I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50. It was a severe misalignment in expectations, and this was after 3 months of meeting regularly to refine the idea and build out prototypes (read: I was building the prototypes).
My advice is to have this conversation with a potential business co-founder as early as possible to avoid wasted time. I could have saved myself months.
Look out for business guys who severely discount your value as a technical founder. Not saying they're all like this, but a really skewed equity split is typically a red flag.
I’m running a business that’s currently doing around 32k a month at ~85% margin after 2 years in operations, no funds raised to far. I have a friend who is an MBA and only held corporate roles up until now. I’ve been running companies my entire life, and had one exit that was 42.5M US.
We discussed partnering up, and when i mentioned a buy in or 10% equity split (with no buy in) or some combo of the two, he backed off pretty quick.
Turns out he expected something around 40%-50% with no buy in. To me this is just unintelligent? Especially from an MBA.
From what i'm reading, you seem like you need employees or outsourcing, not partners. Why would you even bother with this person, their incentives seem all misaligned.
Not sure if they approached you, or vice versa -- but people often approach with deals like this because they are trying to find suckers who they can dupe. And sadly, they find them.
Totally agree. To be honest, I think a 10% offer here would kind of lead to the worst of all worlds: too high for the person to be considered an employee, but too low for the person to really be considered a partner.
I've seen a case where a company was started by a very small, relatively inexperienced team, and then had 2 much more experienced "business people" join later. These 2 business people were actually given "founder" credit and equal equity stakes, because it was clear these folks would be integral to the success of the business (and, indeed, in retrospect, they were, and the business became quite successful). I point this out because it's an example were the addition of some later stage business people does deserve large equity stakes. But given the original commenters history (e.g a previous large exit), it doesn't appear that's the case here, so it doesn't look like he needs a partner to begin with.
Agree on your case also. Business folks can add tremendous value. But especially late-joiners as, in your case, the better setup is to set some success criteria, hurdles, and reward accordingly. Win-win.
Yeah frankly my expectation on the most realistic outcome was some middle ground: where they buy in and i juice it with a bonus of equity based on outcomes.
Regardless, I’m just trying to work on making progress day over day. It’s fun, and a real business, so good problems to have.
Yeah, i mean, I’ve done this a few times before and had one decent outcome…i feel I’ve seen enough to feel totally at peace with this outcome.
I think getting incentives right is the hardest part of business, once you find any initial traction. It’s less sexy but i agree, finding good employees and contractors is the next step from here.
I would say that MBA means nothing by itself. It's 100% about their social network. MBAs were a great way to network as a lot of elite kids got MBAs. An MBA is just a proxy for something else which isn't necessarily there...
When we hire MBAs it means nothing except a minimum standard of work ethic and communication skills and usually (but not always) ability to grasp and breakdown problems. What they usually lack is expertise/applicable experience, we know this when we hire them, but any non-MBA candidate with relevant experience is preferred to an MBA. Like I said we don't expect fresh MBAs to know deeply about software but you do get pompous types who don't have the humility to realise they are out of their depth
An MBA is exactly what it sounds like. It teaches you how to administer a business. Not how to found one (it’s often counterproductive for that), not how to have good ideas, not how to spot product cycles, but to take an existing business and make economically rational, not entirely stupid decisions for it.
Curriculum usually includes things like pricing; applied microeconomics; power & politics (ie how to get the org to do what you want), business ethics, some intro to corporate law, oftentimes electives that are deeper dives on how specific industries are structured.
My wife got an MBA at the same time I was working on founding a startup and they are basically completely disjoint skillsets. If you treat the MBA as training for how to be the hired Director/VP in an established organization and not the person who wills it into existence in the first place, it can be a pretty interesting curriculum.
I have no idea what they teach in MBA programs these days - I'm many years removed from the age that most people get theirs.
My dad got his MBA in 1959. When I was younger and considering one (I moved out of day to day tech work a long time ago because I wanted to "fix" the business problems I kept encountering because of their negative impact on the tech work), we reviewed curricula for several programs.
My dad was pretty astounded that in the wake of globalism and technology, they were still teaching the same tired-ass theories that he was taught in the 50's. Note that this conversation wasn't all that long ago in the grand scheme of things.
I get that this is a vulture capital site but all one has to do is look at what is happening in the world (Bain capital et al) and you see that all they are really teaching/practicing is wealth extraction, not wealth building.
Edit: sorry, my dad got his BS in 1959, his MBA in 1962.
He discussed partnering up on your current business or were you talking about a new and different startup? I think you mean the first one, but that seems shocking to me.
He’s could be taking a significant pay cut and only assigns a moderate future value to the stock, eg, 1% of 50M exit and 10% of 5M exit with 50% ownership is only $500k expected value. Amortized across several years of pay cut (eg, 5 years to exit) you’re looking at $100k/yr “bonus” on $160k for effective $260k/yr. (And that’s assuming no dilution events!)
I agree expectations were misaligned so a bad partnership — but the ask doesn’t seem particularly crazy.
If your assumptions here are correct, he's just not a good candidate for being a founder. If you see earning 163k/year a hardship and don't value 10% equity in a high margin business doing > 30k MMR, then you should try to become an employee at a big company.
Well no, I don't know how startups work, having never been a founder or an investor, but my understanding is that startups are valued at a few multiples of ARR, 10x if there's major growth, for which in almost all cases you'll need VC money (which they don't have).
I'm going to assume that either A) there is no growth without this partnership, so the startup is maybe worth up to 1M, in which case getting up to 40% over 4 years with work and targets makes sense, or B) the original founder is expecting significant growth even without the partnership, in which case he needs an employee and not a partner (and he should pay him as such).
Very typical. I've run into cases where an "idea guy" basically says "you do all the product and tech half, I'll do marketing and strategy." Which is dumb, because sometimes I'm legitimately better at the strategy half too. Generally these people want ridiculous equity splits of that nature.
It's worth anyone technical's time to build skills in strategy, marketing, finance, etc. The technical co-founder always gets screwed and suffers from a general lack of respect. In my opinion, it's usually unwise to take positions where you're strictly the technical co-founder, or where you're marketed as the same.
> Which is dumb, because sometimes I'm legitimately better at the strategy half too
A semi-related thought I've had recently:
I've run into a number of non-technical product people that say that they're primary skill is that they have a great "product sensibility" that engineers lack so they need to step in and provide guidance. It's true that many engineer-designed products are terrible, but I'd argue that most engineers have pretty good product sense.
The problem is that engineers have a conflict of interest that leads to them making sub-optimal product decisions. A non-technical product person gets the "luxury" of only thinking "what is the best product for the user?", so they end up with a good design. But an engineer can't help but also factor in "i'm the one that has to build this, so how much extra work am i giving myself?" so they're design will be a compromise of what's good for the user and what can be built easily.
this can have big consequences for how an org should divide work. If somebody has a broad set of responsibilities, they can't help but make tradeoffs (that they might not even be cognizant of) because they're weighing multiple objective functions.
So, when it comes time for figuring out who should be in charge of strategy, it might not just be an issue of "who's better" but more an issue of "who has the least conflict of interest"
Every feature, design decision, and iota of technical debt are money and time. Either that's raised and spent up front, eating at equity, or it is deferred until a point where revenue pays for it, it is redundant due to a pivot, or becomes so essential that new funding is raised (possibly from a pool that doesn't dilute so much value).
Presenting an accurate and fair cost / benefit analysis of these tradeoffs (at least on the technical side) is the main purpose of a technical lead. Non-technical business people can't get that information on their own. They should have a say in the decision if it materially affects the product's launch, but that's the normal give and take.
>> But an engineer can't help but also factor in "i'm the one that has to build this, so how much extra work am i giving myself?" so they're design will be a compromise of what's good for the user and what can be built easily.
The PM/Strat component is like a fifth or tenth of the tech work, typically. Every product design decision often has a magnitude more of associated implementation work. The only way i'd go with this setup is if the PM/Strat person if one of these things:
- PM/Strat person already has customers lined up
- PM/Strat person has paying partners lined up
- PM/Strat person has had exits with associated aura
- PM/Strat person puts in upfront $ to compensate the tech person
> But an engineer can't help but also factor in "i'm the one that has to build this, so how much extra work am i giving myself?
I wonder how many startups have failed because the tech has been too much of a pain in the ass to maintain and the technical staff burns out and leaves, with more and more expensive developers postponing leaving till as late as possible and doing as little as possible
Start ups that choose things like Azure are a red flag for me. Churn is really problematic. Learning a code base by having to poke and grok takes a lot longer than being able to fire off a few questions.
yeah azure has come a long way since 2016. id say it has devex ~amazon, better than gcp. but to his point the startup picking azure is a bit of a red flag, though it's not the best example of a red flag, imo.
What about "what role needs to be done the most at the time?"
>sometimes I'm legitimately better at the strategy half too
Technical people should be eager for more business responsibilities than ever before starting a business.
If it's an "engineering company" ideally you would have two founders each having outstanding technical abilities, and far exceeding anything a non-technical alternative could bring to the table from a business or sales aspect. To begin with if you want to start a business, you need to be the kind of engineer that wants to build sales in some way or another. On the front lines and/or in the background.
And to be real one of you is going to have to go full-time into sales & marketing to pursue some type of cash flow until things get rolling in some way. At least.
Then you can more sensibly consider having the non-tech MBA type come in under the top engineer who has been successfully selling already. And that's the beginning of a chain-of-command where an "engineer" is never hired or fired by anything other than an "engineer". And there's always an engineer (sharp in business, not lacking anything needed) at the top of any non-tech hierarchy by design.
Non-engineering companies where the non-tech-types dominate the hierarchy, can still have decent opportunities for the engineers they hire to work on projects under them. But there may not be as much room for upward movement or appreciation for outstanding skill up and down the line. Might also be more often found involved with financial irregularity, or more commonly non-fair dealing even with some of their own people sometimes.
The blue-sky utopian version of this for the Business side is a company shaped like a big Inside Sales Funnel, with all Engineering work implemented in off-shored cost-centres paid piecemeal at contract rates.
Steam had a flat-management structure and Engineering driven leadership from its outset. I'm not sure there's many other that can survive the VC landscape where customer focused design is seen as something between over-engineering and altruism.
Conflict of interest is exactly how I term it as well. Tech people with good product sense have to work very hard to override their engineering instincts or they’ll handicap the product.
I’m guilty of it all the time. What helps is remembering that absolutely nobody gives a shit about the code or the architecture. Nobody. It really doesn’t matter. They just want an awesome product.
(Which isn’t to say none of that matters, because it does. We are engineers and know the consequences of shitty technical decisions… it’s just that you have to pull yourself out of that mode when thinking of what needs to be built)
> What helps is remembering that absolutely nobody gives a shit about the code or the architecture. Nobody.
If there is no competition, money is nearly free, and you have all the time in the world, sure. If any of those isn't true, you probably want a reasonably well architected codebase so you're not spending 3X the salaries and 3X the time to build things as you would've with a well designed codebase.
> What helps is remembering that absolutely nobody gives a shit about the code or the architecture. Nobody.
We could easily say the same about anything. Nobody cares about the engine in their car either. Except they do, because it affects things like whether they can get from point A to B, which is what they really care about.
Same with code and architecture. It "doesn't matter" but it does, because it takes you from A to B at a particular speed and cost.
> What helps is remembering that absolutely nobody gives a shit about the code or the architecture
The programmer on call at wee hours in the morning gives a shit. Good news though, that programmer will not be a problem soon enough. You can hire your way out of this problem after they quit.
It’s funny how many people think their ideas are truly brilliant and warrant a massive amount of respect.
Anyone who’s worked as an engineer for awhile knows that ideas are a dime a dozen, they are rarely unique, and are about a millionth of what needs to be done to succeed
EDIT: I say this as an engineer who is putting his notice in tomorrow to found a startup
EDIT EDIT: Thanks guy, this is along the lines I'm thinking. I'll be competing with companies like Asana, Monday.com, and ClickUp. I worked in a consulting environment for two years and these tools could never be adopted despite the org size growing to 1000+ people in my larger team. It was a big pain point and I think I've built a solution that will help big time.
A good biz guy can be worth his weight in gold. It's harder than people think to get it right: to figure out the right markets to address first and how to tweak/target your product to do so, when, how, and from whom to raise capital, at what rate to expand the team, sales and marketing stuff, etc. Doubly so if the technical co-founder isn't as good at these. It's not worth 80% of equity against 20%, but it is worth a reasonably fair share.
For an engineer, sure. But for a business guy, it might be a bit tricky. Though I'd say a good business guy probably has a bunch of engineering contacts.
Demonstrate traction. The idea person should have at least an audience for the problem space. If not, they are Field of Dreams - build it and they will come. That doesn't work.
You didn't ask me, and I don't have a complete answer, but here's a starting point. Consider what's required for a patent: Novelty, usefulness, and reduction to practice. The latter step often changes the first two, for instance by uncovering problems, or even improving the overall quality of the idea.
Of course a lot of things need to right, beyond that point. I use the patent rule as a guide to make sure that the right people get credit where credit is due, when an idea reaches the market successfully.
We don’t need to go that far. I am “just” a developer but I have been in meetings where developers like me had much better ideas and suggestions on product, strategy etc than the suits. I remember being urgently called into a meeting with a big client to explain how a part of our application worked and why it worked that way, when the product owner/designer could not.
People often complain about developer salaries. I wonder how they can justify suits’ salaries
> worth anyone technical's time to build skills in strategy, marketing, finance, etc.
This leads to jack-of-all-trades types. Good non-technical folk exist. They’re just not easy to find for obvious reasons (same as good technical founders who can see the forest for the trees).
A good technical founder dilutes their comparative advantage e.g. negotiating with suppliers and prioritising payments ahead of a close.
It can, to be sure, and it's not ideal. But the perception that technical co-founders typically get gypped hard is very warranted. This is a thing where you can often still get a reasonably good result with a technical co-founder, not as good as were he solely focused on product/tech stuff, but enough that his individual outcome may be higher than letting the biz guys run it.
Obviously good biz guys somewhat mitigate this but finding those is easier said than done.
I don't know that I understand this, typically I structure the shareholder agreement (when I can) to be such that I have clout because I own or control a significant percentage of the shares, not because of my "title".
>> I recently walked away from a potential startup because my non-technical partner (MBA ideas guy) wanted an 80/20 equity split in his favor. I was the first to broach the discussion and proposed 50/50.
I'm constantly approached by "business guy" with deals like this. Here is the truth -- even 50/50 isnt enough because technically, the tech-co-founder is often doing all the upfront work and taking all the upfront risk. The business-co-founder gets a free option to do work (or not) afterwards. All upside and little downside.
IMHO good business co-founders are worth gold and make their worth obvious. They already have POs lined up, they have partnership agreements already in the works, they have VCs willing to invest based on past performance. Perhaps they already tried the business with some overseas teams doing POCs. Perhaps the business co-founder already has exits or a successful business and is willing to pay the tech-co-founder some nominal amount to show skin in the game. Those are all good signs.
If those arent the case, and the "business-co-founder" is sitting back while the other is hard at work coding a prototype -- you dont need a co-founder. Just be the CTO+CEO and hire the "business" work yourself!
In the absolute worst case, i've seen a "business-co-founder" continue to push the definition of MVP more and more and the "tech-co-founder" seeing the sunk-cost of the work they have put in, continues to ever-expand the MVP. Meanwhile the "business-co-founder" gets months or a year of free labour with a free option to participate -- or not.
Because you framed it as a Technical Partner needing a 'Business Guy' and approached someone from the post-2000 Cohort who uses the Wozniak/Gates power-dynamic as a best-practice case study (or RIM's example of Mike Lazaridis/Jim Balsillie).
The fact that you spent months refining the idea and building out prototypes is irrelevant or even detrimental to your position. In fact it may have represented a delivery anti-pattern depending on how far along you were to realising your value proposition as a product. Engineers to build MVPs are a dime a dozen. Why were you wasting time as an individual contributor when positioning yourself as a (co)-founder? Why would a prospective C-Level Business Strategy Leader see you as anything other than an Engineer with a MVP and no GTM, previous exits aside?
This is a common scenario for those who frame themselves as 'Technical Founders' - they end up being perceived as a cost-centre incapable of realising any sort of a GTM strategy, and as such are equity-weighted accordingly.
Good you walked away. In my experience, the heavy lifting in a tech start up is, by definition, the tech. The "idea guys" rarely understand that it's the execution that makes an idea valuable.
Sales are important, but are a bit of a crapshoot. You can't consistently sell trash, no matter how good a salesperson you are. The guy was happy to roll the dice, while using your mental energy. Great deal for him, but not so good for you. You risk the burnout, stress and pressure, while he feeds you requirements and deadlines, and essentially becomes your manager.
In my younger days I got a lot of similar proposals, but thankfully could see right through them from day one. Bootstrapping as a solo founder was the harder, but ultimately more rewarding route for me.
The business side needs to have subject matter expertise in the market, running an org, fundraising, marketing, etc. 'ideas guys' are pretty worthless without that.
80/20 is an insane proposal; 50/50 feels reasonable, but I 100% agree with you that the technical side is way more crucial than the business side, since under $10m in ARR your biggest issue will be making the tech work well enough to attract customers.
Yeah, but that rarely lasts (I am assuming the absence of corruption etc etc). If you set the bar so low with your product that it's easy to outperform by a 10x margin, then you present your customers with a huge incentive to move away.
>> I had this exact scenario happen on the ycombinator cofounder matching of all places. Except the other cofounder (non-technical) wanted it 95/5.
I've gone to some of these just out of curiosity and it seems like people on the hunt for suckers. Having been thru this myself and seen the drama play out with friends from back in the dot-com days to now --
CO-FOUNDING IS LIKE MARRIAGE You cannot just match to someone. There has to be a low-stakes dating period, an engagement period, and then "marriage". You have to be able to walk away early on w/o extensive entanglement. The best co-founder is someone you've known for a long time in various semi-tense scenarios, where you can evaluate their ethics under pressure. This ideally means having worked together or done many projects together.
They may be a little surprised how much that costs. And then the running of it and the bug fixing and the feature expansion. It may be a little… “surprising”. My advice is to get idea guy to price it out haha.
Yeah never take anything less than a 50/50 split. During the initial fundraising rounds (seed, Series A and maybe even into B) you're also going to be doing just as much lifting trying to get a deal done while also doing your regular day-to-day engineering responsibilities. Maybe in a world where it's 3 founders you can side-step this responsibility but at point you're not just the CTO you're also the de facto COO while your partners are trying to get a deal done.
Partnerships should be about leveraging opportunity in the market, not partners leveraging each other.
With business idea guys, the tech guy could own 100% of the shares until business founder shows up with paying demand and repeatable and scalable demand.
The technical founder invariably builds and creates value in working software. It's tangible.
If the business / "idea" person over values their share it's likely due to knowing the mismatch to begin with.
Technical co-founders are perfectly capable of learning all aspects of business. Plenty of good books and resources out there at present.
>Technical co-founders are perfectly capable of learning all aspects of business.
If you assume the technical co-founder doesn't need to sleep or has a magical source of extra time, sure. But in the real world, failing to bring a product or service to market at the appropriate time can be the difference between failure and success. I certainly agree that a technical co-founder's knowledge is harder to replicate in the abstract (OP's story about a co-founder suggesting an 80:20 split is nuts) but trying to be a jack of all trades can leave you a master of none.
Fairness of the equity split aside, it also indicates he doesn’t see you as an equal partner. Rather you are seen more as an employee that is going to be working essentially for free. So he probably also won’t value your input and contributions in the venture either.
>have this conversation [...] as early as possible
Yes, it could be one of the things you bring up on the very first talk you get around this, and it's much easier to do it early than anytime later.
"Hey, this thing you're telling me about, do you want my opinion or are you telling me because you want me to be a part of it?"
(if: want to be part of it)
"Nice, have you thought about how much each one of us will get? I always prefer to do equal splits."
If equal splits or very close to that I might do it. If not, the deal would have to be exceptionally good from the start, e.g. "we'll give you 10% of a post Series A company that is already valued at XX million".
The ignorance comes from lack of experience and it happens often on both sides.
Engineers think they deserve a big equity package for writing CRUD apps.
“Businesspeople” with no startup experience, never raised money and never worked in sales think they have value.
If both co-founders have no prior startup experience then they both need to put in the same amount of money and split equity 51/49 or 60/40 (while considering dilution).
No once can build a meaningful company alone so you need to have a team and that team must have a servant leader willing to break ties.
It’s only inexperienced people that don’t know / understand this.
Hmm, if it were me, I would have asked how his 80% share would have made my 20% a good investment [than all the other options].
It's all about what each of you are bring to the table. It's possible he priced the tech side perfectly AND being the best option available to make you better off.
There’s zero chance this would ever be a fair split.
They know nothing about building technology so are never in the right. This happens often enough that most startup accelerators pre-flag it as criteria to not invest in founders (with an out of balance equity split).
Then why do they need to give the technical co-founder 20%, or even make him a co-founder at all? They either have enough privilege and connection that they can bring in serious funding from investors, future clients, or friends/family/fools, - or they don't and their privilege and connections aren't really worth that much. If they did, they'd much rather give them a few percentage points and pay them a salary, capturing all the upside.
It's a broad over-generalization but it's a good rule of thumb. They must have access to demonstrable money and/or power before they're worth an 80/20 split, well above what most random business guys can bring in from even elite universities.
Edit: A decent somewhat recent example is Theranos. No biotech VC would touch them because they do due diligence on the basic scientific viability of their investments, but Holmes and her cofounder were able to bring in huge tech investors from family connection and even get people like Henry Kissinger on their board, who also helped them get more investors. That's the kind of connections that might be worth an uneven split.
They need to pay for the tech then. Hire an engineer and design team. If they don’t have the access to that sort of immediate funding, then I’d struggle to imagine what sort of in-the-bag contacts they could bring to justify such an uneven split.
And that type of person quite often turns out to be a huge over-privileged narcissist who's never had to work hard a day in their life, because of their family and frat-bro connections, and who will gladly fuck you over without a second thought.
> They know nothing about building technology so are never in the right
I’ve easily seen more start-ups fail because the technical co-founder got pedantic about something with zero commercial relevance than I have where the non-technical founder rolled over their tech team. Mostly because the latter fail early while the former can sort of look like it’s not a trash fire for a little bit longer.
As you say, the unequal split is a red flag. Not the direction it leans.
> I’ve easily seen more start-ups fail because the technical co-founder got pedantic about something with zero commercial relevance than I have where the non-technical founder rolled over their tech team.
Can you think of examples of the opposite? There are a few variables here for technical/business/commercial and fail/succeed so I won’t write them all out, just curious what you have seen to be honest.
If that person was someone like Warren Buffet, e.g. with a massive track of success behind them, then why not. 20 per cent of a billion is a lot more than 50 per cent of a million.
But for random nobodies who think high of themselves, hell no.
It makes sense to walk away even in the game theoretic sense. Many people think in terms of prisoner's dilemma, when it is actually iterated prisoner's dilemma.
Its true in a game-theoretic sense, but I'm actually talking about being honest (and rational) with yourself and what you're able to contribute. There's many other factors that have been mentioned by other people here.
Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably. (Even in the cash state, the better play is vesting, not an unequal split out of the gate.)
If you want an unequitable split, hire an employee. If you can’t (or won’t), you’re not the hot shit you think you are.
> Unless someone is putting cash on the table, or one partner is full time and the other is not, there is zero reason not to split founder interests equitably.
When he asked why I thought 50/50 was fair, this pretty much sums up what I said. I'd be happy to take an 80/20 split with an industry insider or celebrity, someone who's guaranteed to attract buzz and attention. But he wasn't that guy.
should just ask him: what do you think stops me from taking your idea and implementing it myself? I will hire another MBA type of guy for 20% equity to do the work you wanted to do and keep the 80% to myself.
He’s already showed his cards. Partnerships are based on trust, not (explicit) threats. If you’re both approaching the dais locked and loaded, call off the wedding.
But beyond that, a good partner might be one where you can first successfully try to come up with an arrangement that you would each be delighted with at the 50/50 point.
Without any adversarial attitude, what can really work is that kind of baseline, which can be negotiated away from, but also returned to without disdain.
There has to be a sense that each person at the baseline would generously actually be putting in 60% for the foreseeable future and love it because it was still an equal partnership and you were getting 120% accomplished consistently. Ideally you want to build consensus not by trying to limit contributions to keep from putting in too much, nor valuing other contributions for less than they are. When it is 50/50 it's more likely to be harmonious when both partners step up to the plate simultaneously and try to put in more than their fair share when needed, and see the other partner as an over-contributor just like themself.
Like what if somebody thinks they're hot and can raise a million within one year, or less if you have something tech ready to deploy? Or they say they can sell your product through the roof. You could make that a contingency they would be proud to achieve or they would have to understandably not be up to their share. If you came to a tentative agreement like that, that you were both very happy with at 50/50, all you would be doing next is planning to "start your engines" soon.
If the potential partner comes back a couple days later with a $4 million commitment within a month by selling some property or something, and it's for real, you will probably re-negotiate. The contingency would be over in a month then, and you would be flying. This wouldn't be too bad if it was non-adversarial from the get-go. You could end up at something way different that's quite fair anyway.
Remember each engineer is worth a million in the right situation, now with their $4 million it's a 4:1 imbalance, so 80/20 might be easy to migrate toward then so you can still go forward.
From my experience, about 1-2 in 10 co-founders are like that. They bring negotiation and networking to the table and demand compensation that no hardworking and honest co-founder would ever ask.
I think Sturgeons law applies to co-founders, and if you haven't spoken to at least 20, you are likely talking to the crap ones. Not all crap ones demand excessive compensation, there are other types of crap. But there is a huge difference between the ones that will be good for business and the others.
My advice is to have this conversation with a potential business co-founder as early as possible to avoid wasted time. I could have saved myself months.
Look out for business guys who severely discount your value as a technical founder. Not saying they're all like this, but a really skewed equity split is typically a red flag.