paul Bostwick

December 15th, 2013

I'll just jump in and add my voice to the "co-owner" not co-founder, unless you and the new person really pivot hard and wild for the next step. Part of the co-founder role is being involved before revenue and proof. And if that salary is competitive and they are not exposed to any risk (capital investment) then they are not even a co-owner. They are an employee.

As for a 10 year old start up? cf Steve Blank's joke about same. Sound's like you have a nice business - but the founder moment is gone. You need a head-hunter/recruiter to find candidates and help you compose an offer, not a founder dating profile. LInkedIn is FULL of recruiters.

Peter Gabris a humble codecrafter

December 15th, 2013

I understand why you want a co-owner instead of an employee. Been there, employees have excuses. Even when you see your company as a startup, you should treat the new project as a NEW startup. Ether spin of a new company with 50/50% for you and the co-founder or simulate that situation inside of your company. This is the same what you would do if your current company was a brick and mortar or if there would not be one at all.

This way your co-founder will have no problem to put in 120% of his time and energy (call me, may be ;-)) since your limited involvement (you still have to run your current company) will be balanced by the use of resources of your current company.

Peter Morgan CEO at Zepto Ventures

December 15th, 2013

5-10% equity but then they are not really a cofounder, are they?

Anthony Zeoli Digital Strategy and WordPress Consultant and Trainer

December 16th, 2013

I agree, Archer. I had also commented that at the level of maturity this company is currently at, a CTO with equity/compensation package is a better strategy, unless the person is coming in as a partner with a cash investment in the business.

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