Questions

I am currently a sole founder. I am not an engineer. This is a technical startup. So ideally I need a technical co-founder to join me. I'd been planning to just hire a couple engineers to build out the MVP, but this engineer and I really hit it off, and I'd like him to join the company as a co-founder. He also needs to be paid a full salary. I am self-funding the company to MVP on a bootstrapped budget. So two questions... 1. If he didn't need a salary, how much equity would you give him? (just looking for a range)? 2. Since he does need a salary, how much equity would you give him on top of the salary? (again, just a range, please)

Unless there's a strong imbalance in contribution to the company's success or finances, it's usually best to split equity evenly.

In this case there is in fact an imbalance in finance -- he needs a "full salary," which is the *opposite* of what a co-founder generally does with a new business, *especially* with a tech co-founder.

To me, this is not a co-founder, this is employee #1.

To see why, ask this: What is the risk this person is taking in joining the company? He's making a normal salary and can get another job if it doesn't work out.

If the risk is the same as an early employee, this is an employee -- maybe a KEY employee -- and should be treated that way.

I would say 10% sounds good especially if you'll need to take money later.

Put yet another way, this is just a contractor building the MVP for you.

Here's an article of mine with more of a math formula for this question if that's more helpful: http://blog.asmartbear.com/cash-equity-compensation.html


Answered 7 years ago

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