How much equity + salary should a Technical CoFounder get?
I am unable to decide how much should I get by reading the meta thread about equity hence I am asking it here.
I got offer as a technical partner in one web based start-up from two business guys with a nice web based product idea.
I will be joining as a technical partner and I will be doing all the programming, deciding programming languages, selecting product platforms etc. If in future we decided to hire some technical person then I will be their manager and I will handle them.
In short I will be building the whole product from scratch and I am the only tech guy who will work on this. Other two are business administration guys. They will also contribute cool ideas to enhance the product.
I will be also designing the website and designing the product as well as creating blog posts and marketing text.
Right now there is no product and they have only one simple website stating what this product is about. I will have to start from scratch.
Those other two are business guy. One of them will be just as a adviser + some initial money. He has got his own another company to look after so he will be giving only little time as required and only as the role of adviser. Another one will be full time CEO. He will be pitching to investors and doing marketing. We plan to go for funding in coming future.
Both of them have previous experience of their own company as well as job.
They are offering me salary + equity. Do I have to manually write in agreement that my equity is not to be diluted? Or not to be diluted is default?
How much salary and equity should I demand?
3 Answers
Only you can decide on what levels of salary and equity are acceptable.
Regarding the anti-dilution terms you referred to, depending on the circumstances this may make it difficult to raise finance in future. You can read Brad Feld's Venture Deals to get a good understanding of all this stuff, or talk to a qualified lawyer for genuine advice.
As always, IANAL, IMHO, YMMV.
The amount of equity you'll get should have an inverse relationship to the salary you take; if you are taking a 'market' salary, despite the fact you're first in, doing that work you describe, you're an employee, and could expect between 1 & 5 % equity.
If you're 'risking' a serious amount of short term benefit (i.e. by taking a much lower salary) you're taking aper entrepreneurial approach, should be considered a co-founder and should expect anything from 20-50% in your example.
One way to model it is to take the amount of salary you and the three of you are giving up over the first 18 months and the cash being put in. Share the available equity proportional based on these numbers. Also think in advance about what happens when/if the third person was to join full time, maybe even pre allocate the equity with vesting conditions that take it back should he not join as expected.
On anti dilution, you can either remove anythinv you foresee from your available equity value now, and avoid dilution or expect to be diluted. This just happens as you need to bring in more capital/staff. You should budget for 5-10% for your an option pool for your first employees, and 20-30% for your first round of funding.
All equity should vest over 3 years, and have sensible good/bad leaved provisions, to make sure the business (and anyone left) is covered if things don't work out with any of you individually.
Or you can do a Zuckerberg, and run away with their idea and get 100%....
Bad joke aside, and apart from @Craig Edmund's answer, there are 2 things that come to my mind.
- Your equity will depend very much on how difficult the product is to develop. Will your co-founders easily be able to find another programmer to build the product? Or have they come to you because of certain qualities that are hard to find.
- Be aware that the 3rd person who is just an adviser is not really a cofounder, because he is not invested 100% into the company.
