I'm bringing on someone who has been contracting for me; she will now be the Lead UX/UI Designer. She is not coming on board as a co-founder, but as a full-time employee/for equity. I'm wanting to find the right balance to honor the fact that she is taking risk by giving me 160 hrs/month for $0 cash (until funding).
I’ve estimated the valuation of the my company at 3.5M. Her current contract rate is $45 (low, b/c she's transitioning into UX/UI). I used a formula of 90K/3.5M = ~2.57 (x2 as a risk multiplier for taking all equity and no pay) = 5.14%. Curious as to what people’s thoughts are.
She wanted to know what I think about a different scenario:
- She gets paid in equity pro-rated for the amount of time pre-funding (i.e., 100% if 12 months, 50% if 6 months, etc.)
- She receive cash payment at discounted rate - let’s say half - after funding. The other half is paid in equity.
- The equity terms are tbd.
However, I am against splitting it as deferred cash and equity. I'm concerned it will price the equity, which I don't want to do. As such I'm thinking to stay with straight equity for now: the same way I am working and all other team members are working.