My partner and I have been able to bootstrap the business so far and develop a fair amount of functionality. Hiring contractors, though, has prevented us from moving the product development along as quickly as we would have liked. Hence the need for a full time developer that has some skin in the game. My thoughts are the following: Salary of around $100K per year Either performance based bonuses or vesting schedules to earn a modest amount of equity. Goal: Incentivize the developer from working hard for us but ideally not looking to give away equity.

Salary + Bonus + some type of equity typically set up as options. At this point, I would not be giving out actual stock but rather allow this individual to participate in the stock option plan.

From the brief description, this hire seems to be a first technical hire and not a technical co-founder. If you are paying market rates in terms of salary + bonus compensation then the equity component should be at the market level, potentially around 1%. However, that will get diluted as additional equity is distributed. Fred Wilson gives a good class on "Employee Equity" for free at

Definitely 4-year vesting schedule with 1-year cliff as suggested by Adam Lieb.

Make sure you have NDAs, assignment of invention agreements, confidentiality and good employment agreements in place. That will make a substantial difference when going out for funding, in the case of any disputes, and for acquisition.

Also, ensure you have a solid development plan adequately communicated. This should define what developers should pay attention to (ie. security must be included in all development protocols) and no outside software as modules without approval from management.

Work through these issues on my last company from initial developer through to large development team, both in-house and off-shore.

Let me know if you'd like to discuss any more.

Answered 2 years ago

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