Equity distribution · Technical co-founder

How much equity should I offer potential co-founders after building the entire startup myself?

Karen Pouye Wide range of skills and considerable experience

March 6th, 2017

I am a sole founder, but I need help & would like to take on a couple of co-founders (haven't found them yet). I built the entire platform myself which took me 4 years because it is a large ambitious project & much more complex than the average startup. I've just launched, however, I realize that I can't do it all on my own. I probably need a marketing person & another tech person for ongoing maintenance & expansion. The problem is, that after having come so far alone, how much equity should I offer newcomers who have contributed nothing so far?

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

March 6th, 2017

For any team members you add now use a vesting scheme. For instance, figure out how many options you might want them to have in 4 years, assuming that they meet your expectations. Don't worry if they exceed your expectations, you can always give them more - and you can tell them it is your intention to do so for people who exceed your expectations. That might just motivate them to achieve more.

Set a 1 year vesting "cliff". If they don't choose to stay at least 1 year (or if they underperform you fire them within that first year) they lose all their options. Once they complete the first year, have 1/4 of the grant vest. There after have 1/48th of the total grant vest each month. That way if they leave, or stop meeting your expectations, you are only paying for what they will have contributed by that time.

There are various sources online for what typical equity grants are for different roles. https://open.buffer.com/buffer-open-equity-formula/ explains one formula that a VC-funded company uses.

Dane Madsen Organizational and Operational Strategy Consultant

March 6th, 2017

Assuming you own 100% at this point, and you have more equity than cash, and have identified the key positions you have to fill, you should have a "range" for each. If you intend to have outside investors, they are going to want the "Co-Founders" sufficiently incentivized to stay when things are dark. This is different than a VP of marketing or VP of Tech. A Co-Founder should see a path to between 4 and 6% of the shares (with a vesting schedule) and cash compensation in the not to distant future. If you cannot see them having that much future value, even though they have "contributed nothing so far", then you should find a different way to fill your team.

Steve Owens Startup Expert

March 6th, 2017

Not enough information to make a recommendation. If the product is done, why not go out and sell it, then once you have enough revenue coming in, hire a salesman. Or find a channel partner to sell it. Or, hire salesman on commision only. Or??? Why is giving away equity the only option?

Matt Satterlee

Last updated on March 6th, 2017

Aloha Karen! It's good to know that I'm not alone. I have the exact same situation and would love to hear others input regarding this topic. I've been building a platform for almost 3 years....looking for a co-founder to fill specific roles....on a shoestring budget....applying for cohorts......and other stuff. Nothing short of "pounding the pavement" is my motto.