Founders, Co-founders, Sub-founders

Big Red Car here on a wintry but sunny to be day in the ATX. Little before dawn in that quiet moment when the wind is blowing and the house is creeping and The Boss is typing.

It is 50F headed to a high of 52F. Brrrr, Big Red Car, winter is here.

Haha, winter in the ATX is 52F and sunny. Sorry.

So, The Boss has been hearing a lot of chatter about founders and how they are going to work with co-founders. Today the Big Red Car invents a new category of founder, the sub-founder.

Read on, dear readers.

Big Red Car, tell me about founders, co-founders and sub-founders? Please?

The traditional founder of a startup is a person with a vision and a dream. That vision is often shared by another founder who is called a “co-founder.” Could be equal, maybe not so equal. Facts determine this.

Sometimes, the vision is so extraordinary that there can be only one, the original fire starter. Just like The Highlander, “there can be only one.” [In the Highlander series, right about now somebody is getting beheaded. Wow, was that series ahead of its time or what, no?]

This is also driven by investors who say, “We’re investing in a team. Not just the founder.”

That drives founders to seek out co-founders as a condition of seeking an investment from angels, syndicated angels, seed funders. Again, “We’re investing in a team. Do you have a team?”

The entrepreneur answers, “Not yet but hang on for a few minutes and I’ll whip up a team.”

And therein lies the notion of the sub-founder. Not quite as desperate as the Brits impressing American sailors for their fleet on the high seas back about the time of the War of 1812 but related slightly — the CEO, founder, entrepreneur who impresses a sub-founder at an early point in time in the development of a startup.

This is NOT the same thing as a co-equal, co-founder. It is something altogether different.

Founders, entrepreneurs, CEOs, VCs are cautioned not to think it is the same thing as a founder or a co-founder. It is not and should not be received in that manner.

As to the sub-founder, “Hey, sub-founder, you are not one of the real founders but you got there as quickly as they required the need for your expertise. Be happy but realize you will always get second choice of seats around the campfire. No big deal but know it. Of course, you can work your way into the inner circle and, sure, you could be the CEO one day when the founder/CEO moves on. But know where you’re starting.”

Why is this important, Big Red Car?

Because The Boss is seeing a lot of CEOs who are trying to bash the sub-founder personage to fit into a mold that really doesn’t exist when it comes to compensation and equity. It is particularly true of equity.

Sub-founders are important folks but they are not deserving of founder/co-founder equity. They get equity but not equal equity with founders/co-founders. [Here we are roughly suggesting that founders and co-founders are equivalent. Not a foregone conclusion and plenty of reasons why the original founder gets more equity than a co-founder. Save that thought, y’all.]

What is the message, Big Red Car?

The message is elegantly simple, “CEOs, stop beating yourself up trying to grant sub-founders oodles of equity. It is not the right play. Get them on board and get them situated as you need them but know they are replaceable.”

As to sub-founders, “Know that you are a very important part of the brain trust that is going to birth this baby but you are not a ‘real’ founder. It’s OK, deal with it. Make yourself essential to the operation. It is still a great gig.”

One other little detail. You may not know your sub-founders well, so vest the Hell out of their options. I am not a fan of vesting founder or co-founder stock. Hell, it’s YOUR company why should you be vesting what you already own? But, sub-founders are often strangers. Vest their options over four years and get the right to buy them back when they leave. Also, get an unequivocal voting proxy for that same four year period. That is all about control.

That’s it. All I wanted y’all to know today.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. 



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