Starting my own business - how much % to give friend

Hi, I'm in the process of starting up my own business.

To give a bit of background, I came up with a business idea which I decided to speak to a friend who has experience in this sector/area to hear his thoughts. He really liked the idea and said he would love to work on this with me which I thought would be a great idea. Everything has gone well, I don't regret working with him on this, he understands the sector well so definitely adds value and I'm glad he joined me. However, he's been talking about 50/50 ownership and has been writing in our contracts that he is co-founder with 50% ownership.

I never said anything at the time as I didn't really expect that. I was just like "ok cool" when he said this but I really don't feel comfortable with this considering it was my business idea and I've put in most of the work but I don't know how to tell him without causing conflict.

I just don't think it's fair for him to get 50%. Any advice on how to approach this without causing conflict and risk him quitting? He always refers us to partners so in his mind we're co-founders but in my mind, it is my business that I've brought him into.

Thanks.

 

Actually go for 90 / 10 at first for idea generation. Then negotiate to 15 or 20. Or stick to 10 if you can. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 
Most Helpful

You are all thinking about this in the wrong way. You should shift your thinking to the long-run as most of the work is ahead of you and should use equity allocation as a motivator. The work you have done so far is nothing compared to what is ahead of you and you want your partner to see this as a joint venture and work equally as hard as you. Given his expertise, you could argue that he will be providing way more value than you will - idea generation is nothing, execution is everything. It is much better to have 50% of a $1 billion company than it is to have 80% of a $100,000 company because progress is slow and co-founders are not motivated to grow the business. Hope this helps.

 

There's no point in arguing over equity at this stage, don't let the company fail to launch because of something like this. Typically at this stage you should probably give him 50% or at least something substantial since he obviously in some way feels entitled to it. Out of curiosity did he join when you had the idea or after you already had something to show for it?

 

With this limited information it sounds like he should be entitled to 50%. I doubt you brought this idea to someone that coincidentally has experience in the sector without wanting them to jump on board - maybe you did not bring it up, but you were probably happy they did first. It sounds like you realized you probably could not do it alone and needed someone like your friend to jump on board. 

Besides the business idea, we haven't heard what else you are bringing to the table. 

 

This is easy.  Sit down and have an honest conversation with him, and yourself for that matter.  Take a clear-eyed look at what each of you is bringing to the table, and what that's worth.  You had an idea.  Can you execute on it?  Are you providing capital to get it off the ground?  If not, who is?

If all you have is an idea, and your friend is going to be the person who makes it a reality, then of course he deserves 50% of the business (if not more, honestly).  If you're going to quit your current job and work on this full time while he consults for a bit, then maybe you deserve more for the risk you're taking.  From what you're saying, it sounds like he very much has been a co-founder and that your business would remain in your head without his help.  Is his skill set replaceable?  What would you have to pay someone for what he's bringing to the table?  

And finally, what is his friendship worth to you?  If it turns out there is a line of equally competent people willing to come on board for 10% and he's holding out for an even split, maybe he isn't all that much of a friend anyway.

 

Is he going to be actively involved in the day-to-day operations? 50% is way too much for a board member / strategic advisor type, but very much merited for an experienced cofounder.

As the poster said above, ideas are easy to come by but execution is everything. There's a reason Zuck's worth $100bn and the Winklevii got $65M in the settlement. If he's bringing industry experience, relationships, and operational commitment, then you'd be remiss to reduce his incentives here, but if he's going to be a sounding board for ideas while you do the grunt work, I'd probably keep it to 10-15% (obviously if the answer is somewhere in the middle then the equity would be too)

 

Alias expedita quasi tempore iusto enim nulla. Ipsa repellat aspernatur non suscipit. Quia et odit molestiae. Corporis aperiam excepturi nulla ut accusamus quia ea.

Sed at sed eos aut sapiente. Quia nihil nobis pariatur enim voluptas deserunt. Voluptatum eaque et ea. Dignissimos voluptatibus et et facilis sint ipsam quibusdam.

Tempore fugit earum officiis deserunt quos labore quasi. Dolor ex nihil et rerum omnis enim.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”