Ask HN: Suggestions on how to structure working on startup idea as sole engineer
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) 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. > 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! 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.