Starting a new business with former colleagues, advice needed

Question

I was recently contacted by a former boss of mine who is thinking of starting a new business. The business will be online only it will by my job to design, build, and maintain the software going into it. I will also have to maintain the server it's running on, being the only technical person on the team.

I will be one of four members of the business, the other three being the actual business know-hows and salesmen. The other three are shouldering the cost of getting the business going (incorporation, attorney fees, etc) and we will be splitting the cost of the server. I have no business knowledge at all, and don't want any part of it, I am only interested in the technical aspects.

Now that we are finalizing our plans, determining roles, and getting ready to start actual work, we have come to the point where we have to determine what percentage stake each of us has. Since I have never done anything like this before, or met anyone that has, I don't know what I should expect. Can anyone give me some pointers on what to ask for in this deal?

Answer 1

I have no idea, but if you are going to be making all the technical work then don't hesitate to ask high. It will be only you who know the software for probably few months until the business grows, and you will be spending large amounts of time.

Good luck in your startup :)

Answer 2

Make sure that everything, everything, everything is in writing. Handshakes and verbal agreements are for the soon-to-be-screwed.

Don't let your prospective partners undervalue your development work. They will claim that as the parties who are fronting the cash that they deserve a higher stake in the business. Demand to be an equal partner. Take a broad swipe at the number of hours that you'll be putting in to building the application and multiply that by $200/hour or so. That amount is how much you'll be contributing to the business, and you deserve a commensurate ownership stake. Be prepared to constantly fight for yourself, and don't ever let yourself be cowed by some sales gut getting in your face and getting loud.

Be prepared to walk away from these guys and not be friends with or speak to them again. Getting in on the ground-floor of a startup virtually guarantees a high-stress work environment and there's a decent shot that the whole thing will fail. Blame will be tossed around and unforgivable things may be said. Don't go into business with someone from whom you can't walk away with a clear conscience.

Get over your lack of interest in business. Obtain business knowledge and embrace it as much as you do the technical issues. Otherwise, you are unfit for entrepreneurship, and you should stay in a more traditional work setting.