Cyber security · Equity

How much equity one can charge for technology architecting for startup at early stage?

Saugata Chakrabarti Technology Evangelist, Strategic Business developer, Innovation centric Entrepreneur.

November 23rd, 2020

This is basically when a tech-person is working with founders at an early stage and not investing in any monetary terms. And in some cases, at the same time may be working in multiple startups in different business problems. [Not as side projects]

Should it be cash-based, or pro bono mode or should invest some small amount at least?

Gareth James-Ryan A fractional CTO/technical advisor to start-ups and looking for a challenge

November 23rd, 2020

Hi Saugata, this is very subjective. It really depends on what you and the other co-founders bring to the table; if you bring what could be considered equal value then a 50/50 split maybe more appropriate, however in my experience somewhere between 20-40% is considered reasonable.

Don't undervalue yourself, I've experienced a founder offering a pitiful 5% when I would have been responsible for developing the whole business (was a tech business), whereas he would have provided the initial capital and sales. In that scenario the risk would have been mine, as he wouldn't have needed to invest capital until the MVP was launched.

Matthew Mansour Technical CoFounder

Last updated on November 25th, 2020

I keep it it simple and charge an equal stake.

That's assuming simple parameters:

  • I build, scale, enhance and maintain the product and infrastructure.
  • You build converting sales funnels.

The idea doesn't matter much.

But if the above two elements are in place then an equal split makes sense as long as everyone can execute (vesting schedule)

That's with multiple ventures for me or you. I don't care.

I don't care about how many hours you put in per week. I only care about how many paid subscription you bring in per month.

Likewise, If I am building, enhancing, scaling and maintaining a stable product and infrastructure, in a reasonable timeframe, then the number of hours I work during that time is meaningless.

Dane Madsen Organizational and Operational Strategy Consultant

November 24th, 2020

Without detail, it's difficult to answer this fairly (for you or the company).

  • Is it the core and key to success - such as a ML/AI application?
  • Is it an element of success - a platform that could be built or licensed from an existing vendor such as a marketplace where having an in house one is more cost effective and allows for proprietary customization but there are off the shelf options?
  • Is it a feature of success - such as an eCommerce platform where the primary product is a physical good that is not the tech - like clothing, food, home goods?)

Each of those will have a different answer except it should not be pro bono if it is a for profit company.

Saugata Chakrabarti Technology Evangelist, Strategic Business developer, Innovation centric Entrepreneur.

November 23rd, 2020

Good point @Gareth. I may not need monetary benefit/remuneration immediately, neither I feel investing. I just like tech challenge to be solved for the non-tech-founders, so that they can scale up quickly. But, a free service may not be taken seriously, and may lose its value as the priority of the organization keeps changing. A free service that leads to an open-source may add significance, but many founders are skeptical to share. So, the easy way out maybe "maybe" to charge for tech-service at an hourly rate and get a dignified option to invest in early equity if it makes sense.

Dr. Mike Ph.D. level AR/VR expert and serial startup CTO

November 28th, 2020

I've had the exact same problem for the past 7 years or so.

It always depends on the case. Who has what capability to give the startup the best possible chance of success.

If it is a complicated product, the equity should be high.

If it is a commodity product that could be customized from some existing off-the-shelf solution, paying in equity is a bad idea from the founders' side.

Cash-based deals are the cleanest ones and produce the least amount of hassle later on if the business is successful.

And nobody should give out equity for one time contributions. It means the founders now work for you for their entire career as long as that business runs.