Archive for November, 2009

No remorse compensation: Bring friends to work with you, but don’t part as enemies

Friday, November 27th, 2009

Two people get together and start developing a product. You are one of the founders. Few more common friends join. Everybody starts working towards a goal. Six months out, the product is still taking shape; Few people who contributed move-on to other things. This is a usual startup story.

In the above scenario a formal agreement or a compensation is the last thing in everybody’s mind (or like-minded people) when people start working together.FriendsMoreover, working together for some time helps people gauge the ‘mutual fit’ before signing each other up for 4-5 years. It is quite possible that after sometime a few members of the team decide to mutually part way and move-on. The question pops — what/how much would be the compensation if things do not move forward into a formal agreement? How much should be the compensation for the person who has worked his ass off but now thinks that he needs to move on?

People leave because of several reasons; personal, financial, etc. 100% possible that they come back a year later when they have sorted things out.

You as a founder of the company need to worry about people joining your startup — at the same time you also need to think through of compensating people who came trusting you for shorter stints. You have to decide this upfront when the person starts working using a simple math.

No Remorse Compensation is a way of rewarding people (esp. friends) who plan to contribute in building your startup but may move on later to do something else. To keep things simple you agree on a compensation before writing things on stone say 6 months later. Here’s a simple math:

1. 2 people team, started, now looking for a seasoned techie to manage the codebase and developers while the two of you do sales/marketing/product as well.

2. The 2 founders decide that the techie would get 10% of the equity (and some salary, if any, but for now, none) — however, the techie says “lets work together before making a decision.” You don’t want to leave things hanging without making any decision on that. Assume that the techie would work 4 years (48 months). So the techie would “earn” 10% / 48 = 0.2% equity every month.

3. Most probably you are not paying any salary to him — so add 25% – 50% more equity. So the number becomes 0.3%. Assuming you have 1,000,000 shares outstanding, that becomes 3,000 shares every month.

4. The techie earns 3,000 per month until you come with a formal agreement which maybe in line with the 10% equity or maybe less. Make sure to arrive at a decision point in 3-6 months and convert this into a formal agreement.

5. If ok, you can sign a simple consulting agreement with the numbers mentioned.

The above idea is simple — You bring friends to work with you but don’t wanna part with them as enemies, if it did not work out. You may meet him again at beer in the evening!

TED, NED & politicians the last 50 years, India bred

Sunday, November 8th, 2009

This is like a 360 degree view of India in less than a week. On one side; Lakshmi Pratury co-hosted the 1st ever TED in India; on the other I was watching the dirty politics of India. Whereas one Chief Minister had amassed Rs. 2000+ crore (around $500m) the other put 1 million homeless at stake after the worst ever flood in the state of Karnataka. The former state is the one of the poorest albeit richest in minerals whereas the other had people thronging to attend the glitz, ideas and dazzling display of innovation at the Infosys campus Mysore.

Amongst this I attended the annual National Educators Day — to which I fondly christened it as NED to make it more marketable. While NED had 2000 educators and students putting their best brains to solve some interesting issues like Robotics for masses, triple-powered Reva, a Traffic violation system, etc etc. On the other hand the best brains were showcasing personal power plants, raising the livelihood of rickshaw pullers to advancement in neuroscience to raising the bar of education in disconnected villages of India at the TED event.

Bewildered by the fact that on one side educators, innovators & think-tanks are pushing the envelope to take the country forward, while on the other the likes of Reddys, Yeddys, Kodas are taking the country backwards.

corruption_statesDo we think that the advancement in technology, media, innovation are automatically going to fix the larger issues of corruption which touch our daily lives in an infamous way? Or we simply ignore this like we ignore the garbage outside our own homes?

The corruption is especially high in the states as multiple regional parties clamor for power and the national parties “support” them to get the favor back for the national parliament. It flows all the way up from the policemen at the local region to the capital.

The big question is how do we cleanse the system — or does it flush out like a bad meal automatically? Boils my blood seeing all this but I have the same genetic defect like rest of the Indians — a nonchalant attitude until my pants are on fire.

PS. Huh, it does not even hurt anymore; Madhu Koda has already dropped to page 5 in the majority of national media papers.