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)

You will find a lot of different views on equity split. I haven't found a silver bullet. My preference/experience is for:
1. Unequal shares because one person needs to be the ultimate decision maker (even if it's 1% difference). I have found that I have never had to use that card because we are always rational about this (and I think us being rational is driven because we don't want a person to always pull that card cause it's a shitty card to pull)
2. When it comes to how much equity, I like Paul Graham's approach best: if I started the business by myself, I would own 100% of the equity; if xxx joined me, he/she would increase my chances of success by 40% (40% is just an example) at this moment in time. Therefore, I should give him/her 40% of the company (http://paulgraham.com/equity.html)
3. In terms of range, it could go between (15-49%) depending on the level of skill. But anything less than 15%, I would personally not feel like a cofounder
4. Regarding salary and the fact that you will pay him/her, that's tricky but a simple way to think about it: If an outside investor were to invest the equivalent of a salary at this exact moment into the startup, what % of the company would they get? (this may lowball it if you think the valuation is high but then again if you think you could get a high valuation for a company with no MVP, then you should go raise money)

One extra thing for you to noodle on: given you are not technical, I would make sure a friend you trust (and who's technical) help you evaluate the skill of your (potential) cofounder. It will help stay calibrated given you really like this person.


Answered 7 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2020 Startups.com LLC. All rights reserved.