Incorporation and stock sharing dilemma
So, let's get started. (P.S. - I am avoiding mentioning names of stuff like university etc, since it will be very
embarrassing if this gets read by my future co-founder, as he doesn't know about this dilemma i am facing yet)
First, A little background. I graduated as a Master's in CS from a reputable university this
summer. I am planning to start this company that uses AI to solve some major NP complete
problems related to resource allocation problems. It's planned to be a software product company.
This has been a product of my master's thesis. So, obviously the IP(Intellectual Property) is in both mine and my adviser's name. This idea is
basically an evolution of his idea, which his earlier students had been trying their hands on,
but it didn't quite work as well as it was supposed to be.
And finally, I came along and with all my magic touch (If you can believe that), we did it. I
started implementing from scratch and finally after one and half years or so, we got it working. Now, this product has myriad applications and all that, but we want to focus on two, at most,
for now, and see where we go from there. and when i say we, i mean the company.
I guess we have enough information now.
I have two major questions for you guys.
1. I have to incorporate this company sometime this week, since we had a demo last Friday and it
went very well. Now, the users are asking for this product, so this is the right time to incorporate and start selling i guess.
Now, I am not sure what kind of company it has to be. According to Ycombinator FAQs, we need to be a C-Corp. I am wondering "Is that like the common
requirement to accept money from any of the other investors as well? or is it just YC? ". How about other types? LLC? etc etc. I am not even sure what other types are out there, except these and S-corps. How about S-Corps? I have heard about S-Corp but i am not really sure if startups qualify.
2. And the more important one. So, I finally had the guts to ask him (my adviser) about our
stock distribution as co founders of this new company. His thoughts were the following:
"We make it 50-50, except since he will be continuing his full time job as a professor/head of department and I am doing all the coding full time (most of it is done already), I get a fixed salary(not yet decided) first from the revenue and then we evenly get 50-50."
Now, I was all happy with this for a few hours, thinking this is great. I start selling my
product, and apply to Ycombinator, which obviously is going to invest once they hear of me, my co founder, my company and my product. And I get to go live in bay area and share the startup experience with you guys.
And then i called people to talk about this and share this great news... I go : "Hey, listen, my adviser wants to open a company with me. How cool is that? This is totally awesome. He is a genius, and now he wants to partner with me"
Too bad, I had mixed opinions from them and that got me all confused.
Here's the thing. I am pretty sure he is NOT going to leave his job. And I am the one who has coded everything in this product. But the initial idea was his. IP is shared between both of us.
But if you ask me, he taught me everything related to this idea, and he has been helping me
through the worst of my times(I was in a coma, horrible horrible stuff happened to me,and he
agreed to give me a chance and guide me , believed in me, when i was almost broke...so....u
know...he is like...i don;t know, if you divide god into half....one half....well whatever,
that's another long story...maybe later)
He is not bringing in any coding to the company, though we always talk through all features of
the product and decide it. He is not an MBA, he is more like a head of dept now. He has opened 2
startups, he has so much more experience, he is a brilliant guy and i feel so lucky for even
being able to work with him. He is like one of the gods of his field. But we haven't decided roles specifically yet. And someone said that his offer of the whole 50-50 is unfair and all.
Now, I am confused here. What do people do when one of the co founders is technical, but he is more like an abstract
adviser, still a top guy in his field in academics? and in this case,he is not even going to work full time for the company. but he is like eric schmidt in some sense, that he actually manages a lot of stuff in his
current position (u knw, like eric was working for google and apple until recently, and like he
was a chairman for quite some time with google, before he switched over to google as CEO back
then).
I am not even sure at this point exactly what his role would be. I just know what it won't be. Also, his name and reputation follows him. Having him on my side is really good.
Just that I don't know how to make sure I don't feel like a fool later on. Coz I have read everywhere, it's better to settle all co founders issues from the very beginning
and better put things on paper.
So, I see these as his plus points: 1. Co-inventor of the technology. 2. Great Mentor. 3. Great qualifications. 4. Experience. 5. Good contacts. 6. Highly Technical guy.
And the minus: 1. I am considerably younger, so getting a buddy like feeling is almost impossible. 2. I might feel like I am working alone until I get some developers as employees, which might
take time since we have the product ready to sell. 3. Not a coder. 4. Not full time employee, more like a partner who runs other stuff as well.
I am dying to hear from you guys on this.