Hi! I co-founded a startup about 6 months ago with a 65/35 split (no other compensation right now), where I have 65% and my co-founder has 35%. We have a 4 year vesting period with a 1-year cliff. Their role is business development and marketing. My role is product, technical, and anything else that needs to get done. I also have more experience in the industry, with startups, and have the funds to bootstrap it, which all contributed to my higher percentage (for reference). In the last couple of months, I noticed that my co-founder wasn't putting in as much effort and was failing to deliver on things we had agreed. After bringing it up a few times and seeing no improvements, I asked them to take some time off in order to really think about whether they were still interested in doing this and able to balance work/life. When they came back from that break, they confirmed that they were still very interested in continuing to work towards our mission, but that their private life was getting in the way and that they would only be able to contribute part-time work for the foreseeable future (think at least 1 & 1/2 years).
I should also mention that we've worked together at a prior company, so I already know their work ethic and that they can get things done, otherwise, I wouldn't even be considering this. With that said, the company was definitely larger and with product-market fit. This person has never worked in a true startup environment and has struggled a bit with that. I see them as providing the most value longer-term, but at the same time, by then I'd be able to hire someone with similar skills, so I've tried to keep those facts in mind when issuing a fair equity stake. On the flip side, I do believe that having this person on, even part-time, will help us accelerate revenue and user growth more than if they weren't there at all.
Given all of that, I don't feel like 35% is fair anymore, so I've been thinking about an alternative compensation model that would be made up of a significantly lower equity stake (< 10%), but with a commission structure based on revenue generated. We've already generated revenue (not much), and should be generating quite a bit more this year, but I don't think we'll break 6 figures yet. So while the commissions won't be much this year, they should ramp up over time.
This would also enable me to set very specific targets that need to be met so that if the behavior of failing to deliver happens again, we can cleanly part ways. But if they do deliver, they'll get actual cash compensation + still have a stake in the company's long-term value.
My questions are: have you ever been in this situation? If so, how'd you handle it? Even if you haven't been, what would you do if you were in my position? Although I've been part of a few startups, I've never dealt with a part-time co-founder, so this is new to me. If you think this is a terrible idea, would love to hear it and your alternative ideas! Happy to provide additional details that I may have missed!
Side note: I'm trying to avoid paying a salary until we bring in more revenue since we are bootstrapped and I don't have unlimited funds.
Bay Area-based construction startup TraceAir today announced a $ 3.5 million Series A. Led by London-based XTX Ventures, this round brings the company’s total funding up to $ 7 million. The raise includes existing investor Metropolis VC, along with new additions Liquid 2 Ventures, GEM Capital, GPS Ventures and Andrew Filev.
We first noted the company back in 2016, when it pitched a method for using drones to spot construction errors before they become too expense. It’s a pretty massive field that various technology companies are attempting to solve through a variety of different means, ranging from quadrupedal robots to site-scanning hard hats.
Last February, TraceAir announced a new drone management tool. “Haul Router provides the best mathematically objective hauls for each given drone scan,” the company noted at the time. “Any employee can use the tool to design a haul road and export the results to feed into grading equipment.”
The pandemic has thrown the construction industry for a loop (along with countless others). But unlike other sectors, demand still remains high in many places. TraceAir is hoping its solution will prove beneficial as many outfits seek a way to continue the process in spite of uncertainty.
“The Covid-19 pandemic created new challenges for the U.S. and worldwide construction industries, resulting in delayed projects and growing unemployment rates,” CEO Dmitry Korolev said in a release tied to the news. “Our platform allows industry leaders to manage projects more efficiently and collaborate with their teams remotely, minimizing the need for a physical presence on-site.”
TraceAir says the additional funding will go toward its sales and marketing, along with future product developments, including an unnamed product set for release this quarter.