Agreed about the co-founder vs. investor problem. I would suggest anyone who wants to take this offer up do their diligence on hmexx and find out what he's bringing to the table as a co-founder. If it's just $8k for half a company that you will have to split 50/50 for the rest of it's existence, be wary. If he's a co-founder, he should join in on the workload after the MVP is proven. I would also consider vesting for both of you, keeps things honest.
That being said, I think this idea does have the potential to be very interesting, and if circumstances were different I might even consider it.
Yeah - I am sure hmexx has hit on something - and I think it needs to evolve before its right (pivot! :-)
My guess (above) is that HN is the ideal place for investor / 'prenuer matchmaking. Whether pg will let it be I cannot tell you. But it should beat AngelList just because.
This sounds almost tailor-made for YC to use as filter for their own applications. It's closer to their roots too, a tiny team with exactly enough money and time to do something.
People use the term "vesting" to refer to a clause typically embodied in a founders' agreement in which the shares "vest," or become shares that you actually have a right of ownership over, if you continue to perform your duties.
Vesting schedules typically last 4 years with shares vesting quarterly or monthly.
So, you can think of it like this: After year one, you'll own a 1/4 of your 50%, or 12.5%. Year two, 1/2, or 25% ...and so on. You don't actually own the full 50% (i.e. doesn't "fully vest") until year 4.
Many vesting agreements carry a one year cliff, which means that none of your shares vest if you leave the company before performing for one full year. This is to prevent the "lazy founder" problem, where one founder is doing most of the work and the other one is goofing off, or decides to leave and take another job.
This is important because the first year is the most risky for a startup and requires all hands on deck. If someone flakes out, you can't have a big chunk of shares tied up in them. One, because it isn't fair. Two, because you likely need to go find yourself another founder or will need that equity for first employees. It scares off experienced founders and investors to see a chunk of your cap table trapped in a "bad decision" founder that flaked out. This same logic carries over to why there are vesting arrangements... you shouldn't be compensated if you abandon the company and don't put in the same work as the other founder.
Hope that helped explain what it is and the reasoning for it!
Vesting means that each owners shares of the company will be given to them over time so right off the bat neither of the people own an outright 50% stake.
for example a common scenario is a Four year vesting with a one year cliff, acceleration up any sale or liquidation event.
What this means in every day terms is that you own more shares each month you work, but if you leave before a year is up you own nothing. So if your half is 5 million shares then after the first year of working you will have earned 1.25 million shares after your first year which are now yours and cannot be taken away.
For each working month after that you will earn an additional 104,167 shares (its actually 166 2/3) until you have completed your 48th month at the company at which point you now own all five million shares, or are "Fully vested" as the term would imply.
It basically just ensures dedication to a project and that an early person who was involved with the company in some way does not come back 10 years later suing for "their half" of a company they may have helped start but had no involvement in product direction, success etc.
You would lay out how things are divided in your paperwork when you form the company. If there are no outside investors, it's simpler for a company to fold.
In the case of one person leaving, all their invested shares fall back into the management pool and are distributed proportionally amongst the remaining co-founders (but not investors, they always only have the number of shares they paid for).
Also make sure you do an 83b election (in the US) for vesting shares. Otherwise you pay income taxes on the value of them as they vest. Google it for lots more info, it's pretty straightforward
Thanks to the others for explaining vesting, they are spot in.
Basically, you don't want to end up in a situation where your co-founder can take off after 6 months and still have 50% of the company. Co-founder==co-worker, in the strictest sense.
Conversely, if the $8k is to be treated as just investment (which would not fall under vesting) he should be taking much less than 50%.
It's not just an investment though, the OP has committed to doing some serious marketing, let's say at least equal to the amount of work that the dev co-founder puts in to create the product in the first place.
From what I read, he was committing $3k towards marketing and gathering users, but did not specify how much work he'd personally do. Just want to make sure any people new to this ask the right questions up front, I'm not implying that hmexx is trying to screw anyone
That being said, I think this idea does have the potential to be very interesting, and if circumstances were different I might even consider it.