Side Hustle School Ep. 3234 - Q&A: “What’s a fair founder-investor deal between friends?”
Nov 8, 2025
Tessa, a designer and college friend, dives into the intricacies of founder-investor relationships when seeking a $25,000 investment for her travel accessory prototype. Chris provides insight on balancing cash and sweat equity, suggesting a fair 75/25 equity split. They also discuss the nuances of managing passive investors, advocating for a one-year cliff and monthly vesting to keep motivations aligned. This episode offers a practical guide for navigating financial partnerships among friends.
AI Snips
Chapters
Transcript
Episode notes
Founder Has Prototype; Friend Offers $25k
- Tessa describes her prototype travel accessory and that friend Evan can invest $25,000 while she handles product and ops.
- She worries about resentment from a 50/50 split because she'll work nights while he's mostly passive.
Price Cash Before Splitting Equity
- Value the cash first by treating the idea as worth $0 to set a clear valuation baseline.
- Convert the investor’s cash into equity proportionally (e.g., $25k into 25% at a $100k valuation).
Give The Founder A Larger Share
- Reward the founder who built the prototype and will run operations with the remaining equity after valuing cash.
- Use concrete math (e.g., 75% founder, 25% investor) instead of an arbitrary 50/50 split.