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In regards to #2, he said he's the only software engineer, not the only engineer. It's a hardware startup so I am left to assume there are other engineers on board. Irregardless, the comment that no other department has anything to do until he does his part at best is a bad assumption or at worse completely wrong.

Even in a pure software company, someone should be out there validating the idea, building a client list, etc... In this case, it could be those and things like prepping for a kickstarter campaign, storyboarding, and of course the hardware development. There is always more to be done.

In regards to #3, in the example given, if OP wants to be cofounder then to some degree this makes sense but if not, it gets a bit more tricky. My advice to OP here is to figure out how much commitment you actually want to put in and ask for equity split (vested among all members) accordingly.

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Thanks for the correction -- I didn't take into account the hardware engineers, the thoughts I gave are more valid for pure software companies.

Also, I covered generally the stuff you mentioned under "market research". My point was that there isn't much that's adding value outside of market research and development when you don't have a product yet... That I stand by -- which I think is what you're saying.

Absolutely agree on notes on #3

Would edit the original comment if I could...

Thanks for the tips :) Here is the response I got after discussing it:

"We have an internal structure called the "Grunt Fund" that I would like to go over with you guys which is equity based on time and money put into the business. "

Is that a valid thing?

Nothing I am officially aware of. It could be a structure they created themselves. Perhaps someone can shed better light on this but when we had our structure done, it was base on how the standard structure is set up.

Am I wrong to be against the idea of a "Grunt fund"? Just naming it that kind of rubs me the wrong way, but maybe I'm being too sensitive about treatment of developers/engineers.

Whether or not it is a valid thing depends on the substance of the contract (it is written down, right?) rather than the name.

You should be thinking now about how the exit scenarios might play out. How would it affect your equity and payout? What if the company succeeds? What if it fails or becomes a zombie? What happens if you leave after a year (whether it's your choice or not)?

From the limited information you've provided, my guy says that all stock granted (except in return for actual cash investments) should be subject to a vesting schedule. You may want to search for something like 'founder stock should be subject to vesting' and read up on vesting, cliffs etc.

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