What equity should I claim as a founder CEO?
Some people I know came up with a idea of a startup. They will provide also the seed investment (50k) and contacts for future investment rounds.
I will be in charge of the start up of the company from stage 0, selecting a coder co founder and coming up with a business plan including business model, revenue streams, starting marketing actions, and so on... I don't expect to receive much coaching or advising from the AI.
I was offered 10% of the equity + 12 months salary. Is that a regular deal or is it to low taking into consideration the risk and that all the work is still to be done.
I'm bringing to the table expertise in the market, product development, and marketing.
Thanks!
Founder Equity Compensation Seed Funding CEO
3 Answers
Impossible for us to advise on your personal situation. 10% of a company that could scale to billions, is significant. 10% of a company that will never make a million isn't significant.
I would also look at what value you (and the other parties) bring to the company. Sure, you're not providing the seed funds, but (as an example) if you're doing most of the work to make the company a success, 10% doesn't seem very much.
You might like to read Dharmesh Shah's post on equity split: http://onstartups.com/tabid/3339/bid/146/Startup-Founders-Should-You-Divide-Equity-Equally.aspx
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Thanks Nick. I understand that this is a personal situation but my point was: does this 10% looks like a regular equity stake for a founder CEO in this stage? Found very useful that post, interesting point of view. THX – Thomas 13 years ago
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It's hard to benchmark without more information. Are you able to give us an idea of how the remaining 90% is split? That would make it easier to evaluate whether your deal is "reasonable". – Nick Stevens 13 years ago
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Thx Nick, I'll find that out and share it with you – Thomas 13 years ago
As others have said, depends on each case.
However generally speaking venture capital for a low seed investment of 0.5M they will negotiate for 30 to 40% of the company. But from my point of view, a deal of 50K + SALARY for 10% stake sounds wrong. Salary is included as expenditure and shouldn't go outside the investment. 50K for ~90% of the company (if that is the case) sounds as buying/acquiring your idea.
There is no rule of thumb on this. The question that you should be asking yourself is: How much would I accept to take this risk? If 10% is a reasonable on your account then it is reasonable.
What I would find out if I can would be:
- How much equity would be offered to the VC?
- How much equity would be split between the other people?
Once you answer those questions for yourself the amount of equity to ask for would become clearer.
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great input, I'll find that out to see all in perspective. – Thomas 13 years ago
