From what i'm reading, you seem like you need employees or outsourcing, not partners. Why would you even bother with this person, their incentives seem all misaligned.

Not sure if they approached you, or vice versa -- but people often approach with deals like this because they are trying to find suckers who they can dupe. And sadly, they find them.

Totally agree. To be honest, I think a 10% offer here would kind of lead to the worst of all worlds: too high for the person to be considered an employee, but too low for the person to really be considered a partner.

I've seen a case where a company was started by a very small, relatively inexperienced team, and then had 2 much more experienced "business people" join later. These 2 business people were actually given "founder" credit and equal equity stakes, because it was clear these folks would be integral to the success of the business (and, indeed, in retrospect, they were, and the business became quite successful). I point this out because it's an example were the addition of some later stage business people does deserve large equity stakes. But given the original commenters history (e.g a previous large exit), it doesn't appear that's the case here, so it doesn't look like he needs a partner to begin with.

Agree on your case also. Business folks can add tremendous value. But especially late-joiners as, in your case, the better setup is to set some success criteria, hurdles, and reward accordingly. Win-win.

Yeah frankly my expectation on the most realistic outcome was some middle ground: where they buy in and i juice it with a bonus of equity based on outcomes.

Regardless, I’m just trying to work on making progress day over day. It’s fun, and a real business, so good problems to have.

Yeah, i mean, I’ve done this a few times before and had one decent outcome…i feel I’ve seen enough to feel totally at peace with this outcome.

I think getting incentives right is the hardest part of business, once you find any initial traction. It’s less sexy but i agree, finding good employees and contractors is the next step from here.

>To me this is just unintelligent?

You would know better than us, but I dont think of 10% as a partnership. Maybe they just thought they were going to get a killer deal.

10% sounds like an employee with a decent lottery ticket to me. Maybe that's unfair.

MBA doesn't mean that much by itself.

I would say that MBA means nothing by itself. It's 100% about their social network. MBAs were a great way to network as a lot of elite kids got MBAs. An MBA is just a proxy for something else which isn't necessarily there...

When we hire MBAs it means nothing except a minimum standard of work ethic and communication skills and usually (but not always) ability to grasp and breakdown problems. What they usually lack is expertise/applicable experience, we know this when we hire them, but any non-MBA candidate with relevant experience is preferred to an MBA. Like I said we don't expect fresh MBAs to know deeply about software but you do get pompous types who don't have the humility to realise they are out of their depth

An MBA is exactly what it sounds like. It teaches you how to administer a business. Not how to found one (it’s often counterproductive for that), not how to have good ideas, not how to spot product cycles, but to take an existing business and make economically rational, not entirely stupid decisions for it.

Curriculum usually includes things like pricing; applied microeconomics; power & politics (ie how to get the org to do what you want), business ethics, some intro to corporate law, oftentimes electives that are deeper dives on how specific industries are structured.

My wife got an MBA at the same time I was working on founding a startup and they are basically completely disjoint skillsets. If you treat the MBA as training for how to be the hired Director/VP in an established organization and not the person who wills it into existence in the first place, it can be a pretty interesting curriculum.

MBA is a red flag.

I have no idea what they teach in MBA programs these days - I'm many years removed from the age that most people get theirs.

My dad got his MBA in 1959. When I was younger and considering one (I moved out of day to day tech work a long time ago because I wanted to "fix" the business problems I kept encountering because of their negative impact on the tech work), we reviewed curricula for several programs.

My dad was pretty astounded that in the wake of globalism and technology, they were still teaching the same tired-ass theories that he was taught in the 50's. Note that this conversation wasn't all that long ago in the grand scheme of things.

I get that this is a vulture capital site but all one has to do is look at what is happening in the world (Bain capital et al) and you see that all they are really teaching/practicing is wealth extraction, not wealth building.

Edit: sorry, my dad got his BS in 1959, his MBA in 1962.

I think one fundamental thing to understand is that an MBA is an indoctrination process into capitalist ideology, not a science.

Previous discussion: https://news.ycombinator.com/item?id=6662847 :-D

He discussed partnering up on your current business or were you talking about a new and different startup? I think you mean the first one, but that seems shocking to me.

Why is that so crazy?

85% margin gives $27k a month or $326k a year before taxes.

Was he going to work on this full time? How does he replace a reasonable salary otherwise?

Of course, I would expect this to be over time (say, linearly over 3 years) and subject to hitting growth targets.

Just to further that:

50% margin share would be $163k/yr pre-tax.

He’s could be taking a significant pay cut and only assigns a moderate future value to the stock, eg, 1% of 50M exit and 10% of 5M exit with 50% ownership is only $500k expected value. Amortized across several years of pay cut (eg, 5 years to exit) you’re looking at $100k/yr “bonus” on $160k for effective $260k/yr. (And that’s assuming no dilution events!)

I agree expectations were misaligned so a bad partnership — but the ask doesn’t seem particularly crazy.

If your assumptions here are correct, he's just not a good candidate for being a founder. If you see earning 163k/year a hardship and don't value 10% equity in a high margin business doing > 30k MMR, then you should try to become an employee at a big company.

It's crazy if you know how startups work, and you're not valuing it at all how investors value startups.