Startup and Co-Founder Spouse
Our company is doing great. We’ve grown. We have customers. Our value keeps increasing.
When we started, I went full time with no pay first for about 6 months building. My cofounder then joined at about 9 months and worked as much as they could. It went well and I never had any feelings of animosity. We each have our roles to play in our mission.
Recently, their spouse has been more involved. Generally in a positive way. Early on, their spouse contributed some to marketing (paid as a contractor). Now the spouse wants more of a role in the company. Now employees are confused about the spouse’s role. Now, the cofounders spouse wants equity.
To me, this is a risky thing for us to be considering. How it is perceived by board and employees. Am I wrong on this? They were paid. They have contributed. But, where were they before the money started showing up?
> where were they before the money started showing up?
Is that the question you are going to ask future hires who ask about equity as part of compensation? Equity is typically awarded to a broader base than solely pre-revenue founders - not for what have they done, but what will they do in the future, and at what compensation level and risk level. Equity is a tool to balance bad answers to other aspects of one's employment agreement, not (just) a reward for founders.
So before you come at this negatively, consider the best intentions - maybe they are sincerely interested in helping, and want equity to balance doubling down on their family risk by both partners being involved in a startup. If it fails, the whole family is in trouble, so some compensation for that risk is not unreasonable. At the same time, that needs to be balanced with the question of whether their talents are such that the company gets value back for that equity, and whether you'd make a similar offer to anyone else of similar talent.
If you can say yes -- that they have the correct talent currently needed by the company and anyone else with the same talent would get a comparable offer, then the board and employees should have no problem with the situation. But if you are awarding a nice position on the org chart and equity solely because of a family situation, it will likely cause concerns.
I'd think about the role as a role. Is there a job description? If so, what are the specific responsibilities. What would you pay for the role - comp it to market and company hiring practices. Then, determine if you need the role. Then, open the req and recruit for the role / encourage her to apply. Then, put her through the same interview process as everyone else.
You have to treat your business as a business. If you need the role, are paying a fair rate (salary, bonus, equity) and she's the best candidate, hire her. Then, you have a process that you can be transparent about and is fair.
Don't be bullied into something like this - it could be the beginning of the end.
Where there are three, there usually becomes two and one. You're being invited to be the one and with both the two having their own bond, their equity will speak together.
Funny but true story. A guy and his wife tried to make me a tech. co-founder once (idea stage) and he was persistent that offering 33% to each is equal share :). Happy that I dodged that bullet.
Not a startup founder nor do I really have much knowledge in dealing with equity, but assuming that 51% of the equity remains with OP, couldn’t they give the spouse “equity without executive power”? I know I’ve heard of that concept somewhere but can’t remember exactly where from.
Good point I had not considered. I also feel that mixing family with business is risky? I’ve seen it work once.
Reading your telling of the situation, my tingling sense are suggesting that their spouse is getting greedy. I'm assuming that you paid for the marketing services at a going rate. You have left unsaid whether you have a spouse and what their view is about the company, your cofounder and their spouse. I also get the impression that you and your cofounder might not be 50:50 partners. Of course, my comments assume that you don't yet have outside investors or stakeholders. If you do then they need to assist with your decision making.
Assuming you do need the full-time services of the cofounder's spouse, make her two offers, 1) at the going rate for that role and zero equity; and 2) at a discounted salary and with a small amount of equity, taken from the cofounder's share of equity.
If you don't retain majority of equity, then your company can be easily stolen from you.
Are you giving equity to everyone? Besides being a spouse, how the spouse different than any other employee?
Would you offer this deal to all employees spouses?
Were they paid a fair and equitable rate?
I can see your concern in the last line that the fear is they just waited for you at the finish line and want to get a piece of the prize money.
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wanting equity is very fair if that person is making the cash register ring.
those two knows the ins and outs, they can get rid of you and rebuild everything from scratch and also question what you bring on the table aside from being the idea guy or the visionary or the first mover.
id say be generous because if you three are well compensated, the only problem is increasing the size of the pie. make bold bets, you only got one shot to do this right. you and your cofounder already fucked up by involving family and friends, better go all in instead of planting seeds that can ruin your friendship with your cofounder or the relationship with the spouse.
watch michael and dalton vids on this, the product and the market can turn shit anytime, what matters is you all are working on your best because you trust each other and yall are well compensated enough in equity and money.
also have clear boundaries on each other roles so you dont overlap. review the airbnb guys.
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Would you change your opinion/attitude if it was your spouse?
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