There was a CTO who worked for free at his friend’s startup.
He didn’t really “work for free”, because he expected that he would be come a shareholder. The founders told him that he could join them as a shareholder.
|During hyperinflation, in the Weimar Republic (modern day Germany), children used to play with money like this. The little kid on the right has been left out. He’s thinking, “Where’s my share?” (He was told that he would get get a piece of the pie.)|
Lesson 1: You need to be clear on expectations. All parties included.
In his blog post, he shared what his thoughts were at the time.
1) He thought that there were 6 team members.
2) 50% for investors meant 50% for founders.
3) If 50% was shared between 6 persons, it meant each should get 8.3%.
4) Therefore, them giving him 10% was generous.
Remember, A-S-S-U-M-E means: Making an A-S-S of U and M-E.
Later he found out that the company was registered with only three shareholders. The team hadn’t included him in the list of shareholders. The three founders took 95% for themselves and gave 5% for someone important.
He found that they had considered him an early employee (given shares through vesting), not a founder (entitled to shares, no vesting required).
If he had discussed these uncomfortable terms early on, it would have gotten things out of the way. The black and white could have been drawn up within a few days and they could have signed. Everybody would know where they stand.
Lesson 2: They should have tied up the IP
Lesson 3: Confidentiality counts
There was nothing signed to prevent team members from talking about the startup’s internal affairs. If there was, Julian might have thought twice before publishing his blog post.
Maybe they’ll think about defamation instead.
But the damage has been done. People are going to look at the founders a little bit differently. And it’s a small community.
|Being more explicit is sometimes a good thing.|
Lesson 4: They should have thought about their investors.
Thanks for reading.
Patent, Trademark & Industrial Design Registration
Suites 2A&2C, PO Box 9, Wisma Pahlawan,
Jalan Sultan Sulaiman,
50000 Kuala Lumpur.
Tel: +603 22730688 / 2033 / 6033
Fax: +603 22738033 / 9033
21-1-1, Jalan Medan Putra 3,
Medan Putra Business Center,
Bandar Manjalara, Kepong,
52200 Kuala Lumpur.
Tel: +603 62752511 / 2588
Fax: +603 62758511