Value of technical expertise vs. industry connections, initial risk, and business management
I have been given an offer to join as a partner for an existing startup as the technical owner, and am not sure what is fair in terms of equity.
The current owner has the connections and experience in the niche industry in which we are selling the product, and has already taken most of the initial risk. He has raised enough funding to keep the company afloat for the length of the project. And has been doing some of the technical work (but is more business oriented than technical). The company is also making good earnings on another product.
I have the technical expertise necessary to build this product and am prepared to throw myself at it completely for the next year. But how valuable is that compared to the fact that I was not involved in the initial risk, do not have the industry connections, and cannot handle the business side of things?
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I don't understand why these questions come up so often. You want to get as much equity as you can, and he wants to give you as little as he can get away with. It's up to the pair of you to negotiate and meet somewhere in the middle. Why not ask for half and negotiate from there? – Gavin Coates 11 years ago
2 Answers
It is very difficult to answer your question with given data. Think of it this way (Opportunity Cost ):
- What is his next option (if you don't have this information try to find out in an ethical manner) and you will find out how much your cooperation worth to him.
- What is your next option.
With good negotiation skills you can also find the former from your meetings. According to given data he knows what he is doing so to me plus financial benefits you mentioned, working beside him is an opportunity itself.
First of all, there is no gauge or scale to get equivalence between the two things you want to compare. Neither is an industry standard. Value, in general, is subjective and you two need to gain agreement and thats what will define how valuable is to you what he provides and viceversa. That said, IMHO industry connections and expertise has a higher impact in startup success than technical expertise. How many more times? Gain agreement on that!
