Ask HN: Layoff split startup advice? | Hacker News Reader

Ask HN: Layoff split startup advice?

6 pointsjdoe9 comments

I work at a small design firm (<20 employees). Last week I received a letter which stated that due to economic downturn there was no other option for the board of directors than to fire me and four co-workers.

Up until this point, I had a seemingly good relationship with one of the managers of the company. In my private time, I've been developing a (not design related) concept with a lot of potential (to become a startup and beyond), and he offered to help me out with this. He proposed that we sign an agreement to divide the potential revenue by 50/50. His reasoning was that since he's backing the idea with a company, he deserves 50 percent. And since it's my idea, my share would be the other half. To be more specific, his help would consist solely of providing 'contacts' with investors and such, not help with technical development.

But now I realize that I've actually been fired, I'm feeling more and more awkward about all this. My options are to sit out my time here, to not sign his proposed contract and to develop my idea on my own. The consequence would be that I lose some basic contacts with investors we've initiated together. The other option is to just take my loss, find a new parttime job, and continue to develop the idea together with them.

What would you do? Would you follow your gut feelings or bet on trusting them?

Thanks!

don't swap contacts for equity. Go to opencoffee/linkedin/events and network. Investors aren't hard to find, and finding them yourself just proves how awesome you are.

Totally agree. A long time ago, someone once told me that "contacts aren't contracts" - sure, it's cheesy but it's perfect for this situation.

If I were in your shoes, I'd plan on going to events and steering clear of your "friend" -- doesn't sound like he had your best interests in mind.

While I second the advice not to swap contact for equity, I might swap his getting me the contacts and getting the deals done for equity. 50% seems quite steep to me though for that; I'm with whoever said 5% but even that might be too high or too low depending on the value of the contracts he's able to get signed.

One word of caution, OP - be very careful of people on HN telling you absolutes. I see it over and over on this site: smart people are quick to offer advice in the form of, "This is how you should do it. That other way is ridiculous. {I|my friend} did it like this and we know it works." Careful... Just because one person says one thing works doesn't mean it will work or is right for you.

And I don't mean to douse anyone's flame on this thread; I'm just trying to add a bit of perspective.

The first thing to note is that your position with regards to this has not changed. As he is still with the company he still has the contacts. Thus if this seemed ok when you were employed then it is still ok. The relationship has not changed.

However I do note that there is some hesitancy in your part to the signing. I'm not too sure about this 50/50 split thing. Sure the contacts he can give you might get the company started, and it is only a might at this point but they are of a limited usefulness as time passes.

Once you use those contacts you still have a great deal of work ahead of you. And in all likelihood you will need to make other contacts yourself. But he will still get 50% of the revenue.

Points to remember 1) even if those contacts turn out to be completely useless he has 50% of the revenue from here to eternity 2) even if the contacts are good you still have a great deal of work and sacrifice ahead of you, neither of which he will undertake, but he still gets 50% of the revenue for doing nothing

I wouldn't trust this person unless he can show what he can bring to the table is more than his address book.

50% is a ripoff. 5% is more acceptable, but even then, you'd have to know he would be providing some serious networking juice.

There is NO way his "contacts" are worth 50% of a startup. As already pointed out there are plenty of investors about that you can meet w/o already signing away half your future revenue!

He needs to offer more than that to be worth that much :)

Do you really want the backing of a manager of company that's laying off a large percentage of their employees including yourself? Talk to new people. It will be liberating.

??? I don't see the relation. Are you suggesting that, despite the economic conditions, only bad managers of bad companies have to lay people off? I think this is specious reasoning. I'd be careful of such advice if I were you, OP. And I mean no offense to jakewolf; I just think it's wise for the OP to be wary of this type of advice.

Read "How to get Rich" by Jack Dennis ... see his part about giving out equity.

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