Ask HN: Suggestions on how to structure working on startup idea as sole engineer

11 points by hiphipjorge 3 years ago | 3 comments

Hey HN,

My friend is part of a consulting agency that wants to develop their own product idea (cross-company surveys, dashboard for insights). They're already generating about 900k a year in revenue from consulting fees (which is 90% operating profit).

They're basically looking for an engineer to build an MVP, which they can then iterate on + learn from in order to build a fully fledged product that they can go out an sell to their existing clients. It's definitely a risk, but the fact that they already have relationships with these clients makes it a lot less risky.

My main questions is about how to get compensated as a freelancer and how much risk I'm willing to take. On one side, I don't want it to be based fully on equity. Too much risk and I'd be taking on most of it. At the same time, I don't want it to be all cash compensation: If this works out, I want to have equity in the business and get a constant profit stream from the product (which is what we've talked about).

Curious if anyone has any good templates for this or specific suggestions?

I'm mainly looking for something that: - Is not structured around full time employment, but instead freelance type work - Is structured around shares with profit sharing (with yearly payouts) - Has a good balance of risk (cash vs equity)

ernestipark 3 years ago |

I've been thinking about this type of problem recently so very timely question.

IANA Employment Lawyer, so take everything here with a huge grain of salt, but is the separate product going to be a separate company? If it is would some mix of equity + cash work? If not, it seems like some custom contract based on the product and its dedicated revenues/profits might be necessary with lawyers involved.

To zoom out a bit, the problem I've been honing in on is that there are a lot of companies that may want to issue profit-sharing like agreements or revenue share that have no plans to exit/IPO/go huge. But no one, especially early on when they're small or solo, wants to go hire a lawyer to write these contracts. I wonder if we can create good templates for rev/profit shares for solo/indie/bootstrapped businesses. Think the SAFE that YC created, but more around profit or revenue shares. If this is interesting to you shoot me a msg would love to talk to others who are seeing this type of problem.

Also, if you know Gumroad, they're building out a new product called Flexile.com that enables companies to hire contractors but also give them equity/dividends. It's not released yet, but may be worth looking into and getting on the waiting list. May or may not solve this exact problem but it's in a similar realm.

hiphipjorge 3 years ago | |

> IANA Employment Lawyer, so take everything here with a huge grain of salt, but is the separate product going to be a separate company? If it is would some mix of equity + cash work? If not, it seems like some custom contract based on the product and its dedicated revenues/profits might be necessary with lawyers involved.

It will be, yes! I do think it should work. I think I'm slightly worried about how much is appropriate given an unspecified time commitment.

> But no one, especially early on when they're small or solo, wants to go hire a lawyer to write these contracts. I wonder if we can create good templates for rev/profit shares for solo/indie/bootstrapped businesses. Think the SAFE that YC created, but more around profit or revenue shares.

Think this is a fantastic idea actually! I think there's a lot of projects out there that would benefit from this type of risk sharing in a way that would make sense for both parties.

> If this is interesting to you shoot me a msg would love to talk to others who are seeing this type of problem.

I'll definitely do that. Let me try to do a bit more research on my part too!

> Also, if you know Gumroad, they're building out a new product called Flexile.com that enables companies to hire contractors but also give them equity/dividends. It's not released yet, but may be worth looking into and getting on the waiting list. May or may not solve this exact problem but it's in a similar realm.

Super interesting. Will go and check it out!

ernestipark 3 years ago | | |

If it will be a startup in the more traditional sense, slicingpie.com also exists. The idea is basically dynamic equity allocated based on everyones contributions.