Joining as a co-founder - can it become Fastlane?

[Komodoo]

Background on myself
I'm 24 years old, competent in building technology and entrepreneurship. I co-founded 2 tech businesses, which I hustled on for a total of 4 years while simultaneously working and studying (these did not succeed). Now I'm self-employed, doing ideation, networking, and traveling.

Opportunity
I got an opportunity to join an existing venture as a technical co-founder (CTO). The company is active for 4 months, already after funding, and employs 10 people. The business model already generates revenue from real customers, nearing profitability today. The company aims to grow up to 50-100 employees and then generate recurring dividends for the owners (not to sell the company). It can reach annual profit of $10M - $50M.
The compensation is a modest salary and equity (standard vesting and cliff). There will not be a significant dilution of shares (funding) in the future. Also, they can't promise any increase in my equity in the future. Therefore, the equity will remain fixed.
This is going to take all of my time and I don't intend to pursue other businesses.

Considerations
Pros:

1. Business: The business has already proved itself profitable and scalable, already de-risked.
2. Fit and growth: The role aligns well with my technical knowledge and entrepreneurial background. The other co-founders are complementary.
3. Network and investors: Getting into a great money-makers network that can be beneficial in future ventures. The investors are Fastlane people and want the co-founders to succeed and become rich (they seriously do).

Cons:

1. Income: My income will depend heavily on my salary, as the dividend income is capped by the amount of equity I have. It won't be legendary money, maybe big money. And if I leave (when the equity is fully vested), I get no salary.
2. Control: I'm not the owner and not the CEO. While I can influence decision-making, I ultimately have no control over the company. The investors have full control.

Discussion
Opening that for discussion - can this opportunity become Fastlane? Mainly in terms of income and control. It depends on the amount of equity, of course. While I can provide the exact number, I'm interested in your perspectives first. What is the minimum equity that makes it Fastlane?

 

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[Dark Water]

I don't think "minimum equity" is really the determining factor that decides whether this is fastlane or not. If it was, you're talking about a $3m - $5m exit and living in a MCOL area or lower to live a FIRE lifestyle post-exit.

You co-founded two tech businesses and invested 4 years of time; is that separate from your current self-employment? Are you living comfortably? Where is your time currently tied up and is this going to be all-in or in addition to your current self-employment/side hustles?

You don't need to answer all of these questions, but rather they are things you should be considering when you decide whether or not you want to take this on. In short, we don't know anything about your current situation or prospects... but at the very least, at 24 years old, it doesn't sound like a terrible idea at least for experience - but it heavily depends on the income to time investment.

Is this going to take 4-6 hours of your time each day or 8-12? For me, that would weigh heavily based on the limited amount of info you've given.

 

[Komodoo]

@Choate Good points. I now edited and clarified- this is going to take all of my time and I don't intend to pursue other businesses in the meanwhile.
Right now I'm living comfortably but I don't have any significant passive income.
Based on that additional info, what do you think? Why isn't it about the amount of equity?

 

[Dark Water]

@Choate Good points. I now edited and clarified- this is going to take all of my time and I don't intend to pursue other businesses in the meanwhile.
Right now I'm living comfortably but I don't have any significant passive income.
Based on that additional info, what do you think? Why isn't it about the amount of equity?

Something integral to the fastlane - the very first letter of CENTS - is control.

You don't have control in this situation. The company has had revenue for only four months and there are investors. There are terms and conditions around your equity. You are 24 with only the experience of having two failed companies, but now you are a technical CTO.

I think you will have fun and it could be a worthwhile experience. But you would ultimately be building someone else's dream for relatively little while giving yourself no time to pursue your own true fastlane adventures.

If you can maintain a meta awareness of this and consistently re-assess where things are every 3 months, while planning your own exit, I'd say go for it.

 

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[Komodoo]

@Choate You're right about control and building someone else's dream. Let's say I do go for it. What does it mean to "re-assess where things are every 3 months"? I'm incentivized to stay full-time until the equity is fully vested. What can be the positive outcome here?
Also, let's consider the alternatives. Most entrepreneurs in my area are building tech startups, where the most common structure is 3 co-founders (CEO, CTO, product/sales/etc.) and many investors (seed, A, B, etc.) - it's not that different from my current opportunity.
Do you suggest the alternative of bootstrapping a business that's (close to) 100% mine, without co-founders and without big funding?

 

[Dark Water]

@Choate You're right about control and building someone else's dream. Let's say I do go for it. What does it mean to "re-assess where things are every 3 months"? I'm incentivized to stay full-time until the equity is fully vested. What can be the positive outcome here?

The positive outcome is protection of your time. Staying on the right side of opportunity loss. You're incentivized to stay full-time until equity is fully vested but what if that doesn't manifest? What are the worst outcome scenarios? How do you value your own time?

Also, let's consider the alternatives. Most entrepreneurs in my area are building tech startups, where the most common structure is 3 co-founders (CEO, CTO, product/sales/etc.) and many investors (seed, A, B, etc.) - it's not that different from my current opportunity.
Do you suggest the alternative of bootstrapping a business that's (close to) 100% mine, without co-founders and without big funding?

Just challenging this logic for a sec - why does it matter what most entrepreneurs in your area are doing? What about most entrepreneurs on this forum? Do you think the majority of people here made success with 3 co-founders? What about Johnny Boy, Lex, or Andy Black? Where are their multiple co-founders? Why is this location-relevant for a tech startup? I do not know where you are located, but I'm in Boston, and you have the same exact opportunities today as myself - English speaking and an internet connection. I am your competition today just as much as the tag team co-founder investor duos within your 3 mile square radius.

I'm not suggesting any alternatives like bootstrapping. That's skipping the crucial step of finding a problem and providing a solution. I'm just challenging you to detach yourself from the situation and more clearly look at the pros and cons.

 

[Komodoo]

The positive outcome is protection of your time. Staying on the right side of opportunity loss. You're incentivized to stay full-time until equity is fully vested but what if that doesn't manifest? What are the worst outcome scenarios? How do you value your own time?

Making sure I understand you correctly - do you talk about the possibility that something goes wrong? (e.g. the business does not succeed)

Just challenging this logic for a sec - why does it matter what most entrepreneurs in your area are doing? What about most entrepreneurs on this forum? Do you think the majority of people here made success with 3 co-founders?

My area is like a small Silicon Valley. Lots of startup founders and lots of VCs. It's producing many millionaires every year. Also, my personal assets - skills, industry knowledge, and friends/network - all contribute to a higher success rate if I engage in a tech startup in my area.
This does not mean that I should limit myself only to these opportunities. My previous 2 businesses (that failed) were in a different industry and without VC.

Going back to the main topic - how do we evaluate that opportunity?
The alternatives either:

• Include co-founders and/or investors who limit control (CENTS)
• No co-founders/investors - I have control, but the business takes more time to build, the chance of success is smaller, and the revenue potential is smaller

Is that a valid comparison?

 

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[Dark Water]

I think again I want to challenge your mindset here. Not having co-founders or investors does not mean that the business takes more time to build, the chance of success is smaller, or the revenue potential is smaller. Even the opposite could be true: co-founders and investors can hold you back. Why do you put so much trust and your future into people who are really unknowns to you? I am not saying this is true, but you stated it like a fact, so I think it's worth mentioning.

Revenue is not determined by how many people are on a team but how many customer's needs you can fill and the value of each customer. Craigslist has $650 million revenue and only 50 employees.

Just because you are incentivized to stay until your equity is vested doesn't mean you turn off your brain and stop thinking about the bigger picture; your own fastlane ideas.

You have to recognize that at this moment in time this is a slowlane opportunity. Even if the business is successful, it might not be fastlane for you. With that said, it sounds like a good opportunity and I am not trying to sway you one way or another.

 

[Dark Water]

Co-Founder Experiences?

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www.thefastlaneforum.com

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www.thefastlaneforum.com

 

[Komodoo]

@Choate Statistics show that startup success is positively related to the number of its founders. That's why I'm treating it like a fact, even though in some cases the opposite could be true.
You're saying that this is a Slowlane opportunity. Do you think the same for every startup with that structure? (co-founders, VC, equity vesting and cliff)

 

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[Dark Water]

@Choate Statistics show that startup success is positively related to the number of its founders. That's why I'm treating it like a fact, even though in some cases the opposite could be true.

There's also studies that show the exact opposite: eg a two second Google search says that "Wharton study found that startups with a single founder tend to last longer and achieve higher revenue than those with multiple founders." and also "According to Harvard Business School Professor Noam Wasserman, 65% of startups fail due to conflict among co-founders."

I'm not saying that to argue with you, but rather it's easy to find the facts to support the beliefs we want to hold.

You're saying that this is a Slowlane opportunity.

The compensation is a modest salary and equity. If the equity doesn't pan out, you're left with a modest salary. A modest salary is slowlane. Working a lot of hours for someone else's startup is also slowlane. If your small piece of equity blows up, sure it can be fastlane. But if you're still working a lot of hours for someone else's startup? Still slowlane.

@Choate Do you think the same for every startup with that structure? (co-founders, VC, equity vesting and cliff)

The answer is different for every employee in this sort of structure, never mind the infinite differences between startups in this scenario.

 

[Komodoo]

If the equity doesn't pan out, you're left with a modest salary.

Isn't that the same as every other business opportunity that has a high risk of failure?

The answer is different for every employee in this sort of structure, never mind the infinite differences between startups in this scenario.

Let's limit the discussion to a common scenario of 3 co-founders, VC funding, standard vesting and cliff. What can be the differences here?

 

[Dark Water]

There's no one-size-fits-all on whether a "standard" startup scenario is going to have potential fastlane outcomes or not
- whether that outcome is a possibility for yourself is something that you have to assess based on the information available to you.

• Yes, it is a numbers game, equity does ultimately matter. But "fastlane" isn't only about raw numbers, so it's only one piece to the puzzle
• Investors complicate things especially when you say that they have full control
• Trying to calculate a potential fastlane exit on a not yet profitable company where you have a limited equity stake is a fool's errand

If you can detach from the outcome and look at this as a process and learning experience, I'd say go for it. But your perspective is outcome-focused, whether or not your small piece of equity can blow up and be "fastlane" despite violating control and time commandments.

Can you make a lot of money? Sure, maybe.

Is a 4 month old not-yet-profitable investor-controlled company that you got invited to for a modest salary and equity stake going to be your final adventure before you ride off into the sunset in your mid 20s? Maybe, but the answer to that isn't baked into the numbers like this thread suggests, but rather the business itself, and is as much qualitative as it is quantitative. Again, too many factors here that only you have the perspective to assess, not the forum.

 

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[cmh]

How well do you know the CEO? That is really important to this question IMO. Basically, what is his motivation for asking you on as a co-founder? It must either be that he knows you and trusts you, you have a stellar reputation in your circle, or he's desperate and drowning, and grasping at anything that might save him.

 

[Komodoo]

what is his motivation for asking you on as a co-founder?

It's the reputation

 

[Komodoo]

Trying to calculate a potential fastlane exit on a not yet profitable company where you have a limited equity stake is a fool's errand

Even if it was profitable already, it doesn't tell us anything about the potential/profitability in the future. So how is it different than evaluating any other Fastlane opportunity?

 

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[Dark Water]

Even if it was profitable already, it doesn't tell us anything about the potential/profitability in the future. So how is it different than evaluating any other Fastlane opportunity?

I would personally consider current profitability vs. existing solely on investor funding as one consideration for potential/profitability in the future.

How you evaluate "fastlane" opportunities is really on you, your own strengths/weaknesses/quirks, risk tolerance, etc.

cmh said it best: if I were you, I would evaluate the CEO, why they asked you specifically, and if there is a specific fit and need that you serve. Make sure everything checks out. Best of luck to you.