0.5% equity and 2k/month to be the #1 CDO in a startup
I really need your help.
It 's the first time I've been asked to work for a startup.
The company has already been made??, founded by 2 partners, and has already received an initial investment, but has not yet come to round A.
I was asked to be the Chief Design Officer, i have to project the whole UX, obviously studying usability and evaluating the validity of ideas, give advice and possible new features.
In practice I have to give an identity to the entire project, and I would be the employee #1
They have offered me 2k/month and 0.5% equity, scale of 0.5% each year until it reaches a maximum that have not yet defined.
Is it a fair contract? I think not.
Contract Equity Employees Design Stock Options
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0.5% of what? Is this 0.5% of current equity (i.e. the number of shares which are currently issued) or 0.5% after the investors get their share? Remember that they will dilute your share down. If it's 0.5% of current equity, then you have to compare your contributions to the contributions of the other people -- what are the two partners bringing for their 49.75% of equity each? It's common to have some sort of vesting -- you can't expect to get a big equity stake today, and be able to keep it if you leave tomorrow. – Chris Fulmer 12 years ago
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Thanks for response Chris. Good question, 0,5% of what? i don't know right now i don't seen the contract yet. I understand that i can't expect to get a big equity today and it's right to have some sort of vesting, but right now they ask me to image, project, structure, design, etc, and give all of myself for this startup, like a co-founder.. for the 0,5% that will be grow up the next year but will be dilute down..uhm! Maybe i'm wrong, maybe 1% / 2% should be better to me? – Vin 12 years ago
2 Answers
In my opinion, 0.5% equity is low, but it is all relative. It depends on a number of factors: 1) potential size of the company; 2) what the company is trying to achieve; 3) if the co-founders have successfully started other businesses; 4) how much cash runway does the company currently have; etc. However, the biggest part of that is what you feel is right. If you believe in the founders, the company, and you believe that this is a real opportunity you should try and negotiate whatever will be right for you.
If you truly and honestly believe in this company and the people behind it, you will get there. Otherwise, you are just trying to minimize your downside and trying to reduce your risk. If you buy-in to the idea, then that should be less important.
As employee #1 and being in charge of the design, your equity should be closer to 5.0%, but it will also depend on what the two co-founders will be responsible for.
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Thanks Jack for your response. I believe in the people behind the company and i believe the startup could grown much, but they says that the 0,5 is the normality! One of the co-founders is responsible for all the technical stuff (CTO), he says he have the same monthly salary but he holds a slice of the pie! – Vin 12 years ago
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The monthly salary is less important in my view, but that also assumes you have some cash saved up and can operate either with out it or with just the 2K/month. 0.5% may be the right number for your role, but if you are not satisfied with that ownership, then it will likely have an effect on your attitude and your ability to bring what is needed from you to the table. – Jack 12 years ago
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Yes Jack i agree, the monthly is less important for me too, but like you've said the 0,5 seems to low to my role. Am i right? in any case is all about feel satisfied, i'm just thinking about this. Thanks for your advise ;) – Vin 12 years ago
The question is that in which country are you living?
- 2k dollar or euro or what?
- anyways the 0,5% equity seems too low for me, because the UI is a significant part of any software or online solution
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I'm in Italy and i mean 2k euro! I think u're right, but what should be the right percentage? – Vin 12 years ago
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I forgot one thing: I'm in Italy but the startup is from San Francisco, and maybe i should move there for a few months – Vin 12 years ago
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In your case I would try to ask for 2%-5% of the company. And even invest in it, because that shows you really beleive in the product what you're doing! – Roland Pokornyik 12 years ago
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Thanks a lot for the advice! Did u mean i should try to take the 2-5% of the company (not the equity) and give up with the equity? – Vin 12 years ago
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2-5% share in the company – Roland Pokornyik 12 years ago
