I will be that guy and say that all the discussion around who is allowed to self-designate as a ”founder” is fatuous and fetishistic. It’s an obvious attempt to amplify one’s importance beyond sense in order to provide some level of resume inflation and just dilutes the meaning of the word.<p>In my opinion “founder” is not a word someone should be unilaterally conferring upon themselves, but is more meaningfully applied only by others. Until you are making actual money, you are someone trying to start a business. When you actually make money, that is at least break even, perhaps you can consider yourself an “entrepreneur”. Leave the identification of “founders” to people like the Wall Street Journal if you wish for the word to retain any meaning at all.
In my current company, I wish I had handed out the cofounder title more liberally to early employees. The engineer in me wanted to stay true to the definition of "founder" but in retrospect, all of the initial employees would have loved to be founders, too (and with that, behaved as cofounders). The next startup I do will have a small parking lot full of cofounders.
If someone joins you within the first 30 days, contributes as much as you do and is taking as much risk as you do then they are an <i>equal</i> co-founder.<p>If someone joins you later, gets paid from day #1 (and you don't), does a 40 hour work week while you work 80 then they're an employee.<p>In between you can vary the percentage to reflect the difference.
- Yourself: If you have to ask you're an employee.<p>- Someone else: If you have to ask/are confused on where the person sits, employee also.
On the YC SAFE model, there's no stock, so it isn't about that. You give away equity using the SAFE document.<p>We faced this issue in my company and I definitely get the fear of giving away something to someone unproven. I started out with the employee just on salary. In the written agreement, we offered ownership interest over time. In practice, I wound up giving him the full equity and the co-founder title in 3 months because of his contributions.
Easy. If you got stock when the company was formed, you're a co-founder.<p>Anyone who joins after day 1 (and before day .. 180?) is an early employee.
In my experience, the founders are the folks who make the decision to turn an idea into a business, before day 1. The only cofounder-exclusive work is the preparation and work of actually defining the initial business, taking a risk on the idea, and being a part of the incorporation process (broadly defined). Anyone hired on after that point is an early employee, though they might be compensated with equity, or they may be very influential, or they might do more for the company than the founders did... but they were not the originators of the business.
> how do you decide who is actually a co-founder viz-a-viz an early employee with equity<p>Co-founders share both equity and liability, and their names appear on the legal documents regarding the company foundation.<p>Employees (whether early or late) do not.
Technically, there is no difference. In a C corp, everyone is an employee. In practical terms, the founders <i>might</i> make decisions more jointly rather than strictly on a basis of equity.<p>It's worth considering that it is probably a red flag if this becomes a pressing issue because it smells of pettiness and/or ill-feeling. Who is a founder doesn't change the amount of hard work that needs to be done. It's just a distraction from it.<p>It's also a red flag if an early hire with equity resents not being a founder. There's no time for that. Good luck.
Founder = equity on day 1 or first couple of days/weeks/months<p>Co-Founder = more than 1 of above<p>Owner = equity earned after (sweat or money), founders are automatically owners as long as you still have shares<p>You can be a founder but no longer own the company (sold all shares)<p>If you have to take money from your own pocket to keep the company going, you are an owner - capital call anybody?<p>Some people actually don't want to be called founders as they think that the title they give people when they have put out to pasture and no longer actively contributing :)<p>But titles don't really matter unless that is all you are after
I think there are some real practical implications of being a cofounder vs employee<p>- Right to board seats
- Access to the company's bank accounts
- Authorized to approve spend on behalf of the company
- Access to HR data, salaries etc
- Depending on role/stage, may need to sign tax statements or other legal documents as a company representative
- Full insight into the company's financial conditions
- Voice when talking/negotiating with investors
- Part of all crucial decisions about the company's strategy
No hard and fast rules, but generally: founders have to be present before founding (incorporation) - this usually means they will be doing work for free before that time; in many cases, founders may also need to put in money. (Once you're founded, people can't work for free anymore.)
This is what made me technically an early employee rather than a founder of one of my most successful startups - I was one of a handful of peopl who put time, but no cash, into the company - we were the first employees, but that didn't happen until the VC's check was in the bank. (We were somewhat unusually seed-funded by a VC firm.) Those of us who passed on being founders either didn't have the cash or had to keep other jobs until the newco could make a firm offer of employment. (I more or less told them, "Great, I'll help plan and strategize over beer at the pub after work. Other than that, call me when you have money.)
Then there are all the differences in stock class, grants vs. options vs. warrants, etc. Usually, though it's pretty clear who were the actual founders - they're the ones with the original idea, who worked (maybe with the help of others) to get it to the point that a company actually could be founded to go forward.
BTW, founders aren't permanent - the one I mentioned had to rid itself of nearly a half dozen of them in the startup process. This is usually done with option grants or the like and a solid time-limited no-compete. I know another who's reformed his company three times to force bad people out. It's amazing what good lawyers can do for the people who control the company.
One of the ideas I had to instill more motivation is to apply @goopthink's definition with the added idea of "reverse-title-vesting" meaning that if you stay with us for more than X years then you become a founder too, if you were one of the early employees (let's say up until the 3rd employee).
At some point, there must have been this conversation with select few people in which you together decided to start the business. These are potentially your co-founders. In the next few weeks/months, you may expand that list, but I believe the co-founders are the ones that take the highest risk to co-found the company in face of high ambiguity and risk.<p>A good split of responsibilities is that each co-founder has a Cxx role (not necessarily a title). You generally need to fill the roles of a CEO, CFO, COO, CPO, CTO and CMO. This doesn't mean you need this many co-founders, as some roles can be merged, but the responsibilities most likely have to be distributed.
I don't think the line should be set only in time, but also in contribution. Did the person contribute something which is now foundational? For example some thing in the culture or technology or something that made a real difference to the future of the company? Then they should be given co-founder status nevertheless.<p>It's been mentioned before, but making someone co-founder retroactively seems reasonable. I'd go as far as say that someone who are present from day 0, but does not manage to contribute in any lasting or meaningful way, may be unconsidered as co-founder.
I think co-founders should have at least 10% equity, but you might give up to 5-10% to a first employee (depending on a lot of factors.) I guess the line could be somewhere around 10%. I would say that equity is the most important thing to get right, but titles are also very important and can change a lot of the interpersonal dynamics in a startup.<p>[1] <a href="https://www.cnet.com/news/tesla-motors-founders-now-there-are-five/" rel="nofollow">https://www.cnet.com/news/tesla-motors-founders-now-there-ar...</a>
Where ever you like. As the founder, you get to draw that line.<p>There are examples of different perspectives that you can apply through this thread, but as the founder(s) it is part of your job to decide this.
It's easier to say in retrospect. If an exit is financially successful, then:<p>You're a founder if you got <i>rich</i>.<p>You're a late employee if you got <i>paid</i>.<p>You're an early employee if you got <i>screwed</i>.
If you have to keep selling your idea, startup vision, and its future potential to retain the person during initial phase of startup, that person is not co-founder. S/he is an early employee. Co-founders are the one's who have already bought into your vision and fully committed to and working toward the vision without any prodding, convincing, encouragement etc. They independently leading the effort and doing what need to be done to move the startup forward.
I don't really see "founder" as a job role in the company, it's just a thing the media say when they want to denote you as being there since for the formation of the company. Past that you'll have actual job roles such as CEO, Managing Director, CTO, CFO, Finance Director, etc.<p>If you want to get specific, I would say that founders will probably have their names over initial incorporation documents and the stock grants during the formation.
I was watching Selling Sunset and one client was introduced as the founder of Wags, but she was not one of the founders listed on their Wikipedia article. Had a look at her LinkedIn and it looks like she was an early employee. Not sure if it was spiced up by the show or if she's actually considered a founder but I started thinking about the same thing.
Basically when you can afford to build a business with giving away founder sized equity grants, you don’t NEED another founder, but you might want one anyway. The title itself is meaningless.
By how much equity stake they get / risk they take on.<p>To draw a clear line, I like the YC definition others have mentioned in this thread of ≥ 10% == co-founder.
imho The only correct answer should be salary.<p>It doesn't need to be market rate, but if you're ever not paying someone, they're a founder - and deserve to be represented on the cap table