CTO search · Equity

Equity share for a CTO joining as a cofounder after product traction and angel funding

Mr Search Expert Digital Marketing Expert

February 10th, 2018

Trying to determine a fair equity split.

- Person A started the business and worked part time for 1 year and then full time for another 6 months.

- During this time a functional product has been created. The product is MVP quality, that is not maintainable over long term.

- There was an initial traction which resonated with an investor and some initial funding has been secured.

- For the past 1 year there is a monthly re-occurring revenue. Average of 600$ per month. Revenue is not growing.

- Even though the idea can be considered as validated, as there is traction with the market, the business is still in the search of product/market fit, with series of experiments that need to be executed.

- A has built promising relationships with customers (ready to help with experiments)

- A has built a relationship with a few potential investors

- A has built a relationship with industry advisors

- A has few contract engineers currently working on the product maintenance and development. Expenses covered in cash

- A feels long term cash outlay is not sustainable and wants to get someone that can offer sweat equity instead

- Person B - the technical co-founder is about to join to help with these experiments as well as start building a solid product from the existing MVP.

What equity share should be given to B?

- B is joining full time.

- B is not asking for any salary. B wants maximum equity.

- A is looking for exactly the kind of person that is looking to join without asking any salary. After interviewing dozen candidates, A feels that B is a really good fit for the company.

Current investor carries a convertible note at 1 mil cap with 55k invested so far.

Another 2% has been given away to advisors.

A holds 98% equity (minus the convertible note)

Current thoughts for getting the B onboard is

45% equity

Vesting over 4 years

6-month cliff

Ray Li Android Developer w/ 7 published apps on Google Play. Retention + Engagement + Monetization is Life!

April 13th, 2018

45% equity seems very generous. I think it's up to how much Person B is committed. If person B is equally committed (which never happens), then that split might be fair.