Who Is A Founder? – The Dilemma

I’m not writing about the traits required of a founder, already done that. Here the issue is about who can be anointed as a Founder, when, and what “price” should be paid.

I’ll be upfront and say that this is a self-serving piece, since I am currently in a situation where this question – and answer – are relevant. It may even be read by some of the involved parties, or not, but I’m not using this as a platform for influencing the outcome of discussions one way or another.

It’s not the first time I find myself in this situation either. Not surprising since I am so involved in early-stage startups. Early-stage, in that often these are ideas, or problems, or maybe even partial solutions, being discussed in a diner. The idea may change between the soup and the sandwich, or the target market shifts over coffee, or the solution applied to an entirely different problem as the last of the ketchup disappears with fries still on the plate.

So who “owns” an idea? It’s you, if you’re a sole proprietor. It’s you, if you had an idea, filed a patent application (yes, I know there are those out there who don’t like this), built a prototype, found an alpha customer, or raised seed money by yourself with your dazzling slide deck.

But is it only you if you bring in others? At what stage? How much influence can they have over the idea/company before they cross that line in the silicon that turns them into a “Founder”?

Do you need to practice safe-suggestions when you speak with potential co-founders, by answering the question “what’s doing?” by pulling out a non-compete agreement?

Say that Jolene is recruited by a friend-acquaintance-former co-worker (“FAF”) to take some role in their new company. Right now the company consists of the FAF, who is the technical wiz, the GoFAF (Girlfriend of FAF) who is providing pro-bono legal advice, and a FoaFAF (Friend of a FAF) who is a graphic artist and will provide some graphics for the website in their spare time. FAF wants Jolene to take on the marketing role. So far they’ve built an early prototype on a password-protected website. FAF loves to code, and doesn’t have any management skills or pretentions (FAF requires GoFAF to manage his wardrobe). FAF has divided the equity by giving GoFAF and FoaFAF a few percent each of the company’s equity at the time of incorporation.

It’s clear that it’s his idea, he’s registered a company, and built something. For the sake of this example let’s say that he’s built a website that taps into airline flight data (this is public information, by the way) and displays the flight tracks on a map of the world in real-time. The site will be ad-supported, since FAF has reached the conclusion that this is cool, and many people will enjoy watching others in flight and they sit with their laptops open at their gates, waiting for their delayed flights to finally take off…

Jolene researches the market and finds that there are already a few players (while this is a fictional example, this service really does exist: http://flightwise.com/flighttracking/ and many more). She looks at this and says, hmmm, what else could this be good for? Real time links to transit databases, graphical display of movement and congestion, advertising potential. How about trains and buses? With slight modifications the site could show that. The advertising model still works and could perhaps be even more lucrative since local advertising could be rolled into it. Perhaps a subscription + notification model since this information could potentially save people from taking the wrong route or mode of transportation, and hence the company is saving them time and money? FAF says “whatever” and changes the code.

What does this make Jolene? While she wasn’t part of the original team, she has had a profound influence on the company. Should she be considered a Founder or was she just fulfilling her duties? In this case I would say Founder since she filled a needed and missing role in the company, was in very early, and has made a significant impact. How much? A significant amount, maybe even to the point of being the largest shareholder (although not majority shareholder).

What do you say?

Let’s try the same example a different way. Jolene, who commutes daily from the suburbs, was getting more and more frustrated with delays in the commuter services. She reasoned that if she knew more about how timely each line was she could make a reasonable decision about which line to take. And if it was good for her it would be a good service for other commuters. She did some research, discovered that this information was publicly available, etc. But Jolene isn’t technical so she recruited a programmer and graphic artist to write the software for her on the promise of being paid first from any income.

Jolene is clearly the founder here, but what of the programmer? He’s essentially put in his time for nothing, contributed knowledge and experience since Jolene doesn’t have the technical expertise necessary to even design the system, and agreed to work for promise of future payment. Does he have a claim to being a Founder?

Now what do you think? Is this scenario all that much different than the previous one?

Here I would say that no, the programmer is not a Founder. That would be the “right” call. But sometimes it’s better to be smart than right. In this case Jolene should consider doling out a few percent – or maybe more than a few percent – to the programmer. In doing so she can gain his loyalty and even place him in a position of fiduciary responsibility. Or maybe it’s just the “ethical” thing to do. How much? Enough to keep him engaged and interested, but not too much that it’s no longer clear who is the boss.

And if you like this idea feel free to run with it, as long as you make me a Founder and give me my cut…

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