I basically interned at a company on and off for 3 years while in college, then worked in front end sales, commission based for another 2, then went on to architect improvements in that company; which there were disagreements, so I went off to form my own company, my own way.
I’ve put just over a year of 24hr days and maybe 10k into my company, which is in industrial manufacturing, and are about 1 month away from our series A, to launch and build the first factory. Starting about 2 months ago, I began working with another resident at a start-up accellerator I am in, eventually, I gave him a title in the company as he helps with a lot of the paperwork, finding people to do certain tasks, planning and certain compliance/regulatory issues.
Recently we brought on a 2nd person who will be handling all the engineering and systems management, as well as when we expand to new regions, to set-up additional factories.
I havent paid either of them anything so far, but the business accellerator mentioned they would come up with comething for them. The first guy put in 1100 for airfare on a business trip for us. They also said they are willing to put in 5k each for the launch, which hasnt happened yet, but will be helpful to launch. Which I would like to view as a freiend and family kind of thing and just repay it when we launch with maybe a nice present or something also.
They will be part of the team though and an integral part of the company. They are asking for a contract agreement to sign so they feel more comfortable and secure in their role and as part of the company. So far, the first guy has put in maybe 100hrs, the 2nd guy, maybe 25, of actual work, not regarding lunches and chats and this and that.
How would you suggest I contract with them? I feel as though they may want equity, but id rather just give a % of the net, rather then equity. I feel this is motivating as the higher the net, the more everyone makes, maybe not though. They seem to have a strong ideaology that because they put in this time, without forward pay, prior to launch, that they will get a big equity chunk and be millionaires in a year or two; which I dont agree with. The net of the company will be approx 4MM+/yr but that must be invested into more factories and product diversification, along with other business grwoth things, and they should just be happy with executive salaries with their year end or quarterly bonus from the net. I would personall feel robbed if i put in all this work, to just go and make them overnight millionaries and feel it is unjust to me. If theyre going to be millionaires formt his startup, they have to put in atleast 4yrs, as i did, into the industry. but it will probably be more like 6-8. I feel theyre a bit greedy and i maybe gave away too many of my trade secrets, which they think is common knowledge, but is actually deep industry inside information. Well, that was my mistake.
The engineer is very good at what he does, albiet, there is a large supply of engineers in this city, maybe not as skilled, but desperate for qualtiy jobs, especially something so amazing and exciting as this. The tech writing guy is pretty good also, and i do see value in him, but i believe an administrative assistant could similarly fill that role, along with an health and safty manager or warehouse manager/compliance officer. It would parlay the launch to replace them, but it could be done. This business is highly investable and extremely exciting to work for. If we cant come to terms on this before the launch, it will be bothersome, so i’d like to find a middle ground pre-launch.
What type of terms would you suggest?