Ask HN: Employee, Partner or Co-Founder? | Hacker News Reader

Ask HN: Employee, Partner or Co-Founder?

6 pointsUSNetizen9 comments

Someone I know has run into a little dilemma regarding "status" in a new company. Let's just say that this friend started a company and brought on their first actual employee after winning a few contracts about 6 months after the company was legally formed. My friend, the founder, never took a salary since the inception of the company, instead plowing all earnings and savings into this new employee's salary, taxes and other reimbursements to grow the business.

This employee eventually transitioned to working on a lower than market rate salary in exchange for equity at a later date. Now, this employee doesn't want to be referred to as a "partner" in the company but rather as a "co-founder" because of an increase in interest and activity, though not revenue (yet), that has occurred as a result of them coming on board to handle business development (which my founder friend actually trained this person to do while paying them over several months).

So, to make a long story short. Would you consider this person, who drew a salary (albeit at a lower than market rate), was paid with company revenue since joining about 4-6 months after incorporation, and who has put no personal guarantees on company debt(s) but does own some equity a "co-founder," "partner," or simply "employee?"

If not co-founder, how does my friend get through to this person and explain why they aren't really a "co-founder" without causing unnecessary tension?

Simply being a part of a company from the start does not make you a founder, or even a partner. There are plenty of firms that pay in both salary and equity. Unless there was some form agreement, this person in my eyes is an employee.

What I would do in that position is sit down with the employee and explain in clear terms why they are not a founder or parter. If the owner is open to a partner, possibly offer up an agreement. However, I doubt there is any way to go over this without some tension. I would get it over with sooner rather than later, as the company grows it will only become more problematic.

Those are great points. Appreciate the feedback.

"Co-founder" is a fuzzy title that means exactly what the people in actual positions of authority want it to mean. But usually its an explicit up-front agreement at the time a person is brought on, or one made with a real status change later (even though an after the fact "co-founder" seems at odds with the common understanding of the term.) The firm might want to grant the person the title of "co-founder" if they feel the past and ongoing contribution warrants it (and, particularly, if the value of keeping them happy is high.)

"Partner" is a legal relationship; you can only be a partner in a firm which is a partnership (not a corporation).

Otherwise, the person is just an employee.

It sounds like you are attributing a lot of value to several months work and a few months pay. Consider this venture over the next decade - these months are just a rounding error in the lifetime of a successful startup.

It matters a lot more whether this person can influence the success of the company - you describe someone who can learn and grow into additional roles, those are really good talents on top of which they have a functioning work relationship.

So really it comes down to whether your friend wants a cofounder, and secondary to that is whether this person meets the grade looking forward where almost all the work is yet to be done. If not then your friend needs to take that possibility off the table and explain how the employee's future exists within their larger plans.

The term "associate" is sufficiently vague and meaningless to be a perfect match for this situation. I know from experience because I was, once in another lifetime, an associate in a similar situation.

If the employee stays longer and acquires a bit more equity, they can become a senior associate.

Titles are cheap. If it makes him happier to be called "cofounder" it would be foolish to bicker over it. Explain why he's not a cofounder, then grant him "cofounder" status to make the carrot explicit.

This seems like an excellent pawn to negotiate with.

This person identified something which they value greatly( a new title) which presumably doesn't cost you anything.

Figure out what this is worth to this person, whether its a lower salary, having them put money on the line, etc and give them something that costs you very little, a new title.

Can't they compromise with some sort of "Business Lead, Launch Stage" or "VP Sales" type title that satisfies the early hire's desire for recognition of their early influence without confusing potential investors into believing they hold founder-level responsibility at the company?

Tell the person they're an employee, because they are. That's the position they agreed to and were paid for. If they don't like it, they can leave.

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